Comprehensive Annual Financial Report 12/31/2019

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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2019 Actuarial assumptions used in the June 30, 2019 valuation were based on the results of actuarial experience studies. The most recent four-year experience study in the General Employees Plan was completed in 2019. The most recent four-year experience study for Police and Fire Plan was completed in 2016. The following changes in actuarial assumptions and plan provisions occurred in 2019: General Employees Fund Changes in Actuarial Assumptions:  The mortality projection scale was changed from MP-2017 to MP-2018. Changes in Plan Provisions:  The employer supplemental contribution was changed prospectively, decreasing from $31.0 million to $21.0 million per year. The State’s special funding contribution was changed prospectively, requiring $16.0 million due per year through 2031. Police and Fire Fund  The mortality projection scale was changed from MP-2017 to MP-2018. 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 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 class are summarized in the following table: Target Long-Term Expected Asset Class Allocation Real Rate of Return Domestic equity 35.5% 5.10% International equity 17.5% 5.30% Fixed Income 20.0% 0.75% Private markets 25.0% 5.90% Cash equivalents 2.0% 0.00% Totals 100% F. DISCOUNT RATE The discount rate used to measure the total pension liability in 2019 was 7.5%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at the rate set in Minnesota statutes. Based on these assumptions, 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. 69