01-24-2022 Council Packet - Laserfiche WebLink

Home Browse Search

City of Orono, Minnesota Notes to the Financial Statements December 31, 2020 Note 4: Defined Benefit Pension Plans - Statewide (Continued) Police and Fire Fund Changes in Actuarial Assumptions: • The mortality projection scale was changed from MP-2018 to MP-2019. Changes in Plan Provisions : • There have been no changes since the prior valuation. 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: Asset Class Domestic Equity 35.5 %5.10 % Alternative Assets (Private Markets)25.0 5.90 Bonds (Fixed Income)20.0 0.75 International Stocks 17.5 5.30 Cash 2.0 - Total 100.00 % Target Expected Real Allocation Rate of Return Long-term F. Discount Rate The discount rate used to measure the total pension liability in 2020 was 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 r ates set in Minnesota statutes. Based on these assumptions, the fiduciary net position of the G eneral Employees Fund and the Police and Fire Fund were 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.