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4. DETAILED NOTES ON ALL FUNDS (Continued) Pension Plans — Primary Government (Continued) Defined Benefit Plan —Texas Municipal Retirement System (TMRS) (Continued) Members can retire at certain ages, based on the years of service with the City. The Service Retirement Eligibilities for the City are: 5 yrs /age 60, 20 yrs /any age Contri h»ti nn q Under the state law governing TMRS, the actuary annually determines the City contribution rate. This rate consists of the normal cost contribution rate and the prior service cost contribution rate, both of which are calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the currently accruing monetary credits due to the City matching percent, which are the obligation of the City as of an employee's retirement date, not at the time the employee's contributions are made. The normal cost contribution rate is the actuarially determined percent of payroll necessary to satisfy the obligation of the City to each employee at the time his /her retirement becomes effective. The prior service contribution rate amortizes the unfunded (over funded) actuarial liability (asset) over the remainder of the plan's 25 -year amortization period. The unit credit actuarial cost method is used for determining the City contribution rate. Both the employees and the City make contributions monthly. Since the City needs to know its contribution rate in advance for budgetary purposes, there is a one -year delay between the actuarial valuation that is the basis for the rate and the calendar year when the rate goes into effect (i.e. December 31, 2006 valuation is effective for rates beginning January 2008). Schedule of Actuarial Liabilities and Funding Progress Actual Valuation Date 12/31/04 12/31/05 12/31/06 Actuarial value of assets $ 40,716,559 $ 43,807,523 $ 47,190,722 Actuarial accrued liability 56,021,903 60,238,953 64,633,866 Percent funded 72.7% 72.7% 73.0% Unfunded (overfunded) actuarial accrued liability (UAAL) 15,305,344 16,431,430 17,443,144 Annual covered payroll 18,062,782 18,833,204 19,397,795 UAAL as a percentage of covered payroll 84.7% 87.2% 89.9% Net pension obligation (NPO at the beginning of period - - - Annual Pension Cost: Annual required contribution (ARC) 2,761,453 2,808,869 2,763,751 Contributions made 2,761,453 2,808,869 2,763,751 Increase in NPO - - - NPO at the end of the period $ - $ - $ - (continued) 49