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<br />50
<br />
<br />Funded Status and Funding Progress. As of June 30, 2013, the latest valuation
<br />date, the funded status of the Plan, was as follows:
<br />
<br />Actuarial Valuations
<br />Actuarial accrued liability (AAL) $16,081,000
<br />Actuarial value of Plan assets 1,505,000
<br />Unfunded actuarial accrued liability (UAAL) 14,576,000
<br />Funded ratio (actuarial value of Plan
<br />assets/AAL)
<br />9%
<br />Covered payroll (active Plan members) 28,131,000
<br />UAAL as percentage of covered payroll 51.8%
<br />
<br />Actuarial valuations of an ongoing Plan involve estimates of the value of
<br />expected benefit payments and assumptions about the probability of occurrence of
<br />events far into the future. Examples include assumptions about future employment,
<br />mortality, and the healthcare cost trend. Amounts determined regarding the funded
<br />status of the Plan and the annual required contributions of the employer are subject to
<br />continual revision as actual results are compared with past expectations and new
<br />estimates are made about the future. The following table presents information that
<br />shows whether the actuarial value of Plan assets to be decreasing over time relative to
<br />the actuarial accrued liability for benefits.
<br />
<br />Actuarial
<br />Valuation Date
<br />
<br />
<br />Actuarial
<br />Value of
<br />Assets (A)
<br />Actuarial
<br />Accrued
<br />Liability
<br />(AAL)
<br />Entry Age (B)
<br />
<br />Unfunded
<br />AAL
<br />(UAAL)
<br />(B–A)
<br />
<br />
<br />Funded
<br />Ratio
<br />(A/B)
<br />
<br />
<br />Annual
<br />Covered
<br />Payroll (C)
<br />
<br />UAAL as
<br />Percentage of
<br />Covered Payroll
<br />((B–A)/C)
<br />June 30, 2007 $0 $20,977,000 $20,977,000 0.00% $32,564,000 64.4%
<br />June 30, 2009 500,000 16,853,000 16,353,000 3.00 29,408,000 55.6
<br />June 30, 2011 1,102,000 17,281,000 16,179,000 6.40 29,276,000 55.3
<br />June 30, 2013 1,505,000 16,081,000 14,576,000 9.00 28,131,000 51.8
<br />
<br /> Source: City of San Leandro.
<br />
<br />Actuarial Methods and Assumptions. Projections of benefits for financial
<br />reporting purposes are based on the substantive Plan (the Plan as understood by the
<br />employer and the Plan members) and include the types of benefits provided at the time
<br />of each valuation and the historical pattern of sharing of benefit costs between the
<br />employer and Plan members to that point. The actuarial methods and assumptions
<br />used include techniques that are designed to reduce the effects of short–term volatility in
<br />actuarial accrued liabilities and the actuarial value of assets, consistent with the long–
<br />term perspective of the calculations.
<br />
<br />In the June 30, 2013 actuarial valuation, the entry age normal actuarial cost
<br />method was used. The actuarial assumptions included a 5.5% investment rate of return.
<br />Assets in the Plan are invested in a moderately conservative portfolio that will provide
<br />current income with capital appreciation as a secondary objective. A 3.0% general rate
<br />of inflation was used, as well as 3.25% aggregate payroll increases. Healthcare cost
<br />trends utilized actual premium rates for 2014. Future years costs were thereafter
<br />reduced to an ultimate rate 5% for both HMO and PPO plans by 2021. The unfunded
<br />actuarial accrued liability (“UAAL”) is being amortized as a level percentage of projected
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