05 Audit for FY01-02 - Laserfiche WebLink

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City of Paris, Texas Notes to Financial Statements (Continued) September 30, 2002 Other Information (Continued) G. Employee Retirement Systems and Plans (Continued) 2. Firefighter's Relief and Retirement Fund (Continued) Annual Pension Cost The actuarial valuation date used to determine the Annual Required Contribution for the year ended September 30, 2002, and the most current available information required for disclosure under Paragraph 22 of GASB Statement NO. 27 is January 1, 2001. The actuarial cost method used in the January 1, 1999, valuation is the aggregate entry age normal actuarial cost method. This method is also referred to as the entry age actuarial cost method under the terminology developed by the Joint Committee on Pension Terminology. The valuation measures the actuarial balance between the present value of future benefits and the sum of (i) the present value of future contributions and (ii) the actuarial value of assets. The plan is not subject to the minimum funding requirements of Internal Revenue Code Section 412. There has been no change in the actuarial cost method since the last actuarial valuation. The actuarial assumptions used in the actuarial valuation performed as of January 1, 2001, include a rate of return on the investment of present and future assets of 8.00 percent per year compounded annually; UP 1994 Mortality Table; termination rates from the Actuary's Pension Handbook; disability rates from 1985 Society of Actuaries Disability Table Study; and assumed retirement age of 55. Compensation increases for individual members and total payroll is 4.5 percent compounded annually. Projected Post retirement benefit increases are zero. The amortization of the unfunded actuarial accrued liability was determined as a level percentage of payroll. The amortization period is an open amortization period over 19.3 years. The actuarial value of assets is smoothed market value. Calculation of the actuarial value of assets begins with an "initial asset value." The initial asset value is the market value of assets five years prior to the valuation date. Ail receipts from contributions, interest, dividends, and miscellaneous income over the last five years are added to the initial asset value. Likewise, all benefit payments, contri- bution refunds, and expenses are subtracted from the initial asset value. In this manner, all such receipts and disbursements are recognized immediately. The rate of return on present and future assets assumes that inflation and real interest rates will produce a combined rate of return of 6.00 percent per annum. 37