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City of San Leandro
<br />Notes to Basic Financial Statements
<br />For the year ended June 30, 2012
<br />
<br />
<br />87
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<br />NOTE 15 –OTHER POST EMPLOYMENT BENEFITS, Continued
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<br />The City’s annual OPEB cost, equal to the ARC, the percentage of OPEB cost contributed to the plan and the net
<br />OPEB obligation for 2012 and the preceding years were as follows:
<br />
<br />Fiscal Year
<br />Ended June
<br />30,
<br />Annual OPEB
<br />Cost
<br />Contributions
<br />Made
<br />Percentage of Annual
<br />OPEB Cost
<br />Contributed
<br />Net OPEB
<br />Obligation
<br />2007 N/A N/A N/A
<br />2009 1,791,000 1,411,315 79%379,685
<br />2010 1,870,000 1,359,742 73%510,258
<br />2011 1,387,000 920,415 66%466,585
<br />2012 1,452,000 1,169,503 81%282,497
<br />Total Net OPEB Obligation 1,639,025$
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<br />C. Plan Funded Status Information
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<br />As of June 30, 2009, the latest valuation date, the funded status of the plan, was as follows:
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<br />Actuarial accrued liability (AAL)16,853,000
<br />Actuarial value of plan assets 500,000
<br />Unfunded actuarial accrued liability (UAAL)16,353,000
<br />Funded ratio (actuarial value of plan assets/AAL)3%
<br />Covered payroll (active plan members)29,408,000
<br />UAAL as percentage of covered payroll 55.6%
<br />Actuarial Valuations
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<br />Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the
<br />probability of occurrence of events far into the future. Examples include assumptions about future employment,
<br />mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual
<br />required contributions of the employer are subject to continual revision as actual results are compared with past
<br />expectations and new estimates are made about the future. The schedule of funding progress, presented as required
<br />supplementary information following the notes to the financial statements, present multi-year trend information that
<br />shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued
<br />liabilities for benefits.
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<br />D. Actuarial Methods and Assumptions
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<br />Projection of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the
<br />employer and plan members) and include the types of benefits provided at the time of each valuation and the historical
<br />pattern of sharing benefit costs between the employer and the plan members to the point. The methods assumptions
<br />used include techniques that are designed to reduce the effects of short -term volatility in actuarial accrued liabilities
<br />and the actuarial value of assets, consistent with the long-term perspective of the calculations.
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<br />In the June 30, 2011 actuarial valuation, the entry age normal actuarial cost method was used. The actuarial
<br />assumptions include 5.5% investment rate of return, compared to the City’s own year to date investment yield 1.37%.
<br />Assets in the plan are invested in a moderately conservative portfolio that will provide current income with capital
<br />appreciation as a secondary objective. A 3.0% general rate of inflation was used, as well as 3.25% aggregate payroll
<br />increases. Healthcare cost trend rates were 9.5% increases for HMO, and 10% increase for PPO plans respectively.
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