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<br />..NOTE 9 ~ EMPLOYEE BENEFITS (CONTINUED)
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<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 Requ.ired Supplementary Jnformation
<br />following the notes to the financial statements, presents multiyear trend. . information about whether the
<br />actuarial val.ue of plan assets. is increwdng or decreasing. over. time relati.ve! to the actuarial accrued
<br />liabilities for benefits. Since this"is the first year of including this infonnatiori in the finanCial rep<;lrt, the
<br />:, data presented is I..imit~,t' . ' .
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<br />Projectioil,S. of benefits. for financial reporting purposes ~e b~c;ed on the substantive plan (the plan as
<br />understood'by th~: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 em'pJoyer and plan
<br />members. to that point. The actuarial :rnethods and assumptions used: include techniques that- are designed
<br />to reduce the effects.. of short~term volatility .in actuarial accrued liabilities and the. actuarial value of
<br />assets, consistent with the long-term. perspective of t~e ,calcuhl~i?ns. .
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<br />. In, the Jiinuary.1, 2006 a~tuarjaJ, valuation~ the actuarial' ~st method ~s~ is Entry Age Normal. (EAN}.
<br />cost method. Under the 'EAN .cost method, the plan's Nonnal:Cost is developed as a (.evel perccmt of
<br />.payroll throughout the participants' working lifetime. Entry age is ~ased on current age minus years of
<br />service. The. Actuarial Accrued Liahility (AAL) is the:'cuml;lJative value on the valuation :date of prior:
<br />.Normal Cost. For the retirees, th,e AALis the ,present value of all projected benefits. The Unfuf.lded AAL
<br />is be.ing amorti~ed as.a level dollar closed 30 year basis;.Bs a level. percent of payroll with. a .remaining
<br />.amortization period. at January 1, 2006 of30'years.: ' · . :. .:. .
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<br />GASB 4S . requires the;;j~terest.rat~ to represent the. underlying expected return for the source..of funds
<br />,used to, pay benefits. The actuarial methods and assumptions included 4.25% interest rate, representing
<br />the long ter:m :expected ,rate of retum on: the City's pooled inyestments..,f.nnuaJ inflation assumed to'
<br />increase at 3o/~per annuinand Aggregate Payroll assumed to fncrease at .3:.25% per al1num. 'The study
<br />also used assumptions for the salary merit and longevity increases, and demographic assumptions such as.
<br />:mortality,wi.thdrawa~. .and disability based . on, CaIPERS' 1997-2002 .~xpericnce Study. RetiTCme~t
<br />assumption was.atso hased:on CalPERS 199;-2002 Experience Study 9fthe Mjscenan~us PI8!l. 2.7%' at
<br />..5S ye'ars, with exp~cte~(retiremeJlt age of approximately 59, and Public 'Safety :3% 'at 50. years" with
<br />e?,pected.j'etire.ment.ageof approximately 54 for Police and ?5 f6r Fire: : " ,: .
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<br />'.:c.' .. '. Cafeteria Be'i,eflt Plan. ;
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<br />, : The Cj.ty: has a cafeteriaben~fit plan established .p~~suant to section 125 of the IRS code. Under this plan
<br />. ',. eligible employees may direct :a. contribution, made by the.City. into any c~mbination of the fol1owing
<br />. ;three benefit categories:. , ' .. : . ,
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<br />. . 1... ~ M.edical ~nsura.Jlce. Premium Accou~t- .
<br />2. 'Out ofPOckeeMedkal Spendillg.Accoum,
<br />. ' 3., De.pen~ent Care S.pending.AccOunt'
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<br />III ;add-ition to: dire~tingthe City's contribution' to ,the above categ6.ries~ eligible employees may ele.ct to
<br />contribute pre-tax dollars ~o these categori"cs.. Under.'no.circumstances may an employee.direct more than
<br />$5~OOO annually into; the: Dependent:. Care S.pending Ac.count and .$8,000. annuapy. .into the Medical'
<br />Spending Account... This .cap applies to both City. con~ributioJ1s_ai1d employee pre-tax contributions.
<br />There. are no legal limits on contriblltkmsto the Health Premium Account. .. .
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<br />. ': AU regular full-time: ~~d part-:time e~p16ye~s.,em.ployed on:.a.regular and.;'co~tinuous basis,. including
<br />pertain. contractualemployees~are eligible to p~ltticipate in this plan., Te,mporary and casu~1 empLoyees
<br />:--are not eligible'.' The .plan year adopted by. the City begins on JanUary 1 and. ends December 31. To
<br />obtain reiTburs~cnt of expenses inc~~ed within a p.lan. year~lthin the spending accounts (items 2 o.
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