4.1 ERMUSR 04-08-2025 - Laserfiche WebLink

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Elk River Municipal Utilities Elk River, Minnesota Notes to the Financial Statements For the Year Ended December 31, 2024 Note 4: Defined Benefit Pension Plans - Statewide (Continued) F. Actuarial Methods and Assumptions The total pension liability for each of the cost -sharing defined benefit plans was determined by an actuarial valuation as of June 30, 2024, using the entry age normal actuarial cost method. The long-term rate of return on pension plan investments used to determine the total liability is 7%. The 7% assumption is based on a review of inflation and investment return assumptions from a number of national investment consulting firms. The review provided a range of investment return rates considered reasonable by the actuary. An investment return of 7% is within that range. Inflation is assumed to be 2.25% for the General Employees Plan. Benefit increases after retirement are assumed to be 1.25% for the General Employees Plan. Salary growth assumptions in the General Employees Plan range in annual increments from 10.25% after one year of service to 3% after 27 years of service. Mortality rates for the General Employees Plan are based on the Pub-2010 General Employee Mortality Table. Actuarial assumptions for the General Employees Plan are reviewed every four years. The General Employees Plan was last reviewed in 2022. The assumption changes were adopted by the board and became effective with the July 1, 2023 actuarial valuation. The following changes in actuarial assumptions and plan provisions occurred in 2024: General Employees Fund Changes in Actuarial Assumptions: • Rates of merit and seniority were adjusted, resulting in slightly higher rates. • Assumed rates of retirement were adjusted as follows: increase the rate of assumed unreduced retirements, slight adjustments to Rule of 90 retirement rates, and slight adjustments to early retirement rates for Tier 1 and Tier 2 members. • Minor increase in assumed withdrawals for males and females. • Lower rates of disability. • Continued use of Pub-2010 general mortality table with slight rate adjustments as recommended in the most recent experience study. • Minor changes to form of payment assumptions for male and female retirees. • Minor changes to assumptions made with respect to missing participant data. Changes in Plan Provisions: •The workers' compensation offset for disability benefits was eliminated. The actuarial equivalent factors updated to reflect the changes in assumptions. 48 111