C.A.F.R., FY 2011-12 - Laserfiche WebLink

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City of Paris, Texas Notes to Financial Statements September 30, 2012 V. Other Information (Continued) G. Postemployment Benefits Other Than Pensions (Continued) The ARC for 2010 has been calculated to remain at a level dollar amount and the unfunded actuarial accrued liabilities were amortized as a level dollar amount over a period of 15 years. For 2011 and 2012, a closed amortization period for the unfunded actuarial accrued liabilities is 27 years, which is appropriate because the plan has no benefits to employees hired after October 1, 2004. Inflation rate assumption is 3%, healthcare cost trend rate is 3%, and the rate of investment return is 4.5%. The actuarial calculation for the plan reflects a long-term perspective. The Projected Unit Credit Cost Method was used in the valuation. The actuarial present value of benefits allocated to the valuation year is the Normal Cost. The actuarial present value of benefits allocated to all prior periods is the Actuarial Accrued Liability. Actuarial gains (losses) as they occur, reduce (increase) the Unfunded Actuarial Accrued Liability. The City's subsidy for a retiree covered by the plan is assumed to increase 3%. Rates of salary increase vary from 3.5% to 5.25% based on years of service. In prior years, the General Fund has been used to liquidate post- employment obligations. Determination of Unfunded Actuarial Accrued Liability Present Value of Future Benefits i) Retirees and Beneficiaries ii) Vested Terminated Members iii) Active Members Total Present Value of Future Benefits Present Value of Future Normal Costs Actuarial Accrued Liability Actuarial Value of Assets Unfunded Actuarial Accrued Liability Funded Ratio December 31, 2009 2010 2011 $ 1,028,420 $ 1,028,420 $ 765,003 483,343 483,343 2,149,810 1,511,763 1,511,763 2,914,813 173,995 173,995 643,893 $ 1,337,768 $ 1,337,768 $ 2,270,920 $ 1,337,768 0.00% $ 1,337,768 $ 2,270,920 0.00% 0.00% The Unfunded Actuarial Accrued Liability (UAAL) is not booked as an expense all in one year and does not appear in the Employer's Statement of New Assets. The discount rate used is 4.5%. The City intends to obtain an actuarial evaluation of the plan every two years. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future, and actuarially determined amounts are subject to continual revision as results ar,^ rompared to past expectations and new estimates are made about the future. 49