06-27-2016 Council Packet - Laserfiche WebLink

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CITY OF ORONO NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2015 (46) NOTE 6 OTHER POSTEMPLOYMENT BENEFITS (CONTINUED) E. Actuarial Methods and Assumptions (Continued) In the January 1, 2014, actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions included a 4.5% investment rate of return (net of administrative expenses), which the rate of the expected long-term investment returns on the employer’s own investments calculated based on the funded level of the plan at the valuation date. The initial healthcare trend rate was 9%, reduced by decrements to an ultimate rate of 5% after twelve years. The rate includes a 3% inflation rate. The UAAL is being amortized as a level percentage of projected payrolls on an open basis. The remaining amortization period at December 31, 2015 was not to exceed 30 years. NOTE 7 FLEXIBLE BENEFIT PLAN The City offers a flexible benefit plan (the Plan). The Plan is a "cafeteria plan" under §125 of the Internal Revenue Code. All employees who meet the eligibility requirements may participate in the Plan. To be eligible, an employee must be at least 20 years of age and be regularly scheduled to work more than 20 hours per week. Eligible employees can elect to participate by contributing pre-tax dollars withheld from payroll checks to the Plan for healthcare and dependent care benefits. Payments are made from the Plan to participating employees upon submitting a request for reimbursement of eligible expenses actually incurred by the participant. All assets of the Plan are held and administered by an independent contract administrator for child care and medical expense reimbursements, and by the City for health insurance premiums. All activity of the Plan is included in the financial statements as part of the General Fund and enterprise funds as employee benefits. All property of the Plan and income attributable to that property is solely the property of the City, subject to the claims of the City's general creditors. Participants' rights under the Plan are equal to those of general creditors of the City in an amount equal to the eligible healthcare and dependent care expenses incurred by the participants. The City believes it is unlikely that it will use the assets to satisfy the claims of general creditors in the future.