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CITY OF LINO LAKES, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2017 <br /> <br /> <br /> <br /> <br />E. ACTUARIAL ASSUMPTIONS <br /> <br />The total pension liability in the June 30, 2017 actuarial valuation was determined using the following <br />actuarial assumptions: <br /> <br />Inflation 2.50% per year <br />Active member payroll growth 3.25% per year <br />Investment rate of return 7.50% <br />Salary increases were based on a service-related table. Mortality rates for active members, retirees, <br />survivors, and disabilitants were based on RP-2014 tables for the GERF and PEPFF for males or <br />females, as appropriate, with slight adjustments to fit PERA’s experience. Cost of living benefit <br />increases for retirees are assumed to be 1% per year for the GERF through 2044 and PEPFF through <br />2064 and then 2.5% thereafter. <br /> <br />Actuarial assumptions used in the June 30, 2017 valuation were based on the results of actuarial <br />experience studies. The most recent four-year experience study in the GERF was completed in 2015. <br />The most recent five-year experience study for PEPFF was completed in 2016. <br /> <br />The following changes in actuarial assumptions occurred in 2017: <br /> <br /> General Employees Fund <br /> The Combined Service Annuity (CSA) loads were changed from 0.8 percent for active <br />members and 60 percent for vested and non-vested deferred members. The revised CSA <br />loads are now 0.0 percent for active member liability, 15.0 percent for vested deferred <br />member liability and 3.0 percent for non-vested deferred member liability. <br /> The assumed post-retirement benefit increase rate was changed from 1.0 percent per year for <br />all years to 1.0 percent per year through 2044 and 2.5 percent per year thereafter. <br /> <br />Police and Fire Fund <br /> The single discount rate was changed from 5.6% to 7.5%. <br /> Assumed salary increases were changed as recommended in the June 30, 2016 experience <br />study. The net effect is proposed rates that average 0.34 percent lower than the previous <br />rates. <br /> Assumed rates of retirement were changed, resulting in fewer retirements. <br /> The Combined Service Annuity (CSA) load was 30 percent for vested and non-vested deferred <br />members. The CSA has been changed to 33 percent for vested members and 2 percent for <br />non-vested members. <br /> The base mortality table for healthy annuitants was changed from the RP-2000 fully <br />generational table to the RP-2014 fully generational table (with a base year of 2006), with <br />male rates adjusted by a factor of 0.96. The mortality improvement scale was changed from <br />Scale AA to Scale MP-2016. The base mortality table for disabled annuitants was changed <br />from the RP-2000 disabled mortality table to the mortality tables assumed for healthy retirees. <br /> Assumed termination rates were decreased to 3.0 percent for the first three years of service. <br />Rates beyond the select period of three years were adjusted, resulting in more expected <br />terminations overall. <br /> Assumed percentage of married female members was decreased from 65 percent to 60 percent. <br />68