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CITY OF ROSEVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 NOTE 7 —OTHER POST- EMPLOYEMNT BENEFITS (Continued) G. Actuarial Methods and Assumptions 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 the health care cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions (ARC) 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 financial statements, presents multi -year trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effect of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long -term perspective of the calculations. In the January 1, 2011 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions included a 4.5% investment rate of return (net of investment expenses), salary increases of 2.0% (only used to bring salaries into the valuation year) and an initial annual health care cost trend rate of 8% reduced by .5% each year to arrive at an ultimate health care cost trend rate of 5.0% over 6 years. The health care cost trend rate includes a 2.5% inflation rate. The actuarial value of assets was $0. The plan's unfunded actuarial accrued liability is being amortized using the level percentage of projected payroll method over 30 years on a closed basis. The remaining amortization period at December 31, 2010, was 27 years. For the governmental activities, other postemployment benefits are generally liquidated through the governmental fund in which an employee is assigned. 77