8.1. SR 06-04-2012 - Laserfiche WebLink

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CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL. STATEMENTS DECEMBER 31, 2011 Note 4: OTHER INFORMATION - CONTINUED d. Funded Status and Funding Progress As of January 1, 2011, the most recent actuarial valuation date, the funded status of the plan was as follows: Municipal Utility Retiree Retiree Health Plan Health Plan Actuarial accrued liability (a) $ 908,610 $ 42,681 Actuarial value of plan assets (b) - - Unfunded actuarial accrued liability (a -b) $ 908,610 $ 42,681 Funded ratio (b /a) 0.00% 0,00% Covered payroll (c) $ 6,901,671 $ 2,286,547 Unfunded actuarial accrued liability as a percentage of covered payroll ((a - b) / c) 13,17% 1,87% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and healthcare cost trends. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information, following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. e. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The methods and assumptions used include techniques that are designed to reduce the effects of short -term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long -term perspective of the calculations. For the MRHP, in the January 1, 2011 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions included a 4% investment rate of return and an annual healthcare cost trend rate of 8% initially, reduced incrementally to an ultimate rate of 5% after six years. The actuarial value of assets was not determined as the City has not advance- funded its obligation. The plan's unfunded actuarial accrued liability was amortized as a level dollar amount over a closed basis. The remaining amortization period at December 31, 2011 was thirty years. For the URHP, the following simplifying assumptions were made: Retirement age for active employees — Based on the historical average retirement age for the covered group, active plan members were assumed to retire at age 62, or at the first subsequent year in which the member would qualify for benefits. Participation Rate — It is assumed that 10% of active participants continue coverage until age 65. Participants are assumed to continue in their current coverage type (single or family). It is assumed that 100% of retirees will continue their current coverage until age 65. 62