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City of Elk River <br />Notes to Basic Financial Statements <br />NOTE 11 — PENSION PLANS (CONTINUED) <br />Defined Benefit Pension Plan — Volunteer Firefighter's Relief Association (Continued) <br />E. Net Pension Liability (Continued) <br />The total pension liability in the December 31, 2020, actuarial valuation was determined using the <br />following actuarial assumptions, applied to all periods included in the measurement: <br />Inflation <br />Discount rate <br />Investment rate of return <br />2.25 % Per year <br />5.00 % Per year <br />5.00 % <br />The demographic assumption of mortality is based on the rates use in the July 1, 2020 Minnesota PERA <br />Police & Fire Plan actuarial valuation as described below. <br />Healthy Pre -retirement: RP-2014 employee generational mortality table projected with mortality <br />improvement scale MP-2019, from a base year of 2006. <br />Healthy Post -retirement: RP-2014 annuitant generational mortality table projected with mortality <br />improvement scale MP-2019, from a base year of 2006. Male rates are adjusted by a factor of 0.96. <br />Disabled: RP-2014 annuitant generational mortality table projected with mortality improvement scale <br />MP-2019, from a base year of 2006. Male rates are adjusted by a factor of 0.96. <br />The 5.00% long-term expected rate of return on pension plan investments was determined using a <br />building-block method in which best estimates for expected future real rates of return (expected returns, <br />net of inflation) were developed for each asset class using the plan's target investment allocation along <br />with long-term return expectations by asset class. Inflation expectations were applied to derive the <br />nominal rate of return for the portfolio. <br />Best estimates of arithmetic real rates of return for each major asset class included in the pension plan's <br />target asset allocation as of the measurement date are summarized in the table below. <br />Asset Class <br />Domestic equity <br />International equity <br />Fixed income <br />Real estate and alternatives <br />Cash and equivalents <br />Total <br />Long -Term <br />Expected Real <br />Target Allocation Rate of Return <br />32.0 % <br />4.90 % <br />23.0 <br />5.32 <br />25.0 <br />1.40 <br />5.0 <br />4.43 <br />15.0 <br />0.09 <br />100.0 % <br />92 <br />