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the revenues that gambling now gen- in the future to raise taxes to support erates, but without committing the city the relief association because other to using tax money to replace those revenue sources have decreased. revenues if they dry up. City councils who have been asked The January article didn't make it to ratify benefit increases for the relief clear that this issue only comes up if association based on the association's the relief association uses the t.'rlf"firy~ increased revenues from other sources fbenefit". approach to pensions. In a might want to suggest amending the defined benefit plan, the relief associa- relief association's bylaws to change to tion bylaws spell out exactly how many a defined contribution benefit system. dollars in pension benefits a retirin~1t is a good way to let the firefighters firefighter will receive. For example benefit from the association's increased the bylaws might provide that each revenues from other sources. Yet, it retiree will receive a lump sum of $500 for each year of service. Or a defined benefit plan might provide for a monthly pension of say $10 per month for each year of service. In a defined benefit system, you owe a definite amount at a definite future time. To stay solvent, you have to calculate that amount and make sure you're accumulating enough money now to be able to pay those pensions when they're due. The statutes require the city to provide sufficient funds to support those benefits and keep the association solvent. Since 1979 the statutes have allowed volunteer firefighter relief associations ~.. . to adopt instead a ".defined ~COI1tril>U- . ~tion!.;'- benefit system. In a detm'W contribution system, the bylaws don't spell out a specific amount which the retiree will receive. Instead, the reti- ree's benefit is equal to a pro-rata share of whatever funds are available. That is, a retiree's benefit would equal his or her total years of service divided by the total number of person-years of service for all of the association mem- bers times the total funds the relief association has. This "split-the-pie" system has some advantages for both the city and the firefighters. For the firefighter, it means that if the association's assets are up-because of charitable gambling revenues, higher two percent aid, bete ter investment income, more city sup- port, or whatever-the individual's retirement benefit automatically . creases proportionate to the assets. Si:' From' the' city' sstandpoint- a.... big 'advantage, is that a.relief assoCiation .with a defined contribution benefifplan is\alwaysautomatically' solvent. The r~tiringindividual . isn't guaranteed a specific .' dollar amount, but rather a specific share of whatever funds are ,available. You don't have to worry that the city will be legally forced sometime - .J1~........,_ ...- avoids committing the city to provide ai higher level of financial support if the association's other revenue sources dry up. (Thanks to Hallock city Clerk Henry Noel for his suggestion that we elabo- rate on this point.) . * Authority for conducting municipal board hearings by electronic media is in M.S. 444.011, subd. 8; for councils approving payment of bills, M.S. 412.271, subd. 4. -.:::J All Building Systems Are N OJ Created Equal Fire Station and Community Center, Cologne, Minnesota Are you looking for a building system that costs less to heat, cool, insure, and main- tain? One that does not burn, rust, dent, or rot? Look no further. WELLS has the solution to your building needs. The attractive and yet durable characteristics of precast/prestressed concrete combined with the quality and dependability of WELLS makes their building system unequal to any other. To find out more, call WELLS today! 1-800-658-7049 Box 308 Wells, MN 56097 (507) 553-3138 April 1990 35