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CITY OF RAMSEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 1994 Note 11. DEFINED CONTRIBUTION PENSION PLAN - FIRE RELIEF ASSOCIATION (Continued) A. Plan Description (continued) For financial reporting purposes, the Association's financial statements are not included in the City of Ramsey's general purpose financial statements because the Association is not a component unit of the City because of the lack of oversight responsibility. B. Pension Benefits Minnesota Statutes Chapters 424 and 424A authorize pension benefits for volunteer fire relief associations. In order to be entitled to a pension benefit, a fire fighter must have completed a minimum of 10 years of service with the Department and 10 years membership in the Association and attain the age of 50 years. The fire fighter will then be 60% vested with every year after that at 4% per year until the 20th year when 100% vesting will occur. Because this plan is a defined contribution plan, the amount of the retirement benefit is not predetermined, but rather is based on the individual member's allocable portion of contributions made during the participation period. Fire Fighter's also have the availability of other pensions such as deferred pension, disability pension, death benefits and supplemental death benefits. Each of these other pension is determined based on age and years of service. C. Contributions Required and Contributions Made Contributions to the plan include State fire aid pursuant to Minnesota Statutes Chapter 69. In addition, the City is allowed to make voluntary contributions of other public funds pursuant to Minnesota Statutes Chapter 69. The City's contribution to the Relief Association in 1994 was $27,899 which represents the entire amount of State fire aid received by the City on behalf of the Relief Association. This contribution represents 99% of the current covered payroll. There were no current year changes in plan provisions. D. Related Party Investments As of December 31, 1994, and for the fiscal year then ended, the Plan held no securities issued by the City or other related parties. Note 12. DEFERRED COMPENSATION PLANS The City offers its employees four deferred compensation plans created in accordance with Internal Revenue Code Section 457. The plans permit employees to defer a portion of their salary into future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseen emergency. The amounts of compensation deferred under the plans, all property and rights purchased with those amounts, and all income attributable to those amounts are solely the property and rights of the City, subject to the claims of the City's general creditors. Participants' rights under the plans are equal to those of general creditors of the City in an amount equal to the fair market value of the deferred account for each participant. It is the City's belief that they have no liability for losses under the plans but do have the duty of due care that would be required of an ordinary prudent investor. The City also believes that it is unlikely that it will use the assets to satisfy the claims of general creditors in the future. —25—