06-14-2021 Council Packet - Laserfiche WebLink

Home Search

CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2019 G. PENSION LIABILITY SENSITMTY The following presents the City's net pension asset for the SVF plan, calculated using the discount rate disclosed in the preceding paragraph, as well as what the City's net pension asset would be ifit were calculated using a discount rate I% lower or I% higher than the current discount rate: Net pension asset H. PLAN INVESTMENTS I. Inves1ment Policy 1 o/o Decrease in Disco\1111 Rate (5.0%) $296,964 Disco\1111 Rate (6.0%) $317,669 1 % Increase in Disco\1111 Rate (7.0%) $337,322 The Minnesota State Board oflnves1ment (SBI) is established by Article XI of the Minnesota Constitution to invest all state funds. Its membership as specified in the Constitution is comprised of the Governor (who is designated as chair of the Board), State Auditor, Secretary of State and State Attorney General. All inves1ments undertaken by the SBI are governed by the prudent person rule and other standards codified in Minnesota Statutes, Chapter I IA and Chapter 3530. Within the requirements defined by state law, the SBI, with assistance of the SBI staff and the Inves1ment Advisory Council, establishes inves1ment policies for all funds under its control. These inves1ment policies are tailored to the particular needs of each fund and specify inves1ment objectives, risk tolerance, asset allocation, inves1ment management structure and specific performance standards. Studies guide the on-going management of the funds and are updated periodically. 2. Asset Allocation To match the long-term nature of the pension obligations, the SBI maintains a strategic asset allocation for the SVF that includes allocations to domestic equity, international equity, bonds and cash equivalents. The long-term target asset allocation and long-term expected real rate of return is the following: Target Long-Term Expected Asset Class Allocation Real Rate of Return Domestic Stocks 35% 5.10% International Stocks 15% 5.30% Bonds 45% 0.75% Cash 5% 0.00% 100% The 6% long-term expected rate of fl'lurn on pension plan inves1ments was determined using a building-block method. Best estimates for expected future real rates of return ( expected returns, net of inflation) were developed for each asset class using both long-term historical returns and long-term capital market expectations from a number of inves1ment management and consulting organizations. The asset class estimates and the target allocations were then combined to produce a CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2019 geometric, long-term expected real rate of return for the portfolio. Inflation expectations were "!?Plied to derive the nominal rate of return for the portfolio. 3. Description of Significant Inves1ment Policy Changes During the Year The SBI made no significant changes to their inves1ment policy during fiscal year 2019 for the Volunteer Firefighter Fund. L PENSION PLAN FIDUCIARY NET POSmON Detailed information about the SVF plan's fiduciary net position at June 30, 2019 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. Note 9 POST-EMPLOYMENT BENEFITS OTHER THAN PENSIONS fOPEB} A. PLAN DESCRIPTION In addition to providing the pension benefits described in Notes 7 and 8, the City provides post- employment health care benefits, as defined in paragraph B, through its group health insurance plan (the plan). The plan is a single-employer defined benefit OPEB plan administered by the City. The authority to provide these benefits is established in Minnesota Statutes Sections 471.61 Subd. 2a and 299A.465. The benefits, benefit levels, employee contributions and employer contributions are governed by the City and can be amended by the City through its per!!onnel manual and collective bargaining agreements with employee groups. No assets are accumulated in a trust that meets the criteria in paragraph 4 ofGASB Statement No. 75. The plan does not issue a stand-alone financial report. B. BENEFffSPROVIDED The City is required by State Statute to allow retirees to continue participation in the City's group health insurance plan if the individual terminates service with the City through service retirement or disability retirement. Active employees, who retire from the City when over age 50 and with 20 years of service, may continue coverage with respect to both themselves and their eligible dependent(s) under the City's health benefits program until age 65. The City provides health coverage for peace officers or firefighters disabled or killed in the line of duty in accordance with Minnesota Statute 299A.465. The amount of coverage provided is equal to the employer portion of health insurance premiums that would have otherwise been paid if the officer or firefighter was an active employee. All health care coverage is provided through the City's group health insurance plans. The retiree is required to pay I 00"/o of their premium cost for the City-sponsored group health insurance plan in which they participate. The premium is a blended rate determined on the entire active and retiree population. Since the projected claims costs for retirees exceed the blended premium paid by retirees, the retirees are receiving an implicit rate subsidy (benefit). The coverage levels are the same as those afforded to active employees. Upon a retiree reaching age 65, Medicare becomes the primary insurer and the City's plan becomes secondary. IV-32