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CITY OF LINO LAKES, MINNESOTA
<br />NOTES TO FINANCIAL STATEMENTS
<br />December 31, 2017
<br />valuation as of that date. The City's proportion of the net pension liability was based on the City's
<br />contributions received by PERA during the measurement period for employer payroll paid dates
<br />from July I, 2016 through June 30, 2017, relative to the total employer contributions received from
<br />all of PERA's participating employers. At June 30,2017, the City's proportion was 0.257%, which
<br />was a decrease of0.002% from its proportion measured as of June 30, 2016. The City also
<br />recognized $23,130 for the year ended December 31, 2017 as revenue (and an offsetting reduction
<br />of net pension liability) for its proportionate share of the State of Minnesota's on-behalf
<br />contributions to the PEPFF. Legislation passed in 2013 required the State of Minnesota to begin
<br />contributing $9 million to the PEPFF each year, starting in fiscal year 2014.
<br />For the year ended December 31, 2017, the City recognized pension expense of $874,127 for its
<br />proportionate share of the PEPFF's pension expense.
<br />At December 31, 2017, the City reported its proportionate share of the PEPFF's deferred outflows
<br />of resources and deferred inflows of resources related to pensions from the following sources:
<br />Differences between expected and
<br />actual economic experience
<br />Changes in actuarial assumptions
<br />Difference between projected and
<br />actual investment earnings
<br />Changes in proportion
<br />Contributions paid to PERA
<br />subsequent to the measurement date
<br />Total
<br />Deferred Outflows
<br />of Resources
<br />$79,868
<br />4,540,933
<br />46,997
<br />75,053
<br />220,753
<br />$4,963,604
<br />Deferred Inflows
<br />of Resources
<br />$927,062
<br />4,926,263
<br />27,560
<br />$5,880,885
<br />A total of$220,753 reported as deferred outflows of resources related to pensions resulting from
<br />City contributions subsequent to the measurement date will be recognized as a reduction of the net
<br />pension liability during 2018. Other amounts reported as deferred outflows and inflows of
<br />resources related to pensions will be recognized in pension expense as outflows:
<br />Year Ended Pension
<br />December 31 1 Exl!!:!!se
<br />2018 $73,515
<br />2019 73,518
<br />2020 (53,354)
<br />2021 (256,922)
<br />2022 (974,791)
<br />Thereafter
<br />The net pension liability will be liquidated by the general, water and sewer funds.
<br />CITY OF LINO LAKES, MINNESOTA
<br />NOTES TO FINANCIAL STATEMENTS
<br />December 31, 2017
<br />E. ACTUARIAL ASSUMPTIONS
<br />The total pension liability in the June 30, 2017 actuarial valuation was determined using the following
<br />actuarial assumptions:
<br />Inflation
<br />Active member payroll growth
<br />Investment rate of return
<br />2.50% per year
<br />3 .25% per year
<br />7.50%
<br />Salary increases were based on a service-related table. Mortality rates for active members, retirees,
<br />survivors, and disabilitants were based on RP-2014 tables for the GERF and PEPFF for males or
<br />females, as appropriate, with slight adjustments to fit PERA's experience. Cost ofliving benefit
<br />increases for retirees are assumed to be I% per year for the GERF through 2044 and PEPFF through
<br />2064 and then 2.5% thereafter.
<br />Actuarial assumptions used in the June 30, 2017 valuation were based on the results of actuarial
<br />experience studies. The most recent four-year experience study in the GERF was completed in 2015.
<br />The most recent five-year experience study for PEPFF was completed in 2016.
<br />The following changes in actuarial assumptions occurred in 2017:
<br />General Employees Fund
<br />• The Combined Service Annuity (CSA) loads were changed from 0.8 percent for active
<br />members and 60 percent for vested and non-vested deferred members. The revised CSA
<br />loads are now 0.0 percent for active member liability, 15.0 percent for vested deferred
<br />member liability and 3.0 percent for non-vested deferred member liability.
<br />• The assumed post-retirement benefit increase rate was changed from 1.0 percent per year for
<br />all years to 1.0 percent per year through 2044 and 2.5 percent per year thereafter.
<br />Police and Fire Fund
<br />• The single discount rate was changed from 5.6% to 7.5%.
<br />• Assumed salary increases were changed as recommended in the June 30, 2016 experience
<br />study. The net effect is proposed rates that average 0.34 percent lower than the previous
<br />rates.
<br />• Assumed rates of retirement were changed, resulting in fewer retirements.
<br />• The Combined Service Annuity (CSA) load was 30 percent for vested and non-vested deferred
<br />members. The CSA has been changed to 33 percent for vested members and 2 percent for
<br />non-vested members.
<br />• The base mortality table for healthy annuitants was changed from the RP-2000 fully
<br />generational table to the RP-2014 fully generational table (with a base year of2006), with
<br />male rates adjusted by a factor of0.96. The mortality improvement scale was changed from
<br />Scale AA to Scale MP-2016. The base mortality table for disabled annuitants was changed
<br />from the RP-2000 disabled mortality table to the mortality tables assumed for healthy retirees.
<br />• Assumed termination rates were decreased to 3.0 percent for the first three years of service.
<br />Rates beyond the select period of three years were adjusted, resulting in more expected
<br />terminations overall.
<br />• Assumed percentage of married female members was decreased from 65 percent to 60 percent. IV-30
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