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Executive Summary <br />This report has been prepared for the City of Pequot Lakes, for the fiscal year beginning January 1, <br />2012 and ending December 31, 2012, to assist in complying with the reporting and disclosure <br />requirements under GASB Statements 43 and 45. City of Pequot Lakes is a Tier 3 entity under <br />GASB 45 and has implemented GASB 45 for the fiscal year beginning January 1, 2009 and ending <br />December 31, 2009. <br />Funding Policy <br />OPES benefits have historically been funded on a pay -as- you -go basis ( PAYGO). Under GASB 45, <br />plan sponsors may set up a trust and pre -fund the benefits. There is no requirement to pre -fund <br />benefits under GASB 45. However, continuing on a PAYGO basis will create a Net OPEB Obligation <br />(NOO) on the balance sheet over time (the NOO at the beginning of the GASB 45 implementation <br />year is $0). Results throughout the report assume continued funding under PAYGO. <br />Summary of Results <br />The results below reflect initial implementation in the fiscal year ending December 31, 2009. Plan <br />sponsors that finance on a pay -as- you -go basis ( PAYGO) usually pay retiree benefits out of the <br />general fund. General funds typically are invested in short-term securities. Liabilities have been <br />valued using an estimated return on the general fund of 4.50 %. The ARC assumes the Unfunded <br />Accrued Liability (UAL) will be amortized on a closed basis. <br />Discount Rate = 4.50% January 1, 2012 <br />Liabilities <br />a. Accrued Liability <br />i. Actives $ 105,338 <br />ii. Retirees and Beneficiaries 0 <br />iii. Total 105,338 <br />b. Normal Cost 13,676 <br />c. Estimated Benefit Payments 157 <br />d. Valuation Salary 580,558 <br />2. Funded Status <br />a. <br />Accrued Liability $ <br />105,338 <br />b. <br />Market Assets <br />0 <br />c. <br />Unfunded Accrued Liability (UAL), a. — b. <br />105,338 <br />d. <br />UAL as % of Payroll, c.11.d. <br />18.1% <br />3. Estimated <br />Annual Costs for Year Beginning January 1, 2012 <br />a. <br />Pay -as- you -go Cost ( PAYGO) $ <br />157 <br />b. <br />Annual Required Contribution (ARC) <br />20,673 <br />c. <br />Annual OPEB Cost <br />19,174 <br />d. <br />PAYGO as % of ARC <br />0.8% <br />4. Estimated <br />Balance Sheet <br />a. <br />Net OPEB Obligation January 1, 2012 $ <br />93,302. <br />b. <br />Annual OPEB Cost <br />19,174 <br />c. <br />Estimated Employer Contributions under PAYGO <br />157 <br />d. <br />Estimated Net OPEB Obligation December 31, 2012, a.+ b. — c. <br />112,319 <br />City of Pequot Lakes <br />Page 3 <br />