State Auditor’s Working Group Recommends Increasing Fire Relief Benefit Cap

The working group passed the recommendation over the objections of several cities concerned that the change could negatively impact fire relief fund balances.
(Published Feb 5, 2018)

A working group convened by State Auditor Rebecca Otto voted Jan. 31 to support legislation that would increase the maximum allowable lump-sum benefit cap for fire relief associations from $10,000 to $15,000 per year of service.

While not binding, recommendations of the State Volunteer Fire Relief Association Working Group are forwarded to the Legislative Commission on Pensions and Retirement (LCPR) and in the past, the recommendations have generally been included as provisions in the omnibus pension bill.

Although the League does not have a specific policy position on the allowable lump-sum benefit cap, LMC policies support the decision-making authority of local elected officials to set the terms and conditions of employment, including employee compensation and employee benefits.

The League has expressed concerns with this potential change because, under certain circumstances, existing statute allows a fire relief board to increase benefits up to the cap without municipal ratification. The working group passed the recommendation over the objections of several cities that expressed opposition to the change because it would have the potential to drain healthy fire relief fund balances.

It’s important to note that, while the change would increase the maximum allowable lump-sum benefit level for all relief associations, currently very few relief associations are offering benefits near the current $10,000 limit and would meet the requirements to offer a benefit level at a higher maximum without approval by the city.

Approved by LCPR in 2016 and 2017
This issue is not new to the LCPR. In fact, the move to a $15,000 cap has been included in omnibus pension bills passed in each of the last two sessions. Both omnibus bills were vetoed by Gov. Dayton because of his objections to unrelated provisions.

The benefit cap adjustment began as special legislation for the Eden Prairie Firefighter Relief Association during the 2016 legislative session. The proposal was unexpectedly expanded by the LCPR from an Eden Prairie-only provision to a general provision that would be applicable to all defined benefit relief associations. At that time, the League did not object to the measure because we believed any increase at the local level would require municipal ratification.

The League did raise concerns about the provision in 2017, when it was repassed by the LCPR, on the basis that existing statute allows fire relief associations to increase benefit levels without municipal ratification under certain circumstances.

Background on municipal ratification
Relief associations are generally required to obtain ratification from the affiliated municipality or independent nonprofit firefighting corporation of a benefit level change before the change becomes effective. However, under certain circumstances, including if there are surplus funds in the fire relief account, there is authority for a relief association to increase its benefit level without obtaining ratification.

Whether a relief association is required to obtain ratification depends on if the relief association has a surplus and if the municipality is required to provide financial support. There is a risk if a relief association decides to increase benefits on its own. If the benefit level is increased without ratification and a contribution should subsequently become required, the benefit level is no longer effective without ratification, and any future benefits can be paid using only the ratified benefit level (i.e., the relief association must drop its benefit level to the last ratified level).

According to the Office of the State Auditor (OSA), there are about 30 relief associations operating at benefit levels that have not been ratified by the affiliated municipality or independent nonprofit firefighting corporation.

About the working group
The State Volunteer Fire Relief Association Working Group is composed of eight fire relief representatives, two municipal officials, and Auditor Otto. The group began meeting in 2004. According to the OSA website, the purpose of the working group is “To bring together the major volunteer fire relief association stakeholders to develop relationships, open communication, discuss relief association issues, and make the pension process easier and more effective by:

  • Clarifying applicable state laws.
  • Simplifying reporting forms.
  • Discussing training opportunities.
  • Addressing any other relevant issues.

The process of the working group is to “forward suggested statutory changes upon consensus to the Legislative Commission on Pensions and Retirement.”

Next steps
The LCPR is expected to hear and possibly discuss this recommendation at its next meeting on Feb. 6 at 11 a.m. in room 1150 of the Minnesota Senate Building. Members who wish to express concerns about this proposal should contact their own legislators as well as members of the LCPR.

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