Actuarial Valuation Report as of July 1, 2000
Glossary of Terms

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Actuarial Cost Method, Annual Normal Cost, Gross Actuarial Accrued Liability and Unfunded Actuarial Accrued Liability
The contribution requirement of the Plan has been computed according to the Entry-Age-Normal "level percent of pay" Cost Method of Valuation. Under this method, two items are determined for each active participant:
  • the "Annual Normal Cost" which is the annual contribution, Accrued Liability based on a level percent of the participant's annual compensation, such determined from the participant's date of employment to his/her "assumed" Retirement Date which will be sufficient to provide for his/her estimated total retirement benefit, and
  • the "Gross Actuarial Accrued Liability" which is the accumulation value of the "normal costs" due from the participant's date of employment to the valuation date.
The aggregate of the "normal costs" and the "Gross Actuarial Accrued Liabilities" is then determined for all active plan participants.

The single sum actuarial value of plan benefits payable to retired participants, inactive participants and beneficiaries, and terminated participants entitled to deferred benefits is determined and aggregated with the total Gross Actuarial Accrued Liability attributable to the active Plan participants. The total "Gross Actuarial Accrued Liability" of all Plan participants is then offset by the Actuarial Value of Plan Assets accumulated under the Plan, and the difference is called the "Unfunded Actuarial Accrued Liability".
Annual Contribution Requirement
The 1999-2000 Plan Year's contribution, by statute, must not be less than the sum of the following: (1) the Annual Normal Cost and (2) the payment required to amortize the Plan's Unfunded Actuarial Accrued Liability over 40 years from July 1, 1993 as a level percentage of payroll. This contribution is the minimum amount required pursuant to appropriate Illinois Pension Statutes for the Calendar Plan Year commencing July 1, 1999. In addition, and if desired, this amount can be optionally adjusted to reflect accruing interest from the date of determination, July 1, 1999, to the anticipated date of payment into the Trust.

However, the City of Champaign Police Pension Fund amortizes the unfunded actuarial accrued liability over 40 years from January 1, 1980 as a level dollar amount. This amount will exceed the contribution otherwise required by Senate Bill 1650.
GASB Statements N0. 25 and No. 27 Requirements
In an effort to enhance the understandability and usefulness of the pension information that is included in the financial reports of pension plans for state and local governments, the Government Accounting Standards Boards (GASB) has issued Statement No.25 - Financial Reporting for Defined Benefit Pension Plans and Statement No.27 - Accounting for Pensions by State and Local Government Employers.

GASB Statement No.25 establishes a financial reporting framework for defined benefit plans. In addition to two required statements regarding plan assets, the statement requires two schedules and accompanying notes disclosing information relative to the funded status of the plan and historical contribution patterns. Section 4 of this report provides further details and explanations on these requirements.

GASB Statement No.27 establishes standards for the measurement, recognition and display of pension expense and related liabilities. Annual pension cost is measured and disclosed on the accrual basis for accounting. In general, the annual pension cost is equal to the annual required contribution (ARC) with adjustments for past under- contributions or over-contributions. These adjustments are based on the net pension obligation (NPO) that represents the cumulative difference between the annual pension cost and the actual contribution to the plan. The first adjustment is equal to interest on the NPO which is added to the ARC. The second adjustment is an amortization of the NPO which is deducted from the ARC. The amortization is a level percentage of payro11 between now and July 1,2033.
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