5.2. SR 07-12-1999 - Laserfiche WebLink

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rei ---'\) ( )j IIi< Item #5.2. River MEMORANDUM TO: Mayor & City Council -A~ FROM: Lori Johnson, Finance Director DATE: July 12, 1999 SUBJECT: Fire Relief Association Benefit Level Representatives from the Elk River Fire Relief Association will be present at Monday's meeting to request an increase in the retirement fund's per year of service benefit amount. The Council must take action on the Relief Association's request before August 1. The benefit amount can only be increased if the Council approves the increase or if the Relief Association is funded at 110 percent. Attached are a memo from Relief Association President Jim Nystrom, a summary of Benefit Projections, and an article from the League of Minnesota Cities magazine highlighting the city's . responsibilities as they relate to the Relief Association. The Relief Association is requesting that the benefit increase from $2,900 per year of service in 1999 to $3,370 per year of service in 2000. The Relief Association is a defined benefit plan meaning that retirement payments are based on a predetermined amount versus a defined contribution plan where the retirement payments are based on assets available in the retirement fund. As Jim stated in his memo, PERA and TRA are also defined benefit plans; however, they are different from the Relief Association in that benefits are determined based on each employee's individual earnings and PERA and TRA require an employer contribution as set by the legislature. The city's contribution to the Relief Association is determined each year based on the benefit level requested and the assets available to meet the benefit liability. The Relief Association's request does not require a city contribution in 2000. . Although a city contribution is not required this year, the city is ultimately liable for any shortfall in assets available to meet benefit payments at the level approved by the Council. It is unlikely that this would happen unless there was a substantial loss in the value of the investment portfolio or a large number of firefighters collected benefits in a very short time period. The Relief Association has updated its investment policy and transferred much of the portfolio to the State Board of Investments which has eliminated some of the previous concerns relating to the types of investments and lack of 13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · TDD & Phone: (612) 441-7420 · Fax: (612) 441-7425