2021 Annual Comprehensive Financial Report

valued at estimated market value, as determined by the State Treasurer. Administration costs of the OPEB Investment Fund are determined by inter-agency agreement with the North Carolina Department of State Treasurer. Contributions The City will contribute toward the cost of the eligible retiree health and life insurance coverage based on the years of service at retirement. Dental coverage is provided at full cost to the retiree. The City has chosen to fund the healthcare benefits on a pay-as-you-go basis, with additional amounts contributed to prefund benefits, determined annually by management, not as a measure of pay. The current Actuarially Determined Contribution (“ADC”) or $11,041,529 is 6.9% of annual covered employee payroll. For the current year, the City contributed $7,783,154 (or 4.91% of annual covered employee payroll) toward actual benefit payments. The City obtains health care and dental coverage through a self-funded program and through a private insurer for life insurance benefits. The City’s obligation to contribute to the Plan is established and may be amended by the City Council during the budget process per the City annual budget ordinance. Determination of the amounts contributed by the City and retirees is made by the Employee Benefit Executive Committee, annually, upon review of current costs and trends. The Plan is accounted for as an OPEB Benefit Trust Fund. Investment Policy and Long-Term Expected Rate of Return Investment of the OPEB Trust funds are made pursuant to a Deposit Agreement with the North Carolina Department of State Treasurer. The State Treasurer in his discretion may invest the proceeds in equities of certain publicly held companies and long or short term fixed income investments as detailed in G.S. 147-69.2(b) (1-6) and (8). Funds deposited are held in the State Treasurer’s Equity Index Fund, 63.58%, Bond Index Fund, 30.59%, and the Short Term Investment Fund, 5.83%. At June 30, 2021, the Plan assets totaled $34,410,457. A separate report was not issued for the Plan. The Plan’s investment policy, adopted by the City Council in April 2017, allows for investment in instruments authorized by G. S. 159-30 as well as investments available to the North Carolina State Treasurer when managing funds with the same purpose. The investment policy may be amended by a majority vote of Council members. The following was the City Council’s adopted asset allocation policy as of June 30, 2021: Investments in the Bond Index Fund with concentrations of more than 5% of the total portfolio represented the “Mortgages” sector. For the year-ended June 30, 2021, the annual money-weighted rate of return on Plan investments, net of investment expense, was 23.42%. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested. Investments are valued at fair market value. The projected long-term investment returns and inflation assumptions are developed through review of current and historical capital markets data, sell-side investment research, consultant whitepapers, and historical performance of investment strategies. Best estimate ranges of expected future real rates of return are developed for each major asset class. These projections are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class as of June 30, 2021 are summarized in the table above. The long-term nominal rates of return underlying the real rates of return are 10-year geometric compounded annualized figures. The real rates of return are calculated from nominal rates by multiplicatively adjusting for a long-term inflation assumption of 2.19%. All rates of return and inflation are annualized. Target Average Long-Term ExpectedReturn Long-TermExpected Real Rate of Return Asset Class Allocation Equity IndexFund Bond IndexFund 60.0% 40.0% 100.0% 6.75% 2.84% 4.56% 0.65% Total

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