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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2013 Note 18 OTHER POSTEMPLOYMENT BENEFIT PLAN (CONTINUED) C. ANNUAL OPEB COST AND NET OPEB OBLIGATION The City's annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any un -funded actuarial liabilities over a period not to exceed thirty years. The following table shows the components of the City's annual OPEB cost for the year, the amount actually paid from the plan, and changes in the City's net OPEB obligation. Annual Required Contribution $ 29,449 Interest on Net OPEB Obligation 1,663 Adjustment to Annual Required Contribution (3,675) Annual OPEB Cost (Expense) 27,437 Contributions Made (21,289) Increase in Net OPEB Obligation 6,148 Net OPEB Obligation- Beginning of Year 77,821 Net OPEB Obligation- End of Year $ 83,969 The City's annual OPEB cost, the percentage of the annual OPEB cost contributed to the plan, and the net OPEB obligation for 2013 and the two preceding years: Percentage Fiscal Annual of Annual Net Year OPEB OPEB Cost OPEB Ended Cost Contributed Obligation 12/31/2011 $ 27,917 65.9% $ 72,808 12/31/2012 29,610 65.2% 77,821 12/31/2013 27,437 77.6% 83,969 D. FUNDED STATUS AND FUNDING PROGRESS As of January 1, 2011, the most recent actuarial valuation date, the City's unfunded actuarial accrued liability (UAAL) was $474,770. The annual payroll for active employees covered by the plan in the actuarial valuation was $4,953,560 for a ratio of UAAL to covered payroll of 9.6%. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and healthcare cost trends. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. 58