11-13-2018 Council Meeting Packet

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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 F. • Assumed age difference was changed from separate assumptions for male members (wives assumed to be three years younger) and female members (husbands assumed to be four years older) to the assumption that males are two years older than females. • The assumed percentage offemale members electing Joint and Survivor annuities was increased. • The assumed post-retirement benefit increase rate was changed from 1.00 perfect for all years to 1.00 percent per year through 2064 and 2.50 percent thereafter. The long-term expected rate of return on pension plan investments is 7.5%. The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness on a regular basis of the long-term expected rate ofreturn 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 geometric real rates of return for each major asset are summarized in the following table: Target Long-Term Expected Asset Class Allocation Real Rate of Return Domestic stocks 39% 5.10% International stocks 19% 5.30% Bonds 20% 0.75% Alternative assets 20% 5.90% Cash ~ 0.00% Totals 100% DISCOUNT RATE The discount rate used to measure the total pension liability was 7.5%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employees will be made at the rate set in Minnesota statutes. Based on that assumption, the fiduciary net position of the GERF and the PEPFF 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. At June 30, 2016, the Police and Fire Fund projected benefit payments to exceed the funds projected fiduciary net position after June 30, 2056 and therefore used a single discount rate of 5.6%, which as stated above, increased to 7.5% at June 30, 2017. CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 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 ifit were calculated using a discount rate I percentage point lower or I percentage point higher than the current discount rate: City's proportionate share of the GERF net pension liability City's proportionate share of the PEPFF net pension liability City's proportionate share of the I% Decrease in Discount Rate (6.5%) $4,099,410 $6,534,657 H. PENSION PLAN FIDUCIARY NET POSITION Discount Rate (7.5%) $2,642,949 $3,469,806 1 % Increase in Discount Rate (8.5%) $1,450,571 $939,602 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 at www.mnpera.org. I. PENSION EXPENSE Pension expense recognized by the City for the year ended December 31, 2017 is as follows: GERF PEPFF Fire Pension Plan (Note 9) Total $381,0ll 874,127 45,088 $1,300,226 Note 9 DEFINED BENEFIT PENSION PLAN -FIRE DIVISION A. PLAN DESCRIPTION The Lino Lakes Public Safety Department -Fire Division participates in the Statewide Volunteer Firefighter Retirement Plan (SVF), an agent multiple-employer lump-sum defined benefit pension plan administered by the Public Employees Retirement Association of Minnesota (PERA). The SVF plan covers volunteer firefighters of municipal fire departments or independent nonprofit firefighting corporations that have elected to join the plan. At December 31, 2017 (measurement date), the plan covered 23 active firefighters and zero vested terminated fire fighters whose pension benefits are deferred. The plan is established and administered in accordance with Minnesota Statutes, Chapter 353G. IV-31