8.1 SR 07-05-2022 - Laserfiche WebLink

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June 29,2022 To: Mayor and City Council From: Scott Schmitt, President of the Elk River Fire Department (ERFD) Relief Association Background of the Association The ERFD Relief Association is made up of the active paid-on-call members of the ERFD. The purpose of the association is to provide retirement, disability and death benefits to the members or beneficiaries of members of the department. The pension benefit is also one- way to encourage volunteer or paid-on-call members to “stay on the job.” The State of Minnesota has provided the major share of funding for the association through distribution of the money collected from a gross earnings tax on fire insurance premiums sold in the state. The funds are allocated back to the departments based on the population and property values in the area served by that department. There is a strong relationship between state fire aid and the number of fire-related calls a fire department responds each year. The state fire aid was established in 1885 and has been the most stable source of funding. According to the most recent state auditor’s report, Elk River is in the 98% in the amount received and the 97% in pension amount. The relief association does benefit from the population and valuation that comes from the areas of Otsego and Big Lake Township that is served by ERFD. The city has also shown continued support of the Relief Association as exampled by this year’s budgeted contribution of $30,000. State law requires that a nine-member board of trustees govern a relief association. The ERFD Relief Association is directed by six trustees elected by members of the ERFD, the fire chief, the city Finance Director, and the mayor. A minimum of four meetings are held each year to oversee the management of the Association’s funds. Type of Pension Plan The members of the Relief Association are covered by a defined benefit plan. The benefit level of the plan is determined by the number of members, their length of service, and the value of the relief fund. Benefit level studies are performed on an annual basis. When a benefit level increase is warranted an approval request is made to the City Council. This year the relief board approved a request to council for a 9.4% increase effective January 1, 2023. The per year benefit level would go from $8,850 to $9,685.