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CITY OF ORONO, MINNESOTA <br />Notes to Financial Statements (continued) <br />December 31, 1995 <br />NOTE 8 - DEFINED BENEFIT PENSION PLANS - STATEWIDE (CONTLNUED) <br />Actuarial assumptions used in the calculation of the PEPFF include: (a) a rate of return on the <br />investment of presera and fumre assets of 8.591 per year, compounded annually, prior to <br />retirement and 5.0% per year, compounded annually, following retirement; (b) projected salary <br />increases of 6.5% per year, compounded annual!), attributable to the effects of inflation; (c) post­ <br />retirement increases that are accounted for by the 5.0% rate of return assumption following <br />retirement; and (d) mortality rates based on the 1971 Group Annuity Mortality Table projected to <br />1984 for males and females. <br />2. Changes in Actuarial Assumptions and Methods <br />Since the July 1, 1994 acmarial valuation, there were no changes in actuarial assumptions of the <br />PERF and the PEPFF which impacted funding costs. <br />Potential changes in the actuarial assumptions used for the PEPFF may be made in the future. <br />Results of an experience snidy for the fund during the four-year period ending June 30, 1994, <br />disclosed (a) retirees are living longer; (b) the expected active member death rate is declining; (c) <br />the trend toward earlier retirement continues; and (d) the panem of salary increases varies <br />substantially by age. With a strong merit and seniority component evident at the younger ages. <br />Based on these results. PERA will soon consider revising the actuarial assumption for retirement <br />age, mortality, payroll growth, and individual salary increases. These changes, if adopted within <br />fiscal year 1996, will significantly impact the July 1, 1996 actuarial valuation of the PEPFF. <br />3. Changes in Benefit Provisions <br />The 1995 legislative session did not include any benefit improvements which would impact funding <br />costs for the PERF and the PEPFF. <br />D. Ten-Year Historical Trend Information <br />Ten-year historical trend information is presented in PERA’s Component Unit Financial Report for the <br />fiscal year ended June 30, 1995. This information is useful in assessing the pension plan's accumulation <br />of sufficient assets to pay pension benefits as they become due. <br />E. Related Party Investments <br />As of June 30. 1995, and for the fiscal year then ended, PERA held no securities issued by the City or <br />other related parties. <br />I <br />I <br />I <br />I <br />\ <br />1 <br />-49- <br />i