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CITY OF LITTLE CANADA, MINNESOTA <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />DECEMBER 31, 2022 <br /> <br /> <br /> <br />(59) <br />NOTE 8 DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED) <br />D. Pension Costs (Continued) <br />The $53,421 reported as deferred outflows of resources related to pensions resulting <br />from City contributions subsequent to the measurement date will be recognized as a <br />reduction of the net pension liability in the year ended December 31, 2023. Other <br />amounts reported as deferred outflows and deferred inflows of resources related to <br />pensions will be recognized in pension expense as follows: <br /> <br />Pension <br />Expenses <br />Year Ended December 31,Amount <br />2023 170,875$ <br />2024 160,689 <br />2025 (34,435) <br />2026 133,224 <br />Thereafter - <br /> <br />E. Long-Term Expected Return on Investment <br />The State Board of Investment, which manages the investments of PERA, prepares an <br />analysis of the reasonableness on a regular basis of the long-term expected rate of <br />return using a building-block method in which best-estimate ranges of expected future <br />rates of return are developed for each major asset class. These ranges are combined to <br />produce an expected long-term rate of return by weighting the expected future rates of <br />return by the target asset allocation percentages. The target allocation and best <br />estimates of geometric real rates of return for each major asset class are summarized in <br />the following table: <br /> <br />Long-Term <br />Target Expected Real <br />Asset Class Allocation Rate of Return <br />Domestic Equity 33.50% 5.10% <br />International Equity 16.50 5.30 <br />Fixed Income 25.00 0.75 <br />Private Markets 25.00 5.90 <br />Totals 100.00% <br /> <br />F. Actuarial Methods Assumptions <br />The total pension liability in the June 30, 2022, actuarial valuation was determined using <br />an individual entry-age normal actuarial cost method. The long-term rate of return on <br />pension plan investments used in the determination of the total liability is 6.5 percent. <br />This assumption is based on a review of inflation and investments return assumptions <br />from a number of national investment consulting firms. The review provided a range of <br />return investment return rates deemed to be reasonable by the actuary. An investment <br />return of 6.5 percent was deemed to be within that range of reasonableness for financial <br />reporting purposes.