INFORMATION 09-05-1995 - Laserfiche WebLink

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Cityll •~J fiver Apri127, 1995 Randy Sykes Elk River Fire Compensation Task Force 415 tackson Avenue Elk River, Minnesota 55303 Dear Randy;, For well over a year the Fire Department Compensation Task Force has been reviewing firefighter pay in conjunction with discussing the conversion of the Elk River Fire Relief Association pension plan to a defined contribution plan. Recently, the Council and representatives of the fire department met to discuss the proposed compensation plan requested by the firefighters. As you know, that proposal was not approved in its entirety during that initial meeting with the Council. Because I feel that it is important to continue working toward a fair compensation package and the conversion, I requested that the Council discuss this item further. On April 3, 1995, the City Council again discussed the proposed firefighter compensation plan. After discussion, a motion o$ering a compensation package for the firefighters was approved. The Council's • proposal would set firefighter pay at for $22.25 per hour for all emergency calls and $8.00 per hour for all other calls. Emergency hours on the seven holidays outlined in the original proposal would qualify for double time pay, and firefighter pay would be reviewed annually as part of the City pay resolution. In addition, the Council had already agreed to extra pay based on training and to a new pay structure as outlined in the proposal. These are all contingent upon approval to convert the Relief Association pension from a defined benefit to a defined contribution plan. In an effort to assist in the conversion, I would like to address several areas of concern to the firefighters and suggest solutions which should be agreeable to all parties. First, I understand that under the defined contribution plan, the death benefit for firefighters not fully vested is less than it would be under defined benefit. Naturally the firefighters are concerned about the amount available to their beneficiaries; the City is concerned about this as well. Therefore, I am proposing that the City pay for any difference in the death benefit for any firefighter who is currently a member of the department who dies after the conversion to defined contribution. Another issue of even more concern to the firefighters is the initial balance each firefighter will have in his account after the assets of the Association are allocated among the members. There are several methods of allocating the assets. The allocation can be made based on actuarial calculations which is the method used by the Wyatt Company when estimated account balances were provided for us. The allocation can also be made based on years, months, or days of sen~ice (service only allocation). If this allocation method is used, the beginning account balances can be compared to either the balances used in calculating Schedule 1 or the balance based on the vesting percentage to determine each member's gain or loss. It appears that the firefighters prefer the service only allocation. 1f the assets are allocated to member accounts based on this method, there may be a loss in some members' accounts when compared to the amount the members would have received based on the current benefit of $2,30 per }'ear times the years of service times the vesting percentage. Therefore, assuming a conversion date of January 1, 1996, I . am proposing that the City cover all shortfalls. This would be accomplished by appl}~ng the City's 199 1306 Orono Park~~~ay • P.O. Box 490 • Elk River, ~'li~T ~>330 • (612) 441-7420 • Fax: (612) 441-742