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7.1.G. - Page 87 <br /> Notes to the Basic Financial Statements <br /> For the year ended June 30, 2013 <br /> NOTE 9 — EMPLOYEE BENEFITS (CONTINUED) <br /> multiplying 3% by the employee's years of service. This percentage factor increases with the employee's <br /> age upon retirement. <br /> Police and fire safety employees hired on or after October 13, 2011 (Tier 2) are covered under the "3% <br /> at 55" formula. Under this retirement plan, an employee's retirement earnings at age 55 are calculated <br /> by multiplying 3% by the employee's years of service. An employee with five years of service is eligible <br /> to retire at age 50 at a reduced pension amount. The pension amount increases with age and length of <br /> service, with the maximum percentage factor equal to 3 %. <br /> Police and fire safety employees hired on or after January 1, 2013 (Tier 3) are covered under the "2.7% <br /> at 57" formula. Under this retirement plan, an employee's retirement earnings at age 57 are calculated <br /> by multiplying 2.7% by the employee's years of service. An employee with five years of service is <br /> eligible to retire at age 50 at a reduced pension amount. The pension amount increases with age and <br /> length of service, with a maximum percentage factor equal to 2.7% at age 57. <br /> Miscellaneous employees hired before October 13, 2011 (Tier 1) are covered under the "2.7% at 55" <br /> formula. Under this retirement plan, an employee's retirement earnings, at age 55, are calculated by <br /> multiplying 2.7% by the employee's years of service. An employee with five years of service is eligible to <br /> retire at age 50 at a reduced pension amount. The pension amount increases with age and length of <br /> service. <br /> Miscellaneous employees hired on or after October 13, 2011 (Tier 2) are covered under the "2% at 60" <br /> formula. Under this retirement plan, an employee's retirement earnings at age 60 are calculated by <br /> multiplying 2% by the employee's years of service. An employee with five years of service is eligible to <br /> retire at age 50 at a reduced pension amount. The pension amount increases with age and length of <br /> service. <br /> Miscellaneous employees hired on or after January 1, 2013 (Tier 3) are covered under the "2% at 62" <br /> formula. Under this retirement plan, an employee's retirement earnings at age 62 are calculated by <br /> multiplying 2% by the employee's years of service. An employee with five years of service is eligible to <br /> retire at age 52 at a reduced pension amount. The pension amount increases with age and length of <br /> service, with a maximum percentage factor equal to 2.5% at age 67. <br /> PERS determines contribution requirements using a modification of the Entry Age Normal Method. Under <br /> this method, the City's total normal benefit cost for each employee from date of hire to date of retirement <br /> is expressed as a level percentage of the related total payroll cost. Normal benefit cost under this method <br /> is the level amount the employer must pay annually to fund an employee's projected retirement benefit. <br /> This level percentage of payroll method is used to amortize any unfunded actuarial liabilities. <br /> PERS uses the market - related value method of valuing the plan's assets. An investment rate of return of <br /> 7.5% is assumed, including inflation at 2.75 %. Annual salary increases are assumed to vary by duration of <br /> service. The City's unfunded actuarial accrued liability is being amortized as a level percentage of payroll <br /> on a closed basis. <br /> 59 <br />