Deferred Interest Reminders
Important State law changes went into effect in 2014 that affect how relief associations pay interest to deferred members.
Deferred-interest payment methods are now defined in State law. Relief associations that elect to pay interest to a deferred member must decide on an interest payment method, including the interest payment starting date and ending date. Default payment methods for each deferred-interest type are set in statute. A relief association may choose to define a different payment method in its bylaws, but if a method is not defined in the bylaws, or if the bylaw definition does not include the payment starting date and ending date, the default established in statute applies.
Timing of Interest Rates
Interest rates set by a relief association’s board of trustees become payable beginning on January 1 following the date on which the rate was ratified by the municipality or independent nonprofit firefighting corporation. For example, a relief association’s board of trustees sets an interest rate of three percent on December 15, 2020. The affiliated city council ratifies the interest rate at its council meeting on January 20, 2021. The interest rate will become effective on January 1, 2022.
A Statement of Position that provides additional detail regarding statutory requirements for deferred interest payment methods and the timing of deferred interest rates is available on the OSA website.
Published last in the October 2017 Pension Newsletter