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CITY OF LINO LAKES, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2019 <br /> <br /> <br /> <br /> <br /> <br />Actuarial assumptions used in the June 30, 2019 valuation were based on the results of actuarial experience <br />studies. The most recent four-year experience study in the General Employees Plan was completed in 2019. <br />The most recent four-year experience study for Police and Fire Plan was completed in 2016. <br /> <br />The following changes in actuarial assumptions and plan provisions occurred in 2019: <br /> <br />General Employees Fund <br />Changes in Actuarial Assumptions: <br /> The mortality projection scale was changed from MP-2017 to MP-2018. <br /> <br />Changes in Plan Provisions: <br /> The employer supplemental contribution was changed prospectively, decreasing from $31.0 million <br />to $21.0 million per year. The State’s special funding contribution was changed prospectively, <br />requiring $16.0 million due per year through 2031. <br /> <br />Police and Fire Fund <br /> The mortality projection scale was changed from MP-2017 to MP-2018. <br /> <br />The State Board of Investment, which manages the investments of PERA, prepares an analysis of the <br />reasonableness on a regular basis of the long-term expected rate of return using a building-block method in <br />which best-estimate ranges of expected future rates of return are developed for each major asset class. <br />These ranges are combined to produce an expected long-term rate of return by weighting the expected future <br />rates of return by the target asset allocation percentages. The target allocation and best estimates of <br />geometric real rates of return for each major asset class are summarized in the following table: <br /> <br />Target Long-Term Expected <br />Asset Class Allocation Real Rate of Return <br />Domestic equity 35.5% 5.10% <br />International equity 17.5% 5.30% <br />Fixed Income 20.0% 0.75% <br />Private markets 25.0% 5.90% <br />Cash equivalents 2.0% 0.00% <br />Totals 100% <br /> <br /> <br />F. DISCOUNT RATE <br /> <br />The discount rate used to measure the total pension liability in 2019 was 7.5%. The projection of cash <br />flows used to determine the discount rate assumed that contributions from plan members and employers <br />will be made at the rate set in Minnesota statutes. Based on these assumptions, the fiduciary net <br />position of the GERF and the PEPFF was projected to be available to make all projected future benefit <br />payments of current plan members. Therefore, the long-term expected rate of return on pension plan <br />investments was applied to all periods of projected benefit payments to determine the total pension <br />liability. <br /> <br /> <br />69