Comparison of Different Amortization Methods and Periods Paul

Comparison of Different Amortization Methods and Periods Paul Angelo, FSA The Segal Company San Francisco 5061935 v 2 FCERA Dec. 16, 2009 Board Meeting

FCERA Dec. 16, 2009 Board Meeting Amortization of Unfunded Liability Ø FCERA uses multiple layers, decreasing periods to amortize UAAL as a level percentage of pay Ø Amortization periods: Ø UAAL through 6/30/03 valuation: 30 years (25 years remaining as of 6/30/08 valuation) Ø Actuarial gains/losses and assumption changes after 6/30/03 valuation: 15 years Ø Plan amendment: 30 years Slide 2

FCERA Dec. 16, 2009 Board Meeting Amortization of Unfunded Liability Ø Total UAAL in 6/30/08 valuation: $618 million About one-third ($212 million) is from 6/30/03 layer Ø Amortized over 25 years as of 6/30/08 valuation Ø The rest primarily amortized over 15 -year layers Ø Ø As with any amortization, the total interest cost payment for 6/30/03 layer depends on: Method of amortization Ø Level dollar amount or level percent of pay amortization Ø Amortization period Ø Ø Present value of future payments is the same Slide 3

FCERA Dec. 16, 2009 Board Meeting Illustration of Amortization Methods ($000) Slide 4

FCERA Dec. 16, 2009 Board Meeting Illustration of Amortization Methods ($000) Slide 5

FCERA Dec. 16, 2009 Board Meeting QUESTIONS Slide 6