The Shakopee Fire Department Relief Association (SFDRA) approved an amendment to the Association's bylaws at their member meeting on April 16. In order for the bylaw amendment to become effective, it needs to be approved by the City Council. The bylaw amendment becomes effective once approved by the City Council. 

Appendix A of the attached bylaws includes a summary of the changes and also a history of bylaw amendments. The yellow highlighted areas of the bylaws are the areas that are changing.

The major changes to the bylaws includes adding language that survivor benefit includes earned deferred interest. The current bylaws exclude the benefit of deferred interest for survivors of participants who are retired from or ceased active service. The other major change is the request for a change in the pension benefit.

Last summer the City Council adopted a guideline for approving benefit increases for the SFDRA. The goal of the guideline is to ensure the SFDRA assets are sufficiently funded compared to the liabilities before requesting a pension benefit from the City Council. This guideline helps ensure that no additional city contribution is required to fund the pension benefit increase request. 

The SFDRA pension has been above 100 percent since 2013 and the city has not contributed any additional funds since 2014. The Council approved a pension benefit level increase of 3 percent last year, effective August 1, 2017 based on the Funding Coverage Percentage (FCP) of 114.4 percent.  Based on the FCP of 125.6 percent as of December 31, 2017, the SFDRA is requesting an increase of 5 percent or $400 per year of service, bringing the total yearly pension benefit to $8,425. The pension increase would become effective August 1, 2018.

Below is a recap of the pension benefit guideline approved last summer.

The recommended Funding Coverage Percentages (FCP) and corresponding per year of service pension benefit percentage increases are as follows:

1. FCP less than 112% no increase
2. FCP 112% or greater 3% increase
3. FCP 117% or greater 4% increase
4. FCP 122% or greater 5% increase
5. FCP 127% or greater 6% increase

The guideline also recommends further stipulations including:

• The actual dollar amount increase would be rounded to the nearest twenty-five-dollar increment.
• As a further protection and control, it is recommended that there should be no increases in the pension benefit for one year after the last mandatory city contribution. This provides a buffer and additional safeguard for the volatility that may occur when large market corrections occur.
• All spreadsheets and financial models created by SFDRA Board members, and investment professionals should be regularly updated with current information and reviewed at the annual pension benefit discussion in April.
• This guideline may be amended by future councils at their discretion.

Even though the guideline has protections built into it to safeguard against the city needing to make mandatory contributions. These safeguards are not a 100 percent guarantee.  A large correction in the financial markets could bring the FCP below 100 percent and subsequently require a mandatory city contribution.