City of Raleigh
Summary of significant accounting policies:
Basis of Accounting
The City has chosen to fund the Separation Allowance based on the annual required
contribution (ARC) provided by the City’s actuary. Pension expenditures are made in a separate fund which is
combined with the General Fund for reporting purposes and maintained on the modified accrual basis of accounting.
Benefits are recognized when due and payable in accordance with the terms of the plan.
The Separation Allowance has no assets accumulated in a trust that meets the following criteria which are outlined in
GASB Statements 67 and 68:
contributions to the pension plan and earnings on those contributions are irrevocable
pension plan assets are dedicated to providing benefits to plan members
pension plan assets are legally protected from the creditors or employers
The City is required by Article 12D of G.S. Chapter 143 to provide these retirement benefits and has
chosen to fund the amounts necessary to cover the benefits earned by making contributions based on actuarial
valuations. For the current year, the City contributed $3,000,000 or 6.2% of annual covered payroll. There were no
contributions made by employees. The City’s obligation to contribute to this plan is established and may be
amended by the North Carolina General Assembly. Administrative costs of the Separation Allowance plan are
financed through investment earnings.
The City’s annual pension cost and net pension obligation to the separation allowance for the current year were as
Employer annual required contribution
Interest paid on pension obligation
Adjustment to annual required contribution
Annual pension cost
Employer contributions made for current fiscal year
Increase in net pension asset
Net pension (asset) obligation beginning of fiscal year
Net pension (asset) obligation end of fiscal year
Annual required contribution for the current year was determined as part of the December 31, 2014 actuarial
valuation using the projected unit credit actuarial cost method. The actuarial assumptions included (a) 5.0%
investment rate of return and (b) projected salary increases ranging from 4.25% to 7.85% per year. Item (b) included
an inflation component of 3.00%. The assumptions did not include post‐retirement benefit increases. The actuarial
value of assets was market value. The unfunded actuarial accrued liability is being amortized as a level percentage of
pay on a closed basis. The remaining amortization period at December 31, 2014 was 16 years.