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