08-08-2022 Council Packet - Laserfiche WebLink

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City of Orono, Minnesota Notes to the Financial Statements December 31, 2021 Note 4: Defined Benefit Pension Plans - Statewide (Continued) 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 33.5 %5.10 % Alternative Assets (Private Markets)25.0 5.90 Bonds (Fixed Income)25.0 0.75 International Equity 16.5 5.30 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 2021 was 6.50 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. G. Pension Liability Sensitivity The following presents the City’s proportionate share of the net pension liability for all plans it participates in, calculat ed using the discount rate disclosed in the preceding paragraph, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate one percentage point lower or one percentage point higher than the current discount rate: 1 Percent 1 Percent Decrease (6.50%)Current (7.50%)Increase (8.50%) General Employees Fund 2,316,736$ 1,135,939$ 167,023$ Police and Fire Fund 5,234,552 1,648,766 (1,290,691) City Proportionate Share of NPL H. Pension Plan Fiduciary Net Position Detailed information about each pension plan’s fiduciary net position is available in a separately-issued PERA financial report that includes financial statements and required supplementary information. That report may be obtained on the Internet at www.mnpera.org. DRAFT 77