2020 Comprehensive Annual Financial Report

month in which the officer attains 62 years of age or upon the first day of reemployment by any State department, agency, or institution. Article 12D of G. S. Chapter 143 assigns the authority to establish and amend benefit provisions to the North Carolina General Assembly. The retirement benefits are not subject to any increases in salary or retirement allowances that may be authorized by the General Assembly. Management of the Separation Allowance is vested in three Trustees, the CityManager, the Director of Finance and the Director of Human Resources, appointed by the City Council. The Separation Allowance has a June 30, 2020 year end and does not issue a separate stand-alone financial report and is included in the City’s Comprehensive Annual Financial Report as a Pension Benefit Trust Fund. Summary of Significant Accounting Policies For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions and pension expense, information about the fiduciary net position of the Separation Allowance and additions to/deductions from the Separation Allowance’s fiduciary net position have been determined on the same basis as they are reported by the Pension Trust Fund, that is, using the full accrual basis of accounting. Employer contributions to the Separation Allowance are recognized when due and when the City has made a formal commitment to provide the contributions. Benefits are recognized when due and payable in accordance with the terms of the Separation Allowance. Investments are reported at fair value. Contributions The City is required by Article 12D of G.S. Chapter 143 to provide these retirement benefits and has chosen to fund the amounts necessary to cover the benefits earned on a pay as you go basis through appropriations made in the General Fund operating budget and to also advance fund amounts as available. Contributions are not required to be made by employees, and as such, there were none. The City’s obligation to contribute to this plan is established and may be amended by the North Carolina General Assembly. The actuarially determined contribution rate of $3,251,123 for FY 2020 is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City contributed $2,906,943 in FY 2020. These amounts represent 8.33% and 7.45% of covered employee payroll, respectively. Administrative costs of the Separation Allowance are financed through investment earnings. The annual required contribution for the current year was determined as part of the December 31, 2017 actuarial valuation using the entry age normal actuarial cost method, amortized over a level dollar closed period. The actuarial assumptions include (a) 5.5% investment rate of return and (b) projected salary increase of 3.50% to 7.35%. Both (a) and (b) included an inflation component of 2.5%. The assumptions did not include post-retirement benefit increases. The actuarial value of assets was determined using the market value of investments. The remaining amortization period at December 31, 2017 was 13 years. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2020, the City reported a total pension liability of $29,760,903. The total pension liability was measured as of December 31, 2019 based on a December 31, 2018 actuarial valuation. The total pension liability was rolled forward to December 31, 2019 utilizing standard actuarial update rollfoward procedures incorporating the actuarial assumptions. For the year ended June 30, 2020, the City recognized pension expense of $1,678,861. At June 30, 2020, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources, based on amounts computed as of the December 31, 2019 measurement date.

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