96-687��E�.,�, ��
Green Sheet # 3 3, T�
RESOLUTION
CITY OF SAINT PAUL, MINNESOTA
Presented By
Referred To Committee: Date
U.,
1
2
3
4
5 WHEREAS, The Legislature of the State of Minnesota, passed enabling legislation
6 (Laws 1995, Chapter 262, Article 3, Section 4) which lowers the eazly retirement penalty for
7 Public Employees Retirement Association Police and Fire Fund members retiring eazlier than
8 age 55 beginning July 1, 1996; and
9
10 WIIEREAS, The Legislature also provided for addifional amortization aid for
11 municipalities that approve the change (Laws 1995, Chapter 262, Article 4); and
12
13 WIIEREAS, In the case of municipalities that have consolidated their police or
14 firefighter relief associations with the public employee retirement association prior to July l,
15 1995, the enabling legislation (Laws 195, Chapter 262, Article 3, Section 5) requires
16 municipal approval of the change in early retiree benefits; and
17
18 WHEREAS, The Saint Paul local fire and police relief associations have consolidated
19 with the public employees retirement association prior to July 1, 1995; now therefore be it
20
21 RESOLVED, That the Council of the City of Saint Paul, upon the recommendation of
22 the Mayor, does hereby approve the eactension of the post-June 30, 1995, public employees
23 police and fire fund benefit plan to the applicable consolidated account, and the city clerk is
24 hereby directed to file a copy of this resolution with the directar of the Public Employees
25 Retirement Association.
Requested by Department of:
� 1 �Ctw1C4_ p.,� r � '- l ((�
i
By:
(� �� � Form Appro4 �fl by City Attorney
Adopted by Council: Date � �
Adoption Certified by Counci Secretary B. � �
.� \ �
By:
Approved by MayorV Date �Q ��j���'
B � �G ����
Approved by Mayor for Submission to
Council
BY.� � , (��
Council File # 9 G-G g 7
� � - G�"L
DEPARTMENLOFFICE/COUNCIL DATE INITIATE� � V� 3 2 4 0 9
Finance and Management Services Ob/11/96 GREEN .SHEET __ -
LONTACT PERSON 6 PHONE IN[TIAWATE INRIqUOATE
O DEPAHTMEl7� DIRECTOF � CIT' COUNdL
266-8797 A�GN �CRYATfOflNEY �CRYCLERK
NUMBER FOR O g��� flIRECTOR � FlN. & MGL SERYICES DIR.
MUST BE ON CAUNC7L AGENLM BY (DATE) XOVTING
ORDER � �.�pYOR (OR ASSIST O
TOTAL # OF $IGNATURE PAGES (CLIP ALL LOCATIONS POR SIGNATURE)
AGTON REQUE5TE0:
This resolution gives local approval to special legislation that reduces the early xetiremen
penalty for members of the Saint Paul Police and Fire Consolidated PERA AccounYs. A copy of
the 1995 legislation is attached.
RECOMMENDAnONS: Approve (A) rn Reject (R) pERSONAL SERVICE CON7RACTS MUST ANSWER TXE FOLLOWING QUESTIONS:
__ PLANNING CAMMISSION _ CIVIL SEAVIGE COMMISSION �� Has Mis persoNfirtn ever worked under a contrect for this depertment7 -
_ CIB COMMITTEE YES NO
_ STAFF 2. Has ihis personflitm ever been a City employee?
— YES NO
, oISTRICT COURi _ 3. Does this personKrm possess a skill not normally pa5sessetl by any curtent city employee?
SUPPOqTS WHICH COUNpL OBJECfIVE? YES NO
Fxplain all yes enswers on separate shaet anE attaoh to green aheet
INITIATING PROBLEM, ISSUE, OPPORTUNITY (Who, Whet, When. Where, WhyJ:
Law has been passed providing a ieduction in the early retirement penalty for Police and
Fire PERA members hired after 1980, as of July l, 1996. Local approval for similar benefit
change for pre 1980 hires (Consolidation account members) is required.
ADVANTAGES IFAPPROVED:
(See attached memo from Martha Larson and Joe Reid, dated June 11, 1996.)
DISADVANTAGESIFAPPROVED:
There is a risk that changes in State amortization aid, associated with the plans' funding
status, may create a higher than expected contribution requirement for the City related
to this benefit enhancement.
(See attached metao from Martha Larson and Joe Reid, dated June 11, 1994.)
DISADVANTAGES IF NOTAPPROVED.
Police and Fire pre-1980 hires will not have the same early retirement incentive as the
post-1980 hires covered under PERA.
T07AL AMOUNT OP TRANSACTION E COSTfREVENIlE BUDGETED (CiRCLE ONE) YES NO
FUNOI[iG SOURCE �1CTIVITY NUMBER
PINANCIAL INFORMATION: (EXPLAIN)'
DEPARTMENT OF FINANCE AND
MANAGEMENT SERVICES
Manlut G. Lo�son, D'uector
CITY OF SAINT PAUL
Norm Colmwn, Mayor
TO: Mayor Norm Coleman
FROM: Martha son �
Joe Rei�
RE: Police and Fire Early
DATE: 7une 11, 1996
290 Ciry Hall
ZS W. Kellogg Boulevmd
SaintPaul, Mbu+esota 55102
l �' �p Z
Telephone: 612-266�8797
Facsinrile: 612-2668919
Retirement Benefit Enhancement
We have reviewed the financial and operational implications of the proposed benefit
plan change (reduction of the early retirement penalty) for Police and Fire members
covered under the PERA Consolidation accounts. In essence, this plan change will
provide the same reduction in the early retirement penalty for the pre-1980 Police and
Fire hires (those covered under the Consolidation accounts) as will go into effect for the
other Police and Fire PERA members (the post-1980 hires) on 7uly 1, 1996.
The financial ramifications of the plan change are complex. In short, the benefit change
will increase the unfunded pension liabilities for both the Police and Fire accounts. The
increase in the unfunded liabilities will create a related annual increase in the City's
annual pension contributions. These contribution increases will be partially offset by
additional State amortization aid, that is only a�ailable to the City if it implements this
proposed plan change. The C`ity also currently receives a significant amount of other
State amortization aid for the Police and Fire accounts, in relatively fixed annual
amounts, that will be applied against this net increase in the City's additional
contribution caused by this plan change. This aid will continue until the Police and Fire
accounts are fully funded. Ouz most reasonable and conservative estimates indicate that
the projected future City contribution amounts wili not be significandy different as a
result of the plan change.
From an operational perspective, the proposed reduction in the eazly retirement penalty
is not expected to create a significant increase in the numbers of Police and Fire
members opting for early retirement until those members reach five years of service
under the PERA plan (1998 for Fire and 1999 for Police). Wlule we do not andcipate
any immediate significant vacancies or related salary savings to be triggered, it is
reasonable to e�cpect that after 1998/1999, this reduced penalty will be an additional
incentive for more senior Police and Fire staff to retire early. There will also be a
°I,(. - C � Z
benefit in terms of morale for the pre-1980 hires - those affected by this proposed plan
change - in that these members will be entitled to tbe same eazly retirement incentives
that the post-1980 hires are receiving automatically on July 1, 1996.
'Tberefore, because there will be a positive effect on staff tumover and morale, and
because there are not likely to be any negative financial consequences from
implementing tlus plan change, we are recommending approval of the proposed early
retirement penalty reduction for the Police and Fire Consolidation account.
c: City Councilmembers
L\uurs\admin�pepsiovP&D
Public Employees Retirement Association of Minnesota a
Suite 200 — Skyway Level � "��.
514 St. Peter StreeY r e (�, �
St. Paul, Minnesota 55102 ����kJ- �1
+`� Q. � r' •.. rc '_ .
(OFFIC� 612-2967460,�:i,•
(TOLL FRE� 1-800-652-9026 "#-� � � �
(FAX) 612-297-2547 `� p
--- — --- -- - ----- �C �,
June 20, 1995
SHIRLEY DAVIS, TREASURER
CITY OF ST PAUL
15 W KELLOGG BLVD
ST PAUL MN 55102
RE: Legislation Changing Police & Fire Benefits - Local Approval Required
Legisiation enacted this spring will aflow members of the PERA Police and Fire Fund to
retire between the ages of 50 and 55 with less of a reduction for doing so. Chapter 262,
Article 3, Section 4, changes the early retirement reduction factor from the actuarial
amount of about 4 percent per year to 2.�3 percent per year. This lower eariy retirement
penalty is effective for all Police and Fire members who retire earlier than age 55
beginning July 1, 1996.
Members of the consolidated police and fire relief associations do not automatically
receive this benefit improvement. Section 5 of Chapter 262 requires the cities to
approve use of the new factors for their consolidated members. PERA asks that the city
provide a resolution directing use of the new factors. If a resolution is adopted by the
city, the new factoss wi14 be available to members of the local plan on July 1, 1996, or
later if so directed by the city's resolution.
As with the increased benefit formula multiplier in 1993, the change to a lower �
reduction for eariy retirement will probably cost money. Therefore, each city wil� most
likely want to have the Pension Commission's actuary determine the additiona! cost to
extend the new factors to the local plan members who have elected benefit coverage
under tne rERr"� �uiic� and Fire �und.
PERA will automatically ask the actuary to prepare the cost estimates of this change at
the time the annuai valuation is prepared (between July and October). If you do not
want the estimates prepared at this time, please call me at (612) 296-8358 and let me
know. The cost can be estimated at any time by contacting the actuary, Tom Custis,
Milliman & Robertson, 1nc. at (414) 784-2250. The cost of preparing the estimates wil(
be paid from your relief association's consolidated account.
In addition to the benefit improvement for the Police and Fire Fund, Section 4 of
Chapter 262 will give consolidated and local relief associations additionai aid beginning
October 1, 1997. Cities with consolidated plans wifl receive the aid only if the benefits
of the PERA Police and Fire Fund are made availabie to the pian members and the
plans had an unfunded liability. Please refer to the enclosed copy of the legislation for
a description.
Equdl Oppor�uni�y Employer
4
� �-���
Legislative Notice - Page 2- June 20, 1995
We have enclosed a copy of the legislation and a chart that displays a comparison of
the two sets of early retiremenf reduction factors. If you have any questions about ihis
legislation, please feel fFee to contaet me at 296-8358, or toil-free, 1 800 652-9026.
Sincerely,
�Q�Gr�, ��-� (/Q/'fL2�
Mary Most Vanek, Director
Legislative & Member Services
Enclosures
cc: Former Relief Association President
♦ �
22 Sec. 4- Minnesota Statutes 1994, section 353.651,
23 subdivision 9, is amended to zead:
24 Subd. 4. (EP?tLY RETZREMENT.] Any nolice oEficer or
25 firefighter member who has become at least 50 years o1d and who
26 has at least three years of allowable service is entitled upon
27 anplication to a zetirement annuity equal to the normal annuity
28 calculated under subdivision 3, reduced ee-tha=-the
29 Ct.:fC�tp--�-tt1G
30 papab?e-to-tee-neabe:-i'
31 LI:�C=iy-�LOA-�tYG-G�Lp-�kl�-L[S:SG2tp-S�G[JSR�'t0-LCC^tIG-CR�'=?-tF1G
32 memSer-�tteia3 by two-tenths oE one nercent for each
33 month that the member is under a e 55 at the time of retiremen[.
34 Sec. 5. Minnesota Statutes 1994, section 353A.083, is
35 amended to read:
36 353A.083 [PERA-P&F SENEFIT PLAN AP?LZCAHLE TO PRE-1993
CHAPTER No. 262
H.F. No. 1040
1 CONSOLIDATIONS.]
2 Subdivision 1. (PRE-1993 C�NSOLIDATIONS.] For any
3 consolidation account in effect on May 24, 1993, the public
4 emoloyee police and fire fund benefit plan applicable to
5 consolidation account members who have elected or will elect
6' that benefit plan coverage under section 353A.08 is the pre-July
7 l, 1993, public employees police and fire fund benefit plan
8 unless the applicahle municipality app:oves :he estension of the
9 post-JUne 30, 1993, public employees police and fire fund
10 benefit plan to the consolidation account.
11 Subd. 2. [PRE-1995 CONSOLIDATZONS.] For any consolidation
12 account in effect on July 1 1995 the pu�blic emoloyee_police
13 and fire fund benefit nlan a�nlicable to consolidation account
14 members who have elected or will elect that benefit Dlan
15 coveraqe under section 353A OB is the pre-July 1, 1995, public
16 emolo ees oolice and fire fund beneEit nlan unless the
17 zoolicable municinalit aooroves the extension of the Dost
18 30, 1995, oublic emnlovees nolice and fire fund benefit nlan to
19 t'.:= conso=idation accovnt• -
/ t�J '..:�f_.J = V_.�1.: n.�J . _..� _.J-.. . .� .i.. �._J
:B Secc:oa 1. N'-.^.aeso�a S2a2utes 1994, sec�ion 353.65,
!9 s�bd?vision 7, is amenced to read:
20 Subd. 7. (EXCESS CO2:2�2IHUTZOrS YOLDZNG ACCOURT.� (a) The
21 excess con�ributior.s holding account is established in the
22 ovblic employees zeticement zssociation. Excess contributions
23 established by section 69.031, subdivision S, oarzgraohs (2),
24 clauses (b) and (c), and (3) aust be deoosited in the zccount_
25 These contributions and a11 investment earninys associated With
2'0 :hem must be zegularly transferted as provided in paragraph (b).
27 (b) From the amount of the excess contribu:ions and r
28 associated investment earnings:
29 (1) 51,060,000 must be t=ansfezsed annually to the
30 ambulance service pezsonnel longevity award and incentive
31 suspense account established by section 144C.03, subdivision 2;
32 and
33 � (2) any zemaining balance, after deduction of the
34 additional amortization aid allocation if any, under varaqranh
35 (d), must be transferred to the genesal fund.
36 (c) IF a law is enacted creating a police o£ficer stress
_ reduction p=ogeam, and money is zpprogriated for the program, an
= amount equal to the appropriation must be tzansferred from the
_ excess contributions holding account to the stress reduction
. progzam before money is t-er.a'erred-:e-the-eenace?
° allocated under paragraph (b), clause (2).
� fd) On October 1 1997 and annuallv on each October 1
' thereafter one-half of the monev in the excess contributions
_ holdina account undec naraozanh (b1, elause (21, colleeted
> durinq the immediately vrecedina Sulv 1 throvoh June 30 neriod
_: must be allocated bY the commissioner of revenue to all local
_= nolice or salaried firefioitex zeiief associations covernec by
_2 and in full com�liance with section 69.77 that had an unfunded
_� actuar�al accrued liabilitv in the actuarial valuation �ieoared
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Public Employees Retirement Association of Minnesota
Suite 200 — Skyway Level
514 St. Peter Street
St. Paul, Minnesota 55102 Q k�
(OFFIC� 67 2-2 9 6 74 6 0
QOLL FREt� 1-800-652-9026 4 }
(FAXl 612-297-2547
°lG-1.8�
January 9, 'f 996
MS SHI�LEY DAVIS
ST PAUL POLICE AND FIRE CONSOLIDATION
219 CITY HALL
ST PAUL MN 55102
Dear Ms. Davis:
We have finally received the actuarial work from Milliman & Robertson, Inc.
(M&R) that determines the cost of adopting the new early retirement reduction fiactors
effective July 1, 1996. A copy of this information has also been sent to a former
member of the relief association board of trustees, if we had received a request from
one of them.
This information was delayed because M&f2 also wanted to provide you with the
adjusted actuariai numbers resulting from some assumption changes that will be put
into place for the July 1, 1996, valuation ofi your consolidaied account(s). The cover
memo prepared by the actuary explains the changes that will be implemented once the
Legislative Commission on Pensions and Retirement formally adopt them. We expect
this to occur when the Commission meets with the actuaries later this month or early in
February.
We would be happy to make staff available to discuss these numbers or any
other consolidation financing issues with you. Please feel free to contact me at 296-
8358, or Martin Kvidera at 296-8302 if you have any questions or would like to set up a
meeting to discuss the enclosed information.
Sincerely,
Ma�Mo �4� ���
�t Vanek, Director
Legislative & Member Services
Enclosure , -
Equ.il Oppor W nity Employer
a �-���
PUBLIC EMPLOYEES RELIEF ASSOCIATIOl�
POLICE AND FIRE CONSOLIDATION ACCOUNT
�.EXPLANf1TIDNOFATTACH D PPLEMENTA�, O T MMARY
The attached sheet, relating to the individual relief association consolidation account so
indicated, provides useful information about the estimated cost impact of possible assumption
and benefit changes. This sheeY is intended to help you understand the results shown on the at-
tached sheet.
Column (a) provides the contribution information which was developed in the formal July 1,
1995 actuarial valuation. Line 2 of this column, if positive, should be consistent with the
additionai municipal contribution requirement that has previously been communicated to you (if
this number is neaative, you would not have received a supplemental billing).
Column (b) provides contribution information calculated as if the actuazial assumptions proposed
for adoption by the PERA Police and Fire Fund had been in place for the July 1, 1995 valuation.
These new assumptions are based on a recently completed experience study of the PERA Police
and Fire Fund. Minnesota Statutes require the use of the same actuarial assumptions for the
Police and Fire Consolidation Accounts. We expect these new assumptions to be adopted prior
to the July 1, 1996 valuations. The most direct measurement ofthe impact ofthe assumption
change is the difference between line (4), column (b), and line (4), column (a); this impact varies
by account. Most groups will see a modest increase; well-funded groups will see no change;
groups with si�nificant retiree liability outside of MPRIF inay see a decrease.
Column (c) shows the results reflectin� the ne�v early retirement reduction factors and a 2.6�%
multiplier. Since most groups are already usin� the 2.6�% multiplier, line (4), column (d),
represents the cost increase associated with the more generous early retirement provisions.
These more generous provisions have been enacted, but are subject to individual municipality
approval. For those groups �vho have not yet adopted the 2.65°/u multiplier, line (4), column (d),
represents the cost increase to increase tha multiplier and to adopt the new early retirement
provisions.
MILLIMAN & ROBERTSON, INC.
ql.-G�'?
Estimated Impact of Police and Fire
Assumption and Benefit Changes on Local
Relief Association Consolidation Accounts
For
St. Paul Fire Consolidation Account
as �all changes were effective July 1, 1995
(1)� Regular Municipai Contribution
i
(2)y Additional Municipal Contribution
(3)!i Theoretical Municipal Contribution
Municipal Cash Contribution Requirement
Regular Employee Contribution
(6)ij Total Statutory Contribution
�
i F
'� f . Increase
Wrthout _ i With (:; W�th ;,: Due To
�ssumption Assuinption �- Benefit ` ::' Benefit :
Chan C Charige Ghange
-��J :.�� �.1�-�.����
1,484,315 1,484,315 � 1,4 II 0
�
--�
1,815,367 �I 2,301,352 ,� 2,549,930 j 248,578
3�99,682;, 3,785,667�I 4,0�4,245'y4 248,578
3,299,682I 3,785,667 i 4,034,245 � 248,578
989,543 989,543 i 989,543 i 0
a 289,225 � 4,7 217� 0� 5,023,788Ij 248
(1) 11.4°/a percentage of covered pay.
(2) Total of amortization charges (credits).
(3) Sum of(1) plus (2).
(4) "Ihe �reater of (I) or (3). Does not reflect possible supplementary requirements for transfer to MPRIF.
(5) 7.6% percenta�e ofcovered pay.
(6) Sum of (3) plus (5), but not less than 50.
a�-���
Estimafed Impacf of Police and Fire
Assumption and Benefit Changes on Local
ReIief Association Consolidation Accounfs
For
St. Pau� Police Consolidation Account
as if all changes were effective July 1, 1995
Regular Municipal Contribution
Additional Municipaf Contribution
Theoretical NTunicipal Contribution
Municipal Cash Confribution Requirement
Regular Emptoyee Contribution
Total Statutory Contribution
� � ��
Increase "
Without � Wrth � Wrth � "AueTo :
Assumphon: Assumption,[ . Benefit, ._? _-:..Benefit. '
Change �� Charige �k C �_ ;Change
a � (b): .L� �
1,764,540j 1,764,540i 1,764,540;( 0
426,364'I 837,324 � 1,132,059
2,190,904 i 2,601,864 , 2,89 56 99
294,735
294,735
2,190,904 �� 2,601,864 �� 2,896,599 �� 294,735
1,176,360 II 1,176,360 . 1,176,360
�,
3,367,264I, 3,778,224I 4,072,959
(1) 11.4% percentage ofcovered pay.
(2) Tota1 of amortization char�es (credits).
(3) Sum of (I) plus (2).
(4) The �reater of (1) or (3). Does not reflect possible supplementary requirements for transfer to MPRIF.
(5) 7.6% percenta�e of covered pay.
(6) Sum of (3) plus (�), but not less than S0.
n
294,735