05-11-2022 Council Packet - Laserfiche WebLink

Home Browse Search

CITY OF LITTLE CANADA, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2021 NOTE 7 DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED) E. Actuarial Assumptions (Continued) Actuarial assumptions used in the June 30, 2021, valuation were based on the results of actuarial experience studies. The most recent four-year experience study in the General Employees Plan was completed in 2019. The assumption changes were adopted by the Board and became effective with the July 1, 2020 valuation. The following changes in actuarial assumptions and plan provisions occurred in 2021: • The investment return and single discount rates were changed from 7.50 percent to 6.50 percent, for financial reporting purposes. • The mortality improvement scale was changed from Scale MP-2019 to Scale MP-2020. • There were no changes in plan provisions since the previous valuation. 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 Equity 35.5% 5.10% International Equity 16.5% 5.30% Fixed Income 25.0% .75% Private Markets 25.0% 5.90% Totals 100% F. Discount Rate The discount rate used to measure the total pension liability in 2021 was 6.50 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: 70