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CITY OF RAMSEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 1994 Note 10. DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued) C. Funding Status and Progress 1. Pension Benefit Obligation The "pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases and step -rate benefits, estimated to be payable in the future as a result of employee service to date. The measure, which is the actuarial present value of credited projected benefits, is intended to help users assess PERA's funding status on a going concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among Public Employees Retirement Systems and among employers. PERA does not make separate measurements of assets and pension benefit obligation for individual employers. The pension benefit obligations as of June 30, 1994, are shown below: PERF PEPFF (In Thousands) Total pension benefit obligation $ 5,625,598 $ 1,020,950 Net assets available for benefits at cost (Market Values for PERF = $4,762,519; PEPFF = $1,237,484) 4,733,845 1,229,769 Unfunded (assets in excess of) pension benefit obligation $ 891,753 $ (208,819) The measurement of the pension benefit obligation is based on an actuarial valuation as of June 30, 1994. Net assets available to pay pension benefits were valued as of June 30, 1994. For the PERF, significant actuarial assumptions used in the calculation of the pension benefit obligation include (a) a rate of return on the investment of present and future assets of 8.5 percent per year, compounded annually, prior to retirement, and 5 percent per year, compounded annually, following retirement; (b) projected salary increases taken from a select and ultimate table; (c) payroll growth at 6 percent per year, consisting of 5 percent for inflation and 1 percent due to growth in group size; (d) post - retirement benefit increases that are accounted for by the 5 percent rate of return assumption following retirement; and (e) mortality rates based on the 1983 Group Annuity Mortality Table set forward one year for retired members and set back five years for each active member. Actuarial assumptions used in the calculation of the PEPFF include (a) a rate of return on the investment of present and future assets of 8.5 percent per year, compounded annually, prior to retirement, and 5 percent per year, compounded annually, following retirement; (b) projected salary increases of 6.5 percent per year, compounded annually, attributable to the effects of inflation; (c) post - retirement increases that are accounted for by the 5 percent rate of return assumption following retirement; and (d) mortality rates based on the 1971 Group Annuity Mortality Table projected to 1984 for males and females.