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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
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