Comprehensive Annual Financial Report 12/31/2018

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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 Year Ended Pension December 31, Expense 2019 ($91,934) 2020 (204,554) 2021 (394,691) 2022 (1,060,238) 2023 (96,467) Thereafter - The net pension liability will be liquidated by the general, water and sewer funds. E. ACTUARIAL ASSUMPTIONS The total pension liability in the June 30, 2018 actuarial valuation was determined using the following actuarial assumptions: GERF PEPFF Inflation 2.50% per year 2.50% per year Salary Growth 3.25% per year after 26 years of service 3.25% per year after 25 years of service Investment rate of return 7.50%7.50% The total pension liability for each of the defined benefit cost-sharing plans was determined by an actuarial valuation as of June 30, 2018, using the entry age normal actuarial cost method. Inflation is assumed to be 2.50 percent for the General Employees Plan. Salary growth assumptions in the General Employees Plan decrease in annual increments from 11.25 percent after one year of service, to 3.25 percent after 26 years of service. In the Police and Fire Plan, salary growth assumptions decrease from 12.25 percent after one year of service to 3.25 percent after 25 years of service. Mortality rates for all plans are based on RP-2014 mortality tables. The tables are adjusted slightly to fit PERA’s experience. Actuarial assumptions for the General Employees Plan are reviewed every four to six years. The most recent six-year experience study for the General Employees Plan was completed in 2015. The most recent four-year experience study for the Police and Fire Plan was completed in 2016. The following changes in actuarial assumptions occurred in 2018: General Employees Fund • The mortality projection scale was changed from MP-2015 to MP-2017. • The assumed benefit increase was changed from 1.0 percent per year through 2044 and 2.50 percent per year thereafter to 1.25 percent per year. Police and Fire Fund • The mortality projection scale was changed from MP-2016 to MP-2017. 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 of return 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 71