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ORANGE COUNTY, NORTH CAROLINA <br />NOTES TO THE FINANCIAL STATEMENTS <br />FOR THE YEAR ENDED JUNE 30, 2012 <br />Plan Description. <br />The County administers a public employee retirement system (the "Separation <br />Allowance"), a single-employer defined benefit pension plan that provides retirement benefits to the <br />County's qualified sworn law enforcement officers.The Separation Allowance is equal to 0.85% of <br />the annual equivalent of the base rate of compensation most recently applicable to the officer for each <br />year of creditable service. The retirement benefits are not subject to any increases in salary or <br />retirement allowances that may be authorized by the General Assembly. Article 12D of G.S, Chapter <br />143 assigns the authority to establish and amend benefit provisions to the North Carolina General <br />Assembly. <br />The Separation Allowance covers all full-time law enforcement officers of the County. At December <br />31, 2011, the Separation Allowance's membership consisted of: <br />A separate report was not issued for the plan. <br />Summary of Significant Accounting Policies <br />Basis of Accounting. The County has chosen to fund the Separation Allowance on a pay-as-you-go <br />basis. Pension expenditures are made from the General Fund, which is maintained on the modified <br />accrual basis of accounting. <br />Method Used to Value Investments. No funds are set aside to pay benefits and administration costs. <br />These expenditures are paid as they come due. <br />Contributions. <br />The County is required by Article 12D of G. S. Chapter 143 to provide these <br />retirement benefits and has chosen to fund the benefit payments on a pay-as-you-go basis through <br />appropriations made in the General Fund operating budget. The County's obligation to contribute to <br />this plan is established and may be amended by the North Carolina General Assembly. There were <br />no contributions made by employees. <br />Actuarial Assumptions. <br />The amortization method for the Separation Allowance is alevel percent of <br />pay closed. The remaining amortization period is 20 years. The annual required contribution for the <br />current year was determined as part of the December 31, 2010 actuarial valuation using the projected <br />unit credit actuarial cost method. The actuarial assumptions included (a) 5.00% investment rate of <br />return (net of administrative expenses) and (b) projected salary, increase ranging from 4.25% to <br />7.85% per year. Both (a) and (b) included an inflation component of 3.00%. The assumptions did <br />not include post-retirement benefit increases. <br />50 <br /> <br />