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City of Orono, Minnesota <br />Notes to the Financial Statements <br />December 31, 2024 <br />Note 4: Defined Benefit Pension Plans - Statewide (Continued) <br />F. Actuarial Assumptions <br />The following changes in actuarial assumptions and plan provisions occurred in 2024: <br />General Employees Fund <br />Changes in Actuarial Assumptions <br />Changes in Plan Provisions <br />reflect the changes in assumptions. <br />The total pension liability for each of the cost-sharing defined benefit plans was determined by an actuarial valuation as <br />of June 30, 2024, using the entry age normal actuarial cost method. The long-term rate of return on pension plan <br />investments used to determine the total liability is 7.0%. The 7.0% assumption is based on a review of inflation and <br />investment return assumptions from a number of national investment consulting firms. The review provided a range of <br />investment return rates considered reasonable by the actuary. An investment return of 7.0% is within that range. <br />Inflation is assumed to be 2.25% for the General Employees Plan and Police and Fire Plan. <br />Benefit increases after retirement are assumed to be 1.25% for the General Employees Plan and 1.0% for the Police and <br />Fire Plan. <br />Salary growth assumptions in the General Employees Plan range in annual increments from 10.25% after one year of <br />service to 3.0% after 27 years of service. In the Police and Fire Plan, salary growth assumptions range in annual <br />increments from 11.75% after one year of service to 3.0% after 24 years of service. <br />Mortality rates for the General Employees Plan are based on the Pub-2010 General Employee Mortality Table. Mortality <br />rates for the Police and Fire Plan are based on the Pub-2010 Public Safety Employee Mortality tables. The tables are <br />Actuarial assumptions for the General Employees Plan are reviewed every four years. The General Employees Plan was <br />last reviewed in 2022. The assumption changes were adopted by the board and became effective with the July 1, 2023 <br />actuarial valuation. The Police and Fire Plan were reviewed in 2024. PERA anticipates the experience study will be <br />approved by the Legislative Commission on Pensions and Retirement and become effective with the July 1, 2025 <br />- Rates of merit and seniority were adjusted, resulting in slightly higher rates. <br />- Assumed rates of retirement were adjusted as follows: increase the rate of assumed unreduced retirements, slight <br />adjustments to Rule of 90 retirement rates, and slight adjustments to early retirement rates for Tier 1 and Tier 2 <br />members. <br />- Minor increase in assumed withdrawals for males and females. <br />- Lower rates of disability. <br />- Continued use of Pub-2010 general mortality table with slight rate adjustments as recommended in the most recent <br />experience study. <br />- Minor changes to form of payment assumptions for male and female retirees. <br />- Minor changes to assumptions made with respect to missing participant data. <br />78 105