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City of San Leandro <br />Notes to Basic Financial Statements <br />For the year ended June 30, 2013 <br />NOTE 15 — OTHER POST EMPLOYMENT BENEFITS (Continued) <br />C. Plan Funded Status Information <br />As of June 30, 2011, the latest valuation date, the funded status of the plan, was as follows: <br />Actuarial Valuations <br />Actuarial accrued liability AAL <br />$17,281,000 <br />Actuarial value of plan assets <br />1,102,000 <br />Unfunded actuarial accrued liability (UAAL) <br />16,179,000 <br />Funded ratio actuarial value of plan assets/AAL <br />6% <br />Covered payrofl active plan members <br />29,276,000 <br />UAAL as percentage of covered payroU <br />55.3% <br />Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and <br />assumptions about the probability of occurrence of events far into the future. Examples include <br />assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined <br />regarding the funded status of the plan and the annual requires contributions of the employer are subject <br />to continual revision as actual results are compared with past expectations and new estimates are made <br />about the future. The schedule of funding progress, presented as required supplementary information <br />following the notes to the financial statements, present multi-year trend information that shows whether <br />the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued <br />liabilities for benefits. <br />D. Actuarial Methods and Assumptions <br />Projection of benefits for financial reporting purposes are based on the substantive plan (the plan as <br />understood by the employer and plan members) and include the types of benefits provided at the time of <br />each valuation and the historical pattern of sharing benefit costs between the employer and the plan <br />members to the point. The methods assumptions used include techniques that are designed to reduce the <br />effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent <br />with the long-term perspective of the calculations. <br />In the June 30, 2011 actuarial valuation, the entry age normal actuarial cost method was used. The <br />actuarial assumptions include 5.5% investment rate of return, compared to the City's own year to date <br />investment yield 1.37%. Assets in the plan are invested in a moderately conservative portfolio that will <br />provide current income with capital appreciation as a secondary objective. A 3.0% general rate of <br />inflation was used, as well as 3.25% aggregate payroll increases. <br />The unfunded actuarial accrued liability (URAL) is being amortized as a level percentage of projected <br />payroll over a 30 year closed amortization period. There is no assumed post retirement benefit increase. <br />• Healthcare costs trends utilized actual premium rates for 2013. Future years were reduced to <br />an ultimate rate 5% for both HMO and PPO plans by 2021. <br />• The CPI was assumed to be a constant at 3% per year. <br />• Assets in the plan will be invested in a moderately conservative money market portfolio that <br />will provide current income with capital appreciation as a secondary objective. <br />• 5.15% Investment rate of return (net of administrative expenses). <br />78 <br />