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CITY OF LITTLE CANADA, MINNESOTA <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />DECEMBER 31, 2019 <br /> <br /> <br /> <br /> <br /> <br />NOTE 7 DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED) <br />E. Actuarial Assumptions (Continued) <br />Actuarial assumptions used in the June 30, 2019, valuation were based on the results of actuarial <br />experience studies. The most recent four-year experience study in the General Employees Plan was <br />completed in 2019. <br /> <br />The following changes in actuarial assumptions occurred in 2019: <br /> <br />Changes in Actuarial Assumptions: <br />• The morality projection scale was changed from MP-2017 to MP-2018. <br /> <br />Changes in Plan Provisions: <br />• The employer supplemental contribution was changed prospectively, decreasing from $31.0 <br />million to $21.0 million per year. The State’s special funding contribution was changed <br />prospectively, requiring $16.0 million due per year through 2031. <br /> <br />The State Board of Investment, which manages the investments of PERA, prepares an analysis of <br />the reasonableness of the long-term expected rate of return on a regular basis using a building- <br />block method in which best-estimate ranges of expected future rates of return are developed for <br />each major asset class. These ranges are combined to produce an expected long-term rate of return <br />by weighting the expected future rates of return by the target asset allocation percentages. The <br />target allocation and best estimates of arithmetic real rates of return for each major asset class are <br />summarized below: <br /> <br />Asset Class <br />Target <br />Allocation <br />Long-Term <br />Expected <br />Real Rate <br />of Return <br />Domestic Equity 35.5% 5.10% <br />Private Markets 25.0% 5.90% <br />Fixed Income 20.0% .75% <br />International Equity 17.5% 5.90% <br />Cash Equivalents 2.0% 0.00% <br /> Totals 100% <br /> <br />F. Discount Rate <br />The discount rate used to measure the total pension liability in 2019 was 7.50 percent. The <br />projection of cash flows used to determine the discount rate assumed that contributions from plan <br />members and employers will be made at rates set in Minnesota Statutes. Based on these <br />assumptions, the fiduciary net position of the General Employees Fund was projected to be <br />available to make all projected future benefit payments of current plan members. Therefore, the <br />long-term expected rate of return on pension plan investments was applied to all periods of <br />projected benefit payments to determine the total pension liability. <br /> <br /> <br /> <br />69