07-10-1995 Council Packet - Laserfiche WebLink

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I I I I I I I CITY OF ORONO, MINNESOTA Notes to Financial Statements (continued) December 31. 1994 NOTE 8 - DEFINED BENEFIT PENSION PLANS - STATEWIDE (CONTINUED) Actuarial assumptions used in the calculation of the PEPFF include; (a) a rate of return on the investment of present and future assets of 8.5% per year, compounded annually, prior to retirement, and 5.0% per year, compounded annually, following retirement; (b) projected salary increases of 6.5% per year, compounded annually, attributable to the effects of inflation; (c) post retirement increa.ses that are accounted for by the 5.0% rate of return assumption following retirement; and (d) mortality rates based on the 1971 Group Annuity Mortality Table projected to 1984 for males and females. 2.Changes In Plan Provisions The 1994 legislative session did not include any benefit improvements which would impact funding costs for the PERF and the PEPFF. 3.Changes in Actuarial Assumptions Prior to fiscal year 1994. the salary increase assumption and the mortality tables used in the calculation of the pension benefit obligation for the PERF were the same as tho.se specified for the PEPFF. For the July 1. 1994 actuarial valuation. PERA's Board of Trustees approved new mortality rates updated to the 1983 Group Annuity Mortality Table, salary increases which were changed to a select and ultimate table, and a new payrvdl growth assumption which was changed from 6.5% to 6.0%. These changes were made ti> reflect actual experience of the plan. With the adoption of the actuarial assumption changes and the new mortality tables for the PERF, the pension benefit obligation increased by S56.596.000. The actuarial a.ssurnption changes also necessitated an $81 .201 .000 transfer from the PERF Benefit Reserve to the PERF Minnesena Post Retirement Investment Fund (MPRIF) Reserve to finance the increased obligation for future retirement benefits. The change m the mortality rate assumption increased the PERF’s co.sts because pensioners are living longer than assumed previously. The change in the salary increase assumption, however, off set .some of the additional costs becau.se lower salary increases generally translate into lower benefit liabilities in the future. Potential changes in the assumptions used for the PEPFF may be made in the future after completion of a special experience study for that fund. Completion of the PEPFF experience study is expected by February I. 1995. I -50-