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City of Raleigh

Financial Section

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.