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CITY OF LINO LAKES, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2013 <br />Note 18 OTHER POSTEMPLOYMENT BENEFIT PLAN (CONTINUED) <br />E. ACTUARIAL METHODS AND ASSUMPTIONS <br />Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as <br />understood by the employer and plan members) and include the types of benefits provided at the time of <br />each valuation and the historical pattern of sharing of benefit costs between the employer and plan <br />members to that point. The actuarial methods and assumptions used include techniques that are designed to <br />reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, <br />consistent with the long-term perspective of the calculations. <br />In the January 1, 2011 actuarial valuation, the projected unit credit actuarial cost method was used. The <br />actuarial assumptions included a 2% inflation rate, a 2% investment rate of return (net of administrative <br />expenses), which is a blended rate of the expected long-term investment returns on plan assets and on the <br />employer's own investments calculated based on the funded level of the plan at the valuation date. The <br />initial healthcare trend rate was 0%, increasing to an ultimate rate of 4% after three years. The UAAL is <br />being amortized as a level percentage of projected payrolls on an open basis. The remaining amortization <br />period at December 31, 2013 was not to exceed 30 years. <br />59 <br />