6.1. SR 06-06-2016 - Laserfiche WebLink

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CITY OF ELK RIVER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 6: DEFINED BENEFIT PENSION PLANS - FIRE RELIEF ASSOCIATION - CONTINUED The 6.0 percent long-term expected rate of return on pension plan investments was determined using a building-block method in which best estimates for expected future real rates of return (expected returns, net of inflation) were developed for each asset class using the plan's target investment allocation along with long-term return expectations by asset class. Inflation expectations were applied to derive the nominal rate of return for the portfolio. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Total F. Discount Rate 100.00 % The discount rate used to measure the total pension liability was 6.0 percent. The projection of cash flows used to determine the discount rate assumed that contributions to the plan will be made as specified in statute. Based on that assumption and considering the funding ratio of the plan, the fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. G. Pension Liability Sensitivity The following presents the City's net pension liability (asset) for the plan, calculated using the discount rate disclosed in the preceding paragraph, as well as what the City's net pension liability (asset) would be if it were calculated using a discount rate 1 percent lower or 1 percent higher than the current discount rate: 1 Percent 1 Percent Decrease (5.00%) Current (6.00%) Increase (7.00%) Defined benefit plan $ (884,877) $ (954,913) $ (1,023,588) H. Pension plan fiduciary net position The Association issues a publicly available financial report. The report may be obtained by writing to the Elk River Fire Department Relief Association, 13073 Orono Parkway, Elk River, MN 55330. Note 7: POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS A. Plan Description The City provides other postemployment health insurance benefits for retired employees through two defined benefit plans: Municipal Retirees Health Plan (MRHP), a single -employer plan, and Utilities Retirees Health Plan (URHP), a multi-employer plan. Each plan provides benefits for eligible retirees and their dependents through the City's group health insurance plans, which cover both active and retired members. Since the premium is a blended rate determined on the active and retiree population, the retirees are receiving an implicit rate subsidy. The MRHP and URHP do not issue publicly available financial reports. -81- Long-term Target Expected Real Asset Class Allocation Rate of Return Equities 47.00 % 7.75 % Fixed income 25.00 4.50 Real estate 13.00 6.75 Cash 15.00 3.00 Total F. Discount Rate 100.00 % The discount rate used to measure the total pension liability was 6.0 percent. The projection of cash flows used to determine the discount rate assumed that contributions to the plan will be made as specified in statute. Based on that assumption and considering the funding ratio of the plan, the fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. G. Pension Liability Sensitivity The following presents the City's net pension liability (asset) for the plan, calculated using the discount rate disclosed in the preceding paragraph, as well as what the City's net pension liability (asset) would be if it were calculated using a discount rate 1 percent lower or 1 percent higher than the current discount rate: 1 Percent 1 Percent Decrease (5.00%) Current (6.00%) Increase (7.00%) Defined benefit plan $ (884,877) $ (954,913) $ (1,023,588) H. Pension plan fiduciary net position The Association issues a publicly available financial report. The report may be obtained by writing to the Elk River Fire Department Relief Association, 13073 Orono Parkway, Elk River, MN 55330. Note 7: POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS A. Plan Description The City provides other postemployment health insurance benefits for retired employees through two defined benefit plans: Municipal Retirees Health Plan (MRHP), a single -employer plan, and Utilities Retirees Health Plan (URHP), a multi-employer plan. Each plan provides benefits for eligible retirees and their dependents through the City's group health insurance plans, which cover both active and retired members. Since the premium is a blended rate determined on the active and retiree population, the retirees are receiving an implicit rate subsidy. The MRHP and URHP do not issue publicly available financial reports. -81-