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Home My WebLink About6.c. Fire Relief Association Benefit Increase4ROSEMOUNTEXECUTIVE SUMMARY CITY COUNCIL City Council Regular Meeting February 17, 2015 AGENDA ITEM: Fire Relief Association Benefit Increase AGENDA SECTION: Consent PREPARED BY: Dwight Johnson, City Administrator AGENDA NO. 6.C. ATTACHMENTS: Letter; Calculation of Surplus APPROVED BY: ddj RECOMMENDED ACTION: Motion to approve a benefit increase from $6,900 to $7,000 per year of service for the Rosemount Fire Relief Association effective immediately. BACKGROUND: In 2014, the City Council held a meeting with the Fire Relief Association and also had several budget discussions regarding future required property tax levies and benefit increases. Relief Association officers worked with staff to identify a number of spreadsheet scenarios. In August 2014, the Council directed staff to proceed to prepare the 2015 budget with the pension levy reduced from $171,000 per year to $109,100 and the benefit increased per year of service by $100 to $7,000 for qualified persons. The staff recommended that a surplus of $500,000 be maintained in the Fire Relief Association to protect against possible future downturns in investment income. The attached Form SC -14 and the spreadsheet projections from 2014 show that this amount of surplus will be maintained even with the $100 increase. The Fire Relief Association has now formally taken action to request the $100 increase as discussed and planned in 2014. RECOMMENDATION: Staff recommends approval of the request to increase the benefit from $6,900 to $7,000 per year of service effective immediately, based upon the financial plan reviewed by the Council in August, 2014. Rosemount Relief Association Benefit Increase Request of $100 Over the past year the Relief Association has worked with the City Council to begin to reduce the large municipal contribution that is being put into the Relief Association funds. After the large 2008 market downturn, the Relief Association funds have maintained a surplus since 2012, increasing each year to around $590,000 for 2014. The surplus is the difference between the assets in the fund and the calculated liabilities of the firefighter pensions as of that year. Each year the liabilities increase by an amount called the normal cost. This is based on adding a year of service for each firefighter multiplied by the current benefit level. This amount will change as the number of firefighters change and the year of service approach 20 (under 20 years are partially vested and the full amount is not included in the liability calculation). In 2014 the normal cost is $285,563. The Assets increase each year by 3 sources. The gains/losses from the funds the assets are invested in, the state aid that is received, and the contribution from the city. As the assets outgrow the liabilities and the surplus grows. When meeting with the Council last year a number of projections was presented with various Benefit level increases along with various reductions in the city contribution. In the last round of scenarios that was reviewed there was a reduction of $62,000 to the city contribution bringing the amount to $109,000 for 2015. We are proposing a benefit increase of $100 to bring the benefit level to $7,000. With the decrease to the contribution and the increase to the benefit level the projected surplus for 2015 is $626, 294 (an increase of $36,000 from 2014). Despite increasing the benefit level, because of the surplus amount we are not increasing the amount of the city contribution, but in fact we will work with the council to continue reducing the contribution amount. By increasing the benefit level $100, and continuing to reduce the city contribution while maintaining the surplus amount over the $500,000 level, we feel we are working towards the goal of trying to provide incentive to retain firefighters past their 20 year service mark without impacting the continuing reduction to the city contribution amount. If there are any questions or more information is needed please reach out to Chad Ganfield and he will provide the answers or contact the appropriate Relief Association board members to get the information if needed. Thanks, Form SC -14 Rosemount Fire Relief Association Calculation of Normal Cost Total Active Member Liabilities Total Deferred Member Liabilities Total Unpaid Installments Grand Total Special Fund Liability Normal Cost (Cell B minus Cell A) Page 4 2014 2015 2,153,760 2,424,940 568,309 586,566 0 0 A. 2,722,069 B. 3,011,506 C. 289,437 Projection of Net Assets for Year Ending December 31, 2014 Special Fund Assets at December 31, 2013 (RF -13 ending assets) 11 2,886,957 Projected Income for 2014 State Fire Aid (regular state fire aid and supplemental state aid) D. 96,500 Municipal / Independent Fire Dept. Contributions E. 171,000 Interest / Dividends F. Appreciation / (Depreciation) G. 144,348 Member Dues H. Other Revenues I. Total Projected Income for 2014 (Add Lines D through I) 21 411,848 Projected Expenses for 2014 Service Pensions J. 16,800 Member Names: Terry Mooney i I Other Benefits K. Administrative Expenses L. Total Projected Expenses for 2014 (Add Lines J through L) 3 16,800 Projected Net Assets at December 31, 2014 (Add Lines 1 and 2, subtract Line 3) 41 3,282,005 Projection of Surplus or (Deficit) as of December 31, 2014 Projected Assets (Line 4) 5 3,282,005 2014 Accrued Liability (Page 4, cell A) 6 2,722,069 Surplus or (Deficit) (Line 5 minus Line 6) 7 559,936 Form SC -14 Rosemount Fire Relief Association Page 4 - Cont. Calculation of Required Contribution Deficit Information - Original Deficit Information - Adjusted Amount Retired Amount Retired Amount Left Year Incurred Original Amount as of 12/31/2013 Original Amount as of 12/31/2014 to Retire 1/1/2015 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Totals Normal Cost (Page 4, cell C) 8 Projected Administrative Expense Enter 2013 Admin Exp here: 9F-13,657 Amortization of Deficit (Total of Original Amount column x 0.10) 10 10% of Surplus (Line 7 x 0.10) 11 State Fire Aid 12 Member Dues 13 5% of Projected Assets at December 31, 2014 (Line 4 x 0.05) 14 Required Contribution (Add Lines 8, 9 and 10, subtract Lines 11, 12, 13 and 14. If negative, zero is displayed.) 15 No required contribution due in 2015. 289,437 14,135 0 55,994 96,500 0 164,100 0