05-26-2021 Council Packet - Laserfiche WebLink

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CITY OF LITTLE CANADA, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness of the long-term expected rate of return on a regular basis 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 arithmetic real rates of return for each major asset class are summarized below: Asset Class Target Allocation Long-Term Expected Real Rate of Return Domestic Stocks 35.5% 5.10% Alternative Assets (Private Markets) 25.0% 5.90% Bonds (Fixed Income) 20.0% .75% International Stocks 17.5% 5.30% Cash 2.0% 0.00% Totals 100% F. Discount Rate The discount rate used to measure the total pension liability in 2020 was 7.50 percent. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at rates set in Minnesota Statutes. Based on these assumptions, the fiduciary net position of the General Employees Fund was 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, calculated 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: Description 1% Decrease in Discount Rate (6.50%) Current Discount Rate 1% Increase in Discount Rate (8.50%) City’s Proportionate Share of the GERF Net $1,614,251 $1,007,236 $505,499 Pension Liability 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. 72