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CITY OF EUGENE, OREGON <br />Notes to Basic Financial Statements <br />(5) Other Information, continued <br />(C) Retirement Plan, continued <br />Annual Pension Cost, continued <br />Annual required contribution$13,385,408 <br />Interest on pension assets(5,202,160) <br />Adjustment to the annual required contribution6,374,731 <br />Annual pension cost14,557,979 <br />Contributions made13,385,408 <br />Decrease in pension assets(1,172,571) <br />Pension assets, beginning of year65,026,999 <br />Pension assets, end of year$63,854,428 <br />For the fiscal year ending June 30, 2007, the City’s annual required contribution rate for PERS was determined <br />using the entry age normal method. Beginning July 1, 2007, the City’s pension liability and annual required <br />contribution rate for PERS will be determined using the projected unit credit method. The change in the PERS <br />unfunded accrued liability (UAL), due to the change from the entry age normal to projected unit credit method, <br />will be amortized as a level percentage of the combined valuation payroll (PERS plus OPSRP payroll) over a <br />rolling three year period. <br />The December 31, 2005 PERS and OPSRP defined benefit pension plan actuarial valuations were based on <br />the projected unit credit cost method. The actuarial assumptions included an investment return of 8.0% (8.5% <br />for PERS variable account balances), a projected salary growth of 3.75%, and a projected inflation rate of <br />2.75%. The PERS actuarial valuation included a healthcare cost inflation trend rate of 9.0% in 2007 decreasing <br />to 5.0% in 2013. The actuarial value of assets equals the market value of assets. The unfunded actuarially <br />accrued liability and plan gains and losses are amortized as a level percentage of the combined valuation <br />payroll over a closed period of 20 years for PERS and 16 years for OPSRP. <br />Both the PERS and OPSRP defined benefit pension plans utilize a contribution rate stabilization method to <br />restrict the degree of change to new contribution rates. The new contribution rate will not increase or decrease <br />from the prior contribution rate by more than the greater of 3 percentage points or 20 percent of the prior <br />contribution rate. If the plan’s funded percentage drops below 80 percent or increases above 120 percent, the <br />size of the collar doubles. The actuarial value of assets is equal to their fair market value less contingency, <br />capital preservation, and rate guarantee reserves. <br />The Oregon Legislative Assembly created a second level or “Tier” of PERS benefits that modified service and <br />disability retirement allowances payable to persons who established PERS membership on or after January 1, <br />1996 (“Tier Two” members). Future interest credits on all member contributions in Tier One and Tier Two <br />Regular Accounts are assumed to accrue at an annual rate of 8.0%, compounded annually. <br />The following table presents three-year trend information for the City’s defined benefit pension plans: <br /> Annual Percentage <br />Fiscal year pension of APC Pension <br /> contributed <br />ending June 30 <br />cost (APC)Contributionassets <br />2005$6,117,6865,617,89792%65,632,289 <br />200613,230,96912,625,67995%65,026,999 <br />200714,557,97913,385,40892%63,854,428 <br />continued <br />êç <br />