6.2. SR 06-17-2019 - Laserfiche WebLink

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CITY OF ELK RIVER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018 NOTE 11: DEFINED BENEFIT PENSION PLANS — FIRE RELIEF ASSOCIATION - CONTINUED E. Actuarial Assumptions (Continued) The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: F. Discount Rate The discount rate used to measure the total pension liability was 5.75%. 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% Lower (4.75%) C un-ent (5.75%) 1% Higher (6.75%) Net pension liability (asset) ($1,101,139) ($1,146,722) ($1,191,022) 66 Long-term Target Expected Real Asset Class Allocation Rate of Return Domestic equities 42.59% 5.39% International equities 10.87 5.20 Fixed income 32.39 1.98 Real estate and alternative 1.18 4.25 Cash and cash equivalents 12.97 0.79 Total 100.00 % F. Discount Rate The discount rate used to measure the total pension liability was 5.75%. 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% Lower (4.75%) C un-ent (5.75%) 1% Higher (6.75%) Net pension liability (asset) ($1,101,139) ($1,146,722) ($1,191,022) 66