5.1. ERMUSR 04-14-2009 - Laserfiche WebLink

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ELK RIVER MUNICIPAL UTILITIES ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2008 AND 2007 Note 3: DEFINED BENEFIT PENSION PLANS -STATEWIDE -CONTINUED B. Funding Policy Minnesota statutes, chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the State legislature. The Utilities makes annual contributions to the pension plans equal to the amount required by Minnesota statutes. PERF Basic Plan members and Coordinated Plan members were required to contribute 9.10 percent and 6.0 percent, respectively, of their annual covered salazy in 2008. The Utilities is required to contribute the following percentages of annual covered payroll: 11.78 percent for Basic Plan PERF members and 6.5 percent of Coordinated Plan PERF members. Employer contribution rates for the Coordinated Plan will increase to 6.75 percent, effective January 1, 2009. The Utilities' contributions to the PERF for the years ending December 31, 2008, 2007 and 2006 were $151,416, $136,713 and $128,223, respectively. The Utilities' contributions were equal to the contractually required contributions for each yeaz as set by Minnesota statute. Note 4: OTHER INFORMATION A. Territorial Acquisition Agreement The Utilities has entered into an agreement to transfer ownership of electric plant and electric service to customers in certain azeas currently receiving electric service from Anoka Electric Cooperative, Inc. (AEC). The cost of property purchased from AEC will be net book value. The Utilities will also pay AEC for loss of revenue for each azea acquired based on a formula outlined in the agreement. In addition, the Utilities will compensate AEC for the loss of revenue from the future sale of electricity to electric customers in the areas acquired from AEC for a period often years from the date of sale of each individual area. During 2008 and 2007, the Utilities paid $248,976 and $546,086, respectively, under this agreement, including $32,838 and $36,747 in 2008 and 2007, respectively, for loss of revenues. All amounts paid aze included in property and equipment. B. Risk Management The Utilities is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters for which the Utilities carries commercial insurance. The Utilities obtains insurance through participation in the League of Minnesota Cities Insurance Trust (LMCIT), which is a risk shazing pool with approximately 800 other governmental units. The Utilities pays an annual premium to LMCIT for its workers compensation and property and casualty insurance. The LMCIT is self-sustaining through member premiums and will reinsure for claims above a prescribed dollar amount for each insurance event. Settled claims have not exceeded the Utilities' coverage in any of the past three fiscal years. Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities, if any, include an amount for claims that have been incurred but not reported (IBNRs). The Utilities' management is not awaze of any incurred but not reported claims. C. Prior Period Adjustments During the yeaz ended December 31, 2008, the Utilities recorded prior period adjustments in the Electric and Water funds for $108,417 and $8,560, respectively. During the year ended December 31, 2007 the Utilities recorded a prior period adjustment in the Electric and Water fund for $108,899 and $77,492, respectively. All of these adjustments related to correcting accumulated depreciation. -27-