6.3 SR 06-05-2023 - Laserfiche WebLink

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City of Elk River Notes to Basic Financial Statements NOTE 12 — PENSION PLANS (CONTINUED) Defined Benefit Pension Plan — Volunteer Firefighter's Relief Association (Continued) E. Net Pension Liability (Continued) Disabled: Pub-2010 Public Safety Disabled Retiree mortality tables with projected mortality improvements based on scale MP-2020. Male rates are adjusted by a factor of 1.05. The 5.00% 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. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan's target asset allocation as of the measurement date are summarized in the table below. Asset Class Domestic equity International equity Fixed income Real estate and alternatives Cash and equivalents Target Allocation 32.0 % 23.0 25.0 5.0 15.0 Total 100.0 % Long -Term Expected Real Rate of Return 4.90 % 5.32 1.40 4.43 0.09 The discount rate used to measure the total pension liability was 5.00%. 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.