Comparison of Different Amortization Methods and Periods

1. Comparison of Different Amortization Methods and Periods Paul Angelo, FSA The Segal Company San Francisco 5061935v2

2. Amortization of Unfunded Liability • FCERA uses multiple layers, decreasing periods to amortize UAAL as a level percentage of pay • Amortization periods: • UAAL through 6/30/03 valuation: 30 years(25 years remaining as of 6/30/08 valuation) • Actuarial gains/losses and assumption changes after 6/30/03 valuation: 15 years • Plan amendment: 30 years

3. Amortization of Unfunded Liability • Total UAAL in 6/30/08 valuation: $618 million • About one-third ($212 million) is from 6/30/03 layer • Amortized over 25 years as of 6/30/08 valuation • The rest primarily amortized over 15-year layers • As with any amortization, the total interest cost payment for 6/30/03 layer depends on: • Method of amortization • Level dollar amount or level percent of pay amortization • Amortization period • Present value of future payments is the same

4. Illustration of Amortization Methods ($000)

5. Illustration of Amortization Methods ($000)

6. Q U E S T I O N S