Comprehensive Annual Financial Report 12/31/2017

Home Search

CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 E. ACTUARIAL ASSUMPTIONS The total pension liability in the June 30, 2017 actuarial valuation was determined using the following actuarial assumptions: Inflation 2.50% per year Active member payroll growth 3.25% per year Investment rate of return 7.50% Salary increases were based on a service -related table. Mortality rates for active members, retirees, survivors, and disabilitants were based on RP -2014 tables for the GERF and PEPFF for males or females, as appropriate, with slight adjustments to fit PERA's experience. Cost of living benefit increases for retirees are assumed to be 1% per year for the GERF through 2044 and PEPFF through 2064 and then 2.5% thereafter. Actuarial assumptions used in the June 30, 2017 valuation were based on the results of actuarial experience studies. The most recent four-year experience study in the GERF was completed in 2015. The most recent five-year experience study for PEPFF was completed in 2016. The following changes in actuarial assumptions occurred in 2017: General Employees Fund • The Combined Service Annuity (CSA) loads were changed from 0.8 percent for active members and 60 percent for vested and non -vested deferred members. The revised CSA loads are now 0.0 percent for active member liability, 15.0 percent for vested deferred member liability and 3.0 percent for non -vested deferred member liability. • The assumed post-retirement benefit increase rate was changed from 1.0 percent per year for all years to 1.0 percent per year through 2044 and 2.5 percent per year thereafter. Police and Fire Fund • The single discount rate was changed from 5.6% to 7.5%. • Assumed salary increases were changed as recommended in the June 30, 2016 experience study. The net effect is proposed rates that average 0.34 percent lower than the previous rates. • Assumed rates of retirement were changed, resulting in fewer retirements. • The Combined Service Annuity (CSA) load was 30 percent for vested and non -vested deferred members. The CSA has been changed to 33 percent for vested members and 2 percent for non -vested members. • The base mortality table for healthy annuitants was changed from the RP -2000 fully generational table to the RP -2014 fully generational table (with a base year of 2006), with male rates adjusted by a factor of 0.96. The mortality improvement scale was changed from Scale AA to Scale MP -2016. The base mortality table for disabled annuitants was changed from the RP -2000 disabled mortality table to the mortality tables assumed for healthy retirees. • Assumed termination rates were decreased to 3.0 percent for the first three years of service. Rates beyond the select period of three years were adjusted, resulting in more expected terminations overall. • Assumed percentage of married female members was decreased from 65 percent to 60 percent. 68