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� <br />REBECCA OTTO <br />STAT'E AUDITOR <br />STATE OF MINNESOTA <br />OFFICE OF THE STATE AUDITOR <br />SUITE 500 <br />(651) 296-2551 (Voice) <br />525 PARK STREET (651) 296-4755 (Faac) <br />SAINT PAUL, MN 55103-2139 state.auditor@state.mn.us (E-mail) <br />1-800-627-3529 (Relay Service) <br />Statement of Position <br />Required Municipal Contributions to Volunteer Firefighters' Pension Plans <br />State law requires a municipality to pay a minimum annual contribution to the special fund of <br />its affiliated volunteer fire relief association, unless the special fund is fully funded or fire state <br />aid is sufficient to cover the municipal obligation.' The special fund is a fund established and <br />maintained within a relief association to pay service pensions to retiring members. A pension <br />plan is "fully funded" when there are sufficient assets to cover future liabilities. <br />The funded status of a special fund is affected primarily by changes to benefit levels (i.e., <br />liabilities increase) and by investment gains or losses (i.e., assets increase or decrease). Benefit <br />increases and investment losses decrease a fund's assets, thereby increasing the likelihood that <br />a municipal contribution will be required. A decrease in the funded status will also likely <br />increase the size of the required contribution. <br />Whether a municipal contribution is required and the amount of the required contribution is <br />determined by using a statutory formula. The formula varies depending on whether the plan is <br />� a lum sum plan or a monthly service pension plan.2 <br />Lump Sum Plans ' <br />For lump sum plans, the minimum required municipal contribution equals the financial <br />requirements of the special fund minus 1) the amount of fire state aid to be received during the <br />following calendar year; and 2) the amount of any contributions to the special fund from the <br />active members of the relief association to be received during the following calendar year. In <br />addition, five percent annual interest on the assets is also subtracted.3 <br />The minimum required contribution is calculated by the officers of the relief association during <br />the month of July for the following year.4 To calculate the minimum required municipal <br />' Minn. Stat. § 69.772, subd. 3& 4; Minn. Stat. § 69.773, subd. 5. In some instances, a municipal <br />contribution may be triggered even though the pension plan is fully funded. <br />2 See Minn. Stat. § 69.772, subd. 3(for lump sum service pensions) and Minn. Stat. § 69.773, subd. 5(for <br />monthly service pensions). There is no required municipai contribution for a defined contribution plan. <br />3 Minn. Stat. § 69.772, subd. 3(d). <br />`' The Schedule Form, provided by the Office of the State Auditor, calculates the amount of any required <br />municipal contribution for the following year. For example, the 2010 Schedule Form will calculate the <br />required municipal contribution amount for the year 2011. <br />� Reviewed: December 2010 <br />Revised: December 2010 <br />This Statement of Position is not legal advice and is subject to revision. <br />2009-2001 <br />An Equal Opportunity Employer <br />