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NOTE 9—EMPLOYEE BENEFITS�CONTINUED� Effective January 1, 1998, the City signed new deferred compensation plan administration agreements with the deferred compensation providers to provide for the administration and management of employees' deferred compensation plan assets. These agreements incorporate changes in the law governing deferred compensation plan assets which now require plan assets to be held for the exclusive benefit of plan participants and their beneficiaries. Since the assets held under these new plans are not the City's property and are not subject to claims by general creditors of the City, they have been excluded from these financial statements. Effective January 28, 2003, the City implemented a retirement enhancement plan (401-A defined contribution plan) for certain executive management employees. In February 2005, a plan amendment was adopted to extend the 401-A plan to all members of the executive management employees. Under this plan,the City contributes 2% of the employees' compensation into the 401-A plan. NOTE 1 O—NET ASSETS AND FUND BALANCES GASB Statement No. 34 adds the concept of net assets, which is measured on the full accrual basis,to the concept of fund balance, which is measured on the modified accrual basis. A. NetAssets Net assets are the excess of all the City's assets over all its liabilities, regardless of fund. Net assets are divided into three captions under GASB Statement No. 34. These captions apply only to net assets, which is determined only at the government-wide level and are described below: Invested In capltal assets, net ofrelated debt describes the portion of net assets which is represented by the current net book value of the City's capital assets, less the outstanding balance of any debt issued to finance these assets. Restrlcted describes the portion of net assets which is restricted as to use by the terms and conditions of agreements with outside parties, governmental regulations, laws, or other restrictions which the City cannot unilaterally alter. These principally include developer fees received for use on capital projects, debt service requirements, and redevelopment funds restricted to low and moderate income purposes. Un�est�lcted describes the portion of net assets which is not restricted as to use. B. Fund Bala�nces,Reserves and Deslgrlatlons In the fund financial statements, fund balances represent the net current assets of each fund. Net current assets generally represent a fund's cash and receivables, less its liabilities. Portions of a fund's balance may be reserved or designated for future expenditure. Reserves: Portions of fund balance have been reserved for specific purposes as follows: Encumbrances — A reservation is reported for encumbrances outstanding at year-end since they are not considered an expenditure or liability and are reappropriated in the subsequent year. Loans — An amount equal to the non-current portion of loans is reserved as it is not available to finance current operations. The non-current portion is that principal portion of a loan which is not expected to be repaid within 12 months. 53