City will need to cover shortfall in Park Rapids firefighters' pension fund
The city of Park Rapids will need to contribute $27,311 to the Firefighter's Relief Association because of a shortfall in the retirement fund.
The city is required by state statute to make a contribution in the event of a shortfall.
Firefighter Mark Gossman and fire chief Donn Hoffman approached the Park Rapids City Council last week to explain the deficit.
Each year, a schedule form for lump sum pension plans and maximum benefit work sheet are submitted to the Office of the State Auditor to be eligible for state fire aid.
"This is the first year that I'm aware of that there's been a deficit in their fund," said city administrator Bill Smith. "This is the first time their investments didn't perform as well as expected."
The annual maximum benefit level is $3,000. The benefit level was increased in 2006 from $2,500, Gossman said.
The shortfall is a result of the investments in 2008.
"Those forms are looking at how our investments did in 2008 and what our projected liabilities were this year," Gossman said. "Anyone who has a retirement account knows what happened in 2008."
The funds have already started to recover, he said.
"Do I foresee this happening again where the city has to make a contribution in 2009? It's too premature to take a stab at it," Gossman said.
Benefits aren't paid out until firefighters reach the legal retirement age.
If the city doesn't pay the benefit out of the general fund, it can be assessed to property owners in Park Rapids.
Smith has asked the League of Minnesota Cities to do some research on options for the city.
Assessing property owners "may be what we have to do this year because it's not in the general fund budget and the governor's unallotment is looming over our head," Smith said.
The council will make a decision on how to make the contribution after hearing from the League of Minnesota Cities.