2011 PHFA Annual Report - Pennsylvania Housing Finance Agency

notes to
pennsylvania housing finance agency
financial state ments
Years Ended June 30, 2011 and 2010
Amounts determined regarding the funded status of the plan and the annual required
contributions of the employer are subject to continual revision as actual results are compared
to past expectations and new estimates are made about the future.
The Schedule of Funding Progress for the Pennsylvania Housing Finance Agency
Postemployment Benefits Plan, presented as Required Supplementary Information following
the notes to the financial statements presents multiyear trend information, when available, about
whether the actuarial values of Plan assets are increasing or decreasing over time relative to the
actuarial accrued liability for benefits.
Actuarial Methods and Assumptions
Projection of benefits for financial reporting purpose are based on the substantive plan as understood
by the Agency and Plan members and include the types of benefits provided at the time of each
valuation and the historical pattern of sharing of benefit costs between the Agency and Plan
members to that point. There are no legal or contractual funding limitations that would potentially
affect the projection of benefits for financial accounting purposes. The actuarial methods and
assumptions used include techniques that are designed to reduce the effects of short-term volatility in
actuarial accrued liabilities, consistent with the long-term perspective of the calculations.
For the actuarial valuation dated July 1, 2009, the entry age normal cost method was used.
Because the Agency funds its OPEB on a pay-as-you-go basis, the Plan has no assets (investments)
used specifically for paying the post-retirement medical benefits; therefore, the actuarial
assumptions included a 4.5% discount rate, which approximates the expected rate of return
on non-pension investments held by the Agency, a moderate inflation rate based on historical
averages and an annual healthcare cost trend rate of 8% in 2009, decreasing by 0.5% per year to
5.5% in 2015 and thereafter. The UAAL is being amortized as a level dollar amount over thirty
years on an open basis.
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14. Significant Contingencies and Commitments
Federally Assisted Programs
The Agency participates in numerous federally assisted programs. Those programs are subject
to compliance audits and adjustments by the grantor agencies or their representatives. Any
disallowed claims, including amounts already collected, would become a liability of the Agency.
In management’s opinion, disallowance, if any, will be immaterial.
Risk Management
The Agency is subject to normal risks associated with its operations including property damage,
personal injury and employee dishonesty. All risks are managed through the purchase of
commercial insurance. There have been no losses or decreases in insurance coverage over the last
three years.
Litigation
In the normal course of business, there are various claims or suits pending against the Agency. In
the opinion of the Agency’s management and counsel, the amount of such losses that might result
from these claims or suits, if any, would not materially affect the Agency’s financial position.
Commitments
Outstanding commitments by the Agency to make or acquire Multifamily Housing, Single
Family Mortgage and HEMAP Loans were approximately $1,154, $13,759 and $9,804,
respectively, at June 30, 2011.