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IV-36CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2019 NOTE 11 DEFINED BENEFIT PENSION PLANS-FIRE RELIEF ASSOCIATION (CONTINUED) D. Pension Costs At December 31, 2019, the City reported a net pension asset of $205,427 for the plan. The net pension liability (asset) was measured as of December 31, 2018. The total pension liability used to calculate the net pension liability (asset) in accordance with GASB 68 was determined by an actuary applying an actuarial formula to specific census data certified by the Department as of December 31, 2018. For the year ended December 31, 2019, the City recognized pension expense of $822,748. At December 31, 2019, the City reported deferred outflows of resources, including its contributions subsequent to the measurement date, related to pension from the following sources: Description Changes in Actuarial Assumptions Net Difference Between Projected and Actual Earnings on Pension Plan Investments Differences Between Expected and Actual Economic Experience City Contributions Subsequent to the Measurement Date Total $ i Deferred Outflows of Resources 186,060 228,434 30,000 444,494 Deferred Inflows of Resources $ 115,462 I 115,462 Deferred outflows of resources totaling $30,000 related to pensions resulting from the City's contributions to the plan subsequent to the measurement date will be recognized as a reduction of the total pension liability in the year ended December 31, 2020. Other amounts reported as deferred outflows and inflows of resources related to the plan will be recognized in pension expense as follows: Year Ending December 31 2020 2021 2022 2023 2024 Thereafter Expense Amount $ 113,003 49,438 61,169 101,380 (11,372) (14,586) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2019 NOTE 11 DEFINED BENEFIT PENSION PLANS-FIRE RELIEF ASSOCIATION (CONTINUED) E. Actuarial Assumptions The total pension liability at December 31, 2018 was determined using the entry age normal actuarial cost method and the following actuarial assumptions: Retirement Eligibility Age 50 or Aller 20 Years of Service If both age 50, and minimum 10 year of service but not 20 years, pension reduced 4% for each year less than 20 years. Discount Rate 5.25 % Expected Long-tenn Investment Return 5.25 % 20-Year Municipal Bond Yield 3.71 % Projected Salary Increases N/A Includes Inflation at 2.50 % Cost-of-Living Adjustment None Age of Service Retirement 50 The demographic assumption of mortality is based on the rates use in the July 1, 2018 Minnesota PERA Police & Fire Plan actuarial valuation as described below. Healthy Pre-retirement: RP-2014 employee generational mortality table projected with mortality improvement scale MP-2017, from a base year of 2006. Healthy Post-retirement: RP-2014 annuitant generational mortality table projected with mortality improvement scale MP-2017, from a base year of 2006. Male rates are adjusted by a factor of 0.96. Disabled: RP-2014 annuitant generational mortality table projected with mortality improvement scale MP-2017, from a base year of 2006. Male rates are adjusted by a factor of 0.96. The 5.25% 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. 184