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CITY OF LAKE ELMO, MINNESOTA <br />NOTES TO THE BASIC FINANCIAL STATEMENTS <br />DECEMBER 31, 2023 <br /> <br /> <br />66 <br />NOTE 4 DEFINED BENEFIT PENSION PLAN – FIREFIGHTERS RELIEF ASSOCIATION (Continued) <br /> <br />Actuarial Assumptions <br /> <br />The total pension asset measured at December 31, 2022 was determined using the entry age normal actuarial cost method and <br />the following actuarial assumptions: <br /> <br /> Assumptions Rates <br /> Investment Rate of Return (Discount) 5.75% <br /> Expected Long-Term Rate of Return 5.75% <br /> Salary Increases <br />Interest on Deferred Amounts <br /> 2.50% <br />0.00% <br /> <br />The following changes in actuarial assumptions and plan provisions occurred in 2023: <br /> <br />Changes in Plan Provisions: <br />• There were no changes to plan provisions since the prior valuation. <br /> <br />Changes in Actuarial Assumptions: <br />• The discount rate changed from 5.25 percent to 5.75 percent. <br /> <br />Pension Liability Sensitivity <br /> <br />The following presents the City’s net pension asset for the Firefighters Relief Association’s plan, calculated using the discount <br />rate disclosed in the preceding paragraph, as well as what the City’s net pension asset would be if it were calculated using a <br />discount rate one percent lower or one percent higher than the current discount rate: <br /> <br /> <br /> <br />Plan Investments <br /> <br />Asset Allocation <br />The long-term expected rate of return on pension plan investments is 5.75 percent. The target allocation and best estimates of <br />geometric real rates of return for each major asset class of the Association’s pension fund investments are summarized in the <br />following table: <br /> <br /> Long-Term Expected <br />Asset Class Target Allocation Real Rate of Return <br />Cash 12.00% 2.00% <br />Fixed Income 28.00% 3.10% <br />Equities 60.00% 7.90% <br /> <br />Pension Plan Fiduciary Net Position <br /> <br />Detailed information about the pension plan’s fiduciary net position is available in a separately issued financial report that <br />includes financial statements and required supplementary information. That report may be obtained by contacting the City Hall <br />at 3880 Laverne Avenue North, Lake Elmo, Minnesota 55042. <br /> <br /> <br />1% Decrease in 1% Increase in <br />Discount Rate (4.75%)Discount Rate (5.75%)Discount Rate (6.75%) <br />Net Pension Asset 533,647$ 565,242$ 593,879$