5.2. SR 07-16-2007 - Laserfiche WebLink

Home Browse Search

Investments One change implemented by the Relief Association Board this year has been to diversify its asset allocation by investing about thirty-two percent of its assets in funds from Vanguard and American. Approximately 68% of the fund remains with the State Board of Investment. Funding Ratios Funding ratios explain how well funded a plan is by showing the relationship between its assets and liabilities. High ratios can reflect low benefit levels in comparison to pension plan surpluses. Low ratios may signal the need for greater contributions. The ERFD relief Board believes that it has fiduciary responsibilities to both the membership and to the Council. The responsibility to the membership is to seek the highest fmancially sound benefit level. The responsibility to the Council is to not expose the city to any fmancial risk associated with mandatory contributions. The board believes that a funding ratio around one hundred percent represents that important balance. One hundred percent means that there exists an asset dollar for every dollar of liability. Careful Approach The Board of Trustee's takes great care in making sure that all the assumptions used in calculating future benefit increases are conservative and easily obtainable. Please note the following: . Over seventy-five percent of the increase in liability is covered with state fire aid which has been in place since 1885. . We assumed a 1.5 percent increase in the state fire aid. (The form allows a projection of up to 3.5 percent and last years was up 7.3 percent) . We assumed a 6 percent appreciation in our investments for 2007. (The investments had already appreciated 8.2 percent by the beginning of June.) . We have had the City auditors at Abdo Eick & Meyers review our assumptions and the accuracy in the use of the State schedules. Action Requested The Association is requesting that the Council approve an increase in the benefit level for 2008 to $5,091 per each year of service. Using the State schedules we project the 2008 increase to be 100% funded. Since the State of Minnesota provides the basic funding for relief association, the State Auditor maintains strict oversight of the management of funds through reporting and statutes. By August 151 each year, all Associations must ftie reports that estimate the income for the prior year and compare the income to the accrued liability of the fund. The Relief Association membership thanks the Council for its past and future support. UL p~