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~`"`~"k %~~ STATE OF MINNESOTA <br />.~ <br />~~ ~ ~. <br />-~ ~.:_~';~,_ OFFICE OF THE STATE AUDITOR <br />~. ~: <br />'rl'~ '' ~ .~° sU>•TE soo <br />~:-~.~ s~ 525 PARK STREET (651)296-2551 (Voice) <br />REBECCA OTTO SAINT PAUL MN 55103-2139 (651) 296-4755 (Fax) <br />state.auditor@state.mn.us (E-mail) <br />STATE AUDITOR I-800-627-3529 (Relay Service) <br />Statement of Position <br />Required Municipal Contributions to Volunteer Firefighters' Pension Plans <br />State law requires a municipality to pay a minimum annual contribution to the special <br />fund of its affiliated volunteer fire relief association,' unless the special fund is fully <br />funded or fire state aid is sufficient to cover the municipal obligation.2 The special fund <br />is a fund established and maintained within a relief association to pay service pensions to <br />retiring members. A fund is "fully funded" when there are sufficient assets to cover <br />future liabilities. <br />The funded status of a special fund is affected primarily by changes to benefit levels (i.e., <br />liabilities increase) and by investment gains or losses (i.e., assets increase or decrease). <br />Benefit increases and investment losses decrease a fund's assets, thereby increasing the <br />likelihood that a municipal contribution will be required. A decrease in the funded status <br />will also likely increase the size of the required contribution. <br />Whether a municipal contribution is required and the amount of the required contribution <br />is determined by using a statutory formula. The formula varies depending on whether the <br />plan is a lump sum plan or a monthly service pension plan.3 <br />Lump Sum Plans <br />For lump sum plans, the minimum required municipal contribution equals the financial <br />requirements of the special fund minus 1) the amount of fire state aid to be received <br />during the following calendar year; and 2) the amount of any contributions to the special <br />fund from the active members of the relief association to be received during the following <br />calendar year. In addition, five percent annual interest on the assets is also subtracted.4 <br />' State law has been summarized and simplified. Minnesota Statutes should be consulted before making <br />decisions based on this Statement. The Statement does not contain legal advice and it should not be relied <br />upon in lieu of legal advice. It is subject to revision at any time. <br />z Minn. Stat. § 69.772, subd. 3 & 4; Minn. Stat. § 69.773, subd. 5. In some instances, a municipal <br />contribution may be triggered even though the pension plan is fully funded. <br />3 See Minn. Stat. § 69.772, subd. 3 (for lump sum service pensions) and Minn. Stat. § 69.773, subd. 5 (for <br />monthly service pensions). There is no required municipal contribution for a defined contribution plan. <br />a Minn. Stat. § 69.772, subd. 3(d). <br />Reviewed: January 2009 2009-2001 <br />Revised: NA <br />An Equal Opportunity Employer <br />