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3. Scandia Fire Relief request for cost benefit analysis Staff Report Date of Meeting: August 7, 2019 To: City Council From: Mike Hinz, Fire Chief Re: Cost Analysis of Fire Relief Benefit Level Background: Scandia is part of the state wide volunteer firefighter retirement plan. On July 26th we received a letter from the state telling us our plan has a surplus. The letter also gave a recommendation to request a cost analysis of a benefit level change from $2,800/year of service. Their review stated we could increase to $3,500/year of service. This account is funded by the Fire state aid we receive and interest earned on the assets. Issue: Should the city request a benefit level change cost analysis? Proposal Details: Scandia Fire Relief Association is asking the city to request a cost analysis of our benefit level in the amount of $3,300, $3,400 & $3,500. Fiscal Impact: There is no cost to have the analysis done by the state. Options: (1) Direct staff to submit the request for cost analysis to the state (2) Do nothing Recommendation: Option (1). City of Scandia Benefit Level Review As of July 19, 2019 The purpose of this review is to provide an analysis of your annual financial requirement, the cost of being in the pension business, compared to the amount of annual reductions, Fire State Aid and investment earnings, based on your current benefit level. At a minimum, the amount of the annual Fire State Aid should be dedicated to cover those financial requirements. If a portion of your annual Fire State Aid is not dedicated to the annual financial requirement, please consider the information below in determining if your entity should request a cost analysis for a benefit level increase. We have provided an estimated benefit level at which the annual Fire State Aid would cover the annual financial requirement. If you have dedicated your annual Fire State Aid along with a portion of your annual investment earnings, we have provided an estimated benefit level at which the annual Fire State Aid along with the annual 6% investment earning would cover the annual financial requirement. An upper range, if you will. Sponsoring organizations with benefit levels that incur annual financial requirements greater than the annual reduction amount will owe a required contribution. Outcome: Fire State Aid, along with investment earnings, are dedicated to annual financial requirement. Current Benefit Level Analysis Current Benefit Level:2,800$ Financial Requirement at 12/31/2020 42,494$ Fire State Aid 35,241$ 6% Interest on Projected Present Assets 36,260$ For your information, below is the estimated benefit level where the annual Fire State Aid along with the annual investment earnings cover the annual financial requirement. Estimated Benefit Level Analysis FSA plus Investment Earnings = Financial Requirement Estimated Benefit Level:3,500$ Financial Requirement at 12/31/2020 68,939$ Fire State Aid 35,241$ 6% Interest on Projected Present Assets 36,260$ We hope this review provides guidance for your organization relating to a range of benefit levels,the financial requirements at those levels, and reductions available to cover those financial requirements. The request for a cost analysis of a benefit level increase form is attached to this email if you would like to have more detailed information provided to you pertaining to various benefit levels. Scandia Fire & Rescue 2,800 3,300 3,400 City of Scandia 3,500