Financial Arrangements with a City or Town
The OSA has recently become aware of a situation in which a relief association has an arrangement with its affiliated city or town in which the city or town manages the finances of the association. Relief associations should be wary of such arrangements due to State statutes that assign certain duties to the relief association officers and/or trustees.
For example, Minnesota law identifies each trustee of a relief association’s board as a fiduciary, and defines the activities of a fiduciary as including, but not limited to: (1) the investment and reinvestment of plan assets; (2) the determination of benefits; (3) the determination of eligibility for membership or benefits; (4) the determination of the amount or duration of benefits; (5) the determination of funding requirements or the amounts of contributions; (6) the maintenance of membership or financial records; (7) the expenditure of plan assets; and (8) the selection of financial institutions and investment products.
In addition, the municipal treasurer must, within 30 days after receipt, transmit the fire state aid to the treasurer of the relief association. The relief association must deposit all fire state aid and all revenues received from the municipality into its special fund.
State statutes require the officers of a defined-benefit relief association to certify to the affiliated city or town on or before August 1 of each year the financial requirements of the association’s special fund and the minimum municipal obligation.
Although the OSA recognizes that a city or town may wish to help its affiliated relief association by assuming an active role in its financial management, the statutory division of responsibilities should be maintained.
The officers of the relief association must undertake the fiduciary and financial responsibilities outlined in State statute and the relief association bylaws. These responsibilities include depositing relief association funds and determining how the funds should be invested, signing checks and authorizing transfers, and completing the annual Schedule Form to determine and certify the minimum required contribution of the affiliated city or town.
Published last in the April 2013 Pension Newsletter