4.1 ERMUSR 04-14-2020 - Laserfiche WebLink

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Elk River Municipal Utilities Elk River, Minnesota Notes to the Financial Statements December 31, 2019 Note 3:Defined Benefit Pension Plans - Statewide (Continued) The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness on a regular basis of the long-term expected rate of return 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 geometric real rates of return for each major asset class are summarized in the following table: Long-term TargetExpected Real AllocationRate of Return Asset Class Domestic Equity35.5 %5.10 % Private Markets25.05.90 Fixed Income20.00.75 International Equity17.55.90 Cash Equivalents2.0- Total100.0 % F.Discount Rate The discount rate used to measure the total pension liability in 2019was 7.50 percent.The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at rates set in Minnesota Statutes. Based on these assumptions, the fiduciary net position of the General Employees Fundwere projected to be available to make all projected future benefit payments of current plan 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.Changes in Pension Liability During the year ended December 31, 2019the following pension changes occurred in non-current liabilities reported on the financial statements. Employer Contributions/ BeginningPensionNet AnnualEnding BalanceExpenseAmortizationsBalance Business-type Activities GERP$2,884,747$422,390$(432,173)$2,874,964 44 134