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7.A. - Page 77 Attachment 6 <br /> actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued <br /> liabilities for benefits. <br /> Projections of benefits for financial reporting purposes are based on the substantive plan (the <br /> plan as understood by the employer and the plan members)and include the types of benefits provided at <br /> the time of each valuation and the historical pattern of sharing of benefit costs between the employer and <br /> plan members to that point. The actuarial methods and assumptions used include techniques that are <br /> designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial <br /> value of assets,consistent with the long-term perspective of the calculations. <br /> In the June 30, 2011 actuarial valuation, the actuarial cost method used is Entry Age Normal <br /> (EAN) cost method. Under the EAN cost method,the plari s Normal Cost is developed as a level percent <br /> of payroll throughout the participants'working lifetime.Entry age is based on current age minus years of <br /> service. The Actuarial Accrued Liability (AAL) is the cumulative value on the valuation date of prior <br /> Normal Cost. For the retirees, the AAL is the present value of all projected benefits. The Unfunded AAL <br /> is being amortized as a level dollar closed 30 year basis, as a level percent of payroll with a remaining <br /> amortization period at June 30,2011 of 30 years. <br /> GASB 45 requires the interest rate to represent the underlying expected return for the source of <br /> funds used to pay benefits.The actuarial methods and assumptions included a 7.61%interest rate,annual <br /> inflation at 3% per annum, aggregate payroll assumed to increase at 3.25% per annum, and an annual <br /> healthcare trend rate of 10% for 2012, reduced gradually each year with an ultimate rate of 5% for 2021 <br /> and thereafter. The study also used assumptions for the salary merit and longevity increases, and <br /> demographic assumptions such as mortality, withdrawal, and disability based on Ca1PERS 1997-2007 <br /> Experience Study.Retirement assumption was also based on Ca1PERS 1997-2007 Experience Study of the <br /> Miscellaneous Plan 2.7% at 55 years, with expected retirement age of approximately 58.1, and Public <br /> Safety 3%at 50 years,with expected retirement age of approximately 54.1 for Police and 55.3 for Fire. <br /> Location <br /> The County is one of nine counties comprising the economic geographic unit known as the San <br /> Francisco Bay Area. The County is a major employment base, and is also accessible to the San Jose and <br /> Silicon Valley areas approximately 30 miles south via lnterstate 280 or U.S. Highway 101. San Francisco <br /> International Airport is located in the County. <br /> The City is located in the San Francisco Bay Area 25 miles south of San Francisca It is the oldest <br /> bayside city in the County. The City was incorporated in 1867, and has been the County Seat since 1856. <br /> City limits cover approximately 34 square miles of generally level terrain. The City combines residential, <br /> industrial, and commercial elements in a largely urban environment. Its waterfront provides a yacht <br /> harbor and the only deep-water port in the South Bay. A wide variety of housing types are available. <br /> Services and trade, the County's two largest industry divisions, are expected to provide close to two- <br /> thirds of anticipated growth in the next two years. <br /> Appendix A <br /> Page 6 <br />