10.1. SR 06-05-2017 - Laserfiche WebLink

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CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 9 DEFINED BENEFIT PENSION PLANS —STATE-WIDE (CONTINUED) E. Actuarial Assumptions The total pension liability in the June 30, 2016, actuarial valuation was determined using the following actuarial assumptions: Inflation 2.70% per year Active Member Payroll Growth 3.25% per year Investment Rate of Return 7.50% Salary increases were based on a service -related table. Mortality rates for active members, retirees, survivors, and disabilitants were based on RP -2014 tables for males or females, as appropriate, with slight adjustments. Benefit increases for retirees are assumed to be 1 % per year for all future years for the General Employees Plan. Actuarial assumptions used in the June 30, 2016, valuation were based on the results of actuarial experience studies. The most recent four-year experience study in the General Employees Plan was completed in 2015. The following changes in actuarial assumptions occurred in 2016 for the General Employees Fund: • The assumed post-retirement benefit increase rate was changed from 1.0% per year through 2035 and 2.5% per year thereafter, to 1.0% per year for all future years. The assumed investment return was changed from 7.9% to 7.5%. The single discount rate was changed from 7.9% to 7.5%. Other assumptions were changed pursuant to the experience study dated June 30, 2015. The assumed future salary increases, payroll growth, and inflation were decreased by 0.25% to 3.25% for payroll growth and 2.50% for inflation. The long-term expected rate of return on pension plan investments is 7.5%. The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness of the long-term expected rate of return on a regular basis using a building-block method in which best -estimate ranges of expected future rates of return are developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized below: Long -Term Target Expected Real Asset Class Allocation Rate of Return Domestic Equity 45% 5.50% International Equity 15% 6.00% Bonds 18% 1.45% Alternative Assets 20% 6.40% Cash 2% 0.50% Totals 100% (62)