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Pamela Arends-King October 23, 2007 Page 2 (ij4) Valuation Process Our valuation is a four step process consisting of: · Gathering participant data · Meeting with the City to discuss valuation methods and assumptions . Valuation processing · Meeting with the City to discuss valuation results, including: · Annual Required Contribution · Annual OPEB Cost · Expected Net OPEB Obligation · ] 0 years of projected benefit payments and Annual OPEB Cost We will provide the City a discussion outline and formal report including the above information. When the City adopts GASB 45, the City may need us to prepare a draft GASB 45 footnote. Some agencies also request an Executive Summary, which provides a summary of the study results in an easily understandable format. If the City pre-funds using CalPERS Employers' Retiree Benefit Trust (CERBT), the City will need additional information required by CaIPERS. Our Approach We believe that there are two levels to a GASB 45 actuarial valuation. The first level is technical compliance with GASB 45. Some public employers may hire an actuary to assist only with technical compliance with the standard, limiting the scope of services to preparing the required financial reporting and disclosure. The second level goes beyond reporting and disclosure issues, and includes assisting management with an understanding of GASB 45, the actuarial assumptions and methods, the valuation results, the financial statement impact including a review of the plan design and cost. Our recommended approach to GASB 45 studies includes both consulting levels, meeting with management in person at least twice during the valuation process. We would :frrst meet with the City to review employee data, plan provisions, and actuarial methods and assumptions. This will assure that we have the proper information to begin the valuation. We would meet a second time to review the valuation results and their financial impact. Estimated Fees Our fees to prepare a GASB 45 and GASB ] 6 valuation will be approximately $23,500. The approximate cost of each project step is as follows: Proiect Step Estimated Fees Actuarial Valuation (GASB 45 - Cash subsidy) $11,700 Actuarial Valuation (GASB 16 - Unused sick leave) 5,000 Discount Rate Sensitivity (2 discount rates) 800 AB 2544 Unequal Method Impact 500 Methods & Assumptions Meeting 1,500 Preliminary Results Mecting 1,500 Formal Valuation Report 2,500 Total $23,500