Combining Statement of Revenues, Expenditures and Changes in Fund Balances

NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020

Plan Description

The City has a single employer defined benefit pension plan that covers the uniformed police officers who did not elect to participate in the Defined Contribution Police Pension Plan that became effective January 1, 1986 . In 1986, single premium group annuities were purchased for the benefit of retired employees, beneficiaries and terminated vested employees . After January 1, 1986, all new uniformed police officers are participants in the Defined Contribution Police Pension Plan .

The pension plan board consists of seven trustees, the Director of Finance (or designee), the Director of Human Resources (or designee), one resident citizen of the City of Arvada not employed by the City or affiliated with the retirement plan, four members of the retirement system elected by the members of the retirement system .

One fully vested participant remains in the Defined Benefit Plan as of December 31, 2020 . The participant began receiving retirement benefits in 1997, as defined by City ordinance . The City does not issue a standalone financial report for the plan .

Lifetime retirement benefits are established in Chapter 86 of the City of Arvada City Code . A monthly benefit begins at the age of 55 and is based upon the members final base pay, allowing 2 ½ percent for each year of credited service to a maximum of 65 percent of final base pay . Final base pay is determined on the basis of the highest total salary received during any three consecutive years of service divided by the number of months for which pay was received .

No contributions were made by the participant for the year ended December 31, 2020 . The City contributed $20,000 per year to the plan from 2012 through 2015 . During 2016 the City contributed $170,000 to the plan, and a $12,000 contribution in 2019 and 2020 . The City did not make a contribution to the plan during 2017 or 2018 .

Investments

The pension plan’s investment policy follows the City’s investment policy as summarized on pages 55-57 . The December 31, 2020 plan asset allocation is shown below: Asset Class Allocation Local Government Investment Pool 1.54% Pooled cash and investments 98.46% 100.00%

For the year ended December 31, 2020 the annual money-weighted rate of return on pension plan investments, net of pension plan expense, was 3 .31 percent . The money-weighted rate of return considers the changing amounts actually invested during a period and weights the amount of pension plan investments by the proportion of them they are available to earn a return during that period . External cash flows are determined on a monthly basis and are assumed to occur at the beginning of each month . External cash inflows are netted with external cash outflows, resulting in a net external cash flow each month . The money-weighted rate of return is calculated net of investment expenses .

NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020

Net Pension Liability of the City

The components of the net pension liability of the City at December 31, 2020, were as follows:

Total pension liability Plan fiduciary net position City’s net pension liability Plan fiduciary net position as a percentage of the total pension liability $484,232 439,890 $44,342

90 .84%

Mortality rates were based on the Pub-2010 Safety Retiree Mortality (Participant) and Pub 2010 General Retiree Mortality (Spouse), with Generational Projection using MP2020 .

The long-term expected rate of return is selected by the Plan Sponsor after review of expected inflation and long-term real-returns, reflecting volatility and correlation . The assumption currently selected is 2 .5% per annum, net of investment expenses .

The discount rate used to measure the total pension liability was 2 .5 percent . The projection of cash flows used to determine the discount rate assumed the City will not make additional contributions to the plan . Based on those assumptions, the pension plan’s fiduciary net position was projected to make all projected future benefit payments . Therefore, the discount rate for calculating the total pension liability is equal to the long-term expected rate of return .

The following presents the net pension liability of the City, calculated using the discount rate of 2 .5 percent, as well as what the City’s net pension (asset) would be if it were calculated using a discount rate that is 1-percentage point lower (1 .5 percent) or 1-percentage-point higher (3 .5 percent) than the current rate:

Net pension liability (asset) 1% Decrease (1 .5%) $ 105,460 Current Discount Rate (2 .5%) $ 44,342 1% Increase (3 .5%) $ (6,232)

Net Pension Liability of the City

The net pension liability was measured as of December 31, 2020, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of January 1, 2020, rolled forward to December 31, 2020 using standard actuarial methods .

Significant methods and assumptions included the following:

• Actuarial Valuation Date – January 1, 2020 • Measurement Date – December 31, 2020 • Actuarial Cost Method – Entry Age Normal • Amortization Method – Level Dollar • Rate of Investment Return – 2 .5% per annum • Remaining Closed Amortization Period – 11 years • Asset Valuation Method – Market Value • Inflation 2 .2%