Agenda Packet 12-10-18 Meeting - REVISED

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CITY OF EUGENE, OREGON Notes to Basic Financial Statements continued (5) Other Information, continued (C) Retirement Plan – Oregon PERS (OPERS), continued Depletion Date Projection GASB 68 generally requires that a blended discount rate be used to measure the Total Pension Liability (the Actuarial Accrued Liability calculated using the Individual Entry Age Normal Cost Method). The long-term expected return on plan investments may be used to discount liabilities to the extent that the plan’s Fiduciary Net Position is projected to cover benefit payments and administrative expenses. A 20-year high quality (AA/Aa or higher) municipal bond rate must be used for periods where the Fiduciary Net Position is not projected to cover benefit payments and administrative expenses. Determining the discount rate under GASB 68 will often require that the actuary perform complex projections of future benefit payments and pension plan investments. GASB 68 (paragraph 67) does allow for alternative evaluations of projected solvency, if such evaluation can reliably be made. GASB does not contemplate a specific method for making an alternative evaluation of sufficiency; it is left to professional judgment. The following circumstances justify an alternative evaluation of sufficiency for PERS:  PERS has a formal written policy to calculate an Actuarially Determined Contribution (ADC), which is articulated in the actuarial valuation report.  The ADC is based on a closed, layered amortization period, which means that payment of the full ADC each year will bring the plan to a 100% funded position by the end of the amortization period if future experience follows assumption.  GASB 68 specifies that the projections regarding future solvency assume that plan assets earn the assumed rate of return and there are no future changes in the plan provisions or actuarial methods and assumptions, which means that the projections would not reflect any adverse future experience which might impact the plan’s funded position. Based on these circumstances, it is our independent actuary’s opinion that the detailed depletion date projections outlined in GASB 68 would clearly indicate that the Fiduciary Net Position is always projected to be sufficient to cover benefit payments and administrative expenses. Sensitivity of the City's proportionate share of the net pension asset (liability) to changes in the discount rate The following presents the City's proportionate share of the net pension asset (liability) calculated using the discount rate of 7.5%, as well as what the City's proportionate share of the net pension asset (liability) would be if it were calculated using a discount rate that is 1 percentage-point lower (6.5%) or 1 percentage-point higher (8.5%) than the current rate: Current 1% decrease discount rate 1% increase (6.5%) (7.5%) (8.5%) City’s proportionate share of the net pension asset (liability) $ (311,502,876) (182,787,266) (75,157,180) Pension plan fiduciary net position Detailed information about the pension plan's fiduciary net position is available in the separately issued OPERS financial report Changes in Assumptions and Other inputs Changes in actuarial methods and assumptions implemented since the December 31, 2013 valuation are described in the 2014 Experience Study (Study), published September 2015. Changes in assumptions from that Study are reported in the table of actuarial methods and assumptions on page 71. Modifications to the allocation of actuarial accrued liabilities, administrative expense assumptions, healthcare cost inflation, and mortality tables can be found in the Study at: http://www.oregon.gov/PERS/Pages/Financials/Actuarial- Presentations-and-Reports.aspx. Changes in Plan Provisions Subsequent to Measurement Date At its July 28, 2017 meeting, the PERS Board lowered the investment return assumption to 7.2%. The rate takes effect January 1, 2018. 75 December 10, 2018, Meeting - Item 2D