6.1. SR 06-06-2016 - Laserfiche WebLink

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CITY OF ELK RIVER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 7: POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS - CONTINUED D. Funded Status and Funding Progress As of January 1, 2014, the most recent actuarial valuation date, the funded status of the plan was as follows: Municipal Retiree Health Plan Actuarial accrued liability (a) $ 996,344 Actuarial value of plan assets (b) - Unfunded actuarial accrued liability (a -b) $ 996,344 Funded ratio (b/a) - % Covered payroll (c) $ 7,442,216 Unfunded actuarial accrued liability as a percentage of covered payroll ((a - b) / c) 13.4 % Utility Retiree Health Plan 68,948 $ 68,948 $ 2,810,413 2.5 % 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, 2014 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 7.5% initially, reduced incrementally to an ultimate rate of 5% after ten 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, 2015 was over no more than thirty years. -83-