8.1. SR 07-06-2015 - Laserfiche WebLink

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��i Eof lk — - Request for Action River To Item Number Mayor and City Council 8.1 Agenda Section Meeting Date Prepared by General Business July 6, 2015 Tim Simon, Finance Director Item Description Reviewed by 2016 Benefit Level for Elk River Fire Relief Cal Portner, City Administrator Association Reviewed by Action Requested Approve,by motion,an increase for the Elk River Fire Relief Association (ERFRA) benefit to $5,510 per year of service effective January 1, 2016. Background/Discussion Prior to August 1 of each year,the ERFRA is required to certify to the city the required municipal contribution for the following year. A request for an increase in the per-year-of-service pension amount for the next year (effective January 1) must also be acted on by the Council before August 1. The ERFRA operates under a defined benefit plan. The pension liability is calculated by the number of active service years multiplied by a set benefit level. Members who retire with less than 20 years of service and have reached the age of 50 years, and have completed at least five years of active membership are entitled to a reduced service pension. On June 1,the association recommended an increase of 2.80%, or $150 from the current benefit level of $5,360 which was last approved effective January 1,2015. The new rate of$5,510 would be effective January 1, 2016 and does not require a city contribution for 2016. Over the past few years the relief assets have climbed back to a funding level over 110% (actual funding ratio 113% as of 12/31/14). A combination of investment returns,planning, and increases in State Fire Aid have helped with the recovery. The Board changed its thought process from historically requesting increases to be at 100% funding ratio,which didn't allow for much market volatility and if the market drops it may be several years until the next increase. The current practice is to request smaller,gradual increases and leaving the funding ratio over 110% to absorb more market volatility without triggering any mandatory city contributions. Association projections indicate that based on a 5%return the funding ratio remains over 110%if this increase is approved. The year-to-date returns are 1.1 percent (May 31) and over the past five years the plan has averaged 7.32% return on investments. The assets are managed under The Parr McKnight Wealth Management Group of Wells Fargo. P0WIAIa 9r Template Updated 4/14 IN"AfURE]