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CITY OF LAKE ELMO, MINNESOTA NOTES TO THE BASIC FINANCIAL STATEMENTS DECEMBER 31, 2024 68 NOTE 4 DEFINED BENEFIT PENSION PLAN – FIREFIGHTERS RELIEF ASSOCIATION (Continued) Plan Investments Asset Allocation The long-term expected rate of return on pension plan investments is 5.75 percent. The target allocation and best estimates of geometric real rates of return for each major asset class of the Association’s pension fund investments are summarized in the following table: Long-Term Expected Asset Class Target Allocation Real Rate of Return Cash 12.00% 2.00% Fixed Income 28.00% 3.10% Equities 60.00% 7.90% Pension Plan Fiduciary Net Position Detailed information about the pension plan’s fiduciary net position is available in a separately issued financial report tha t includes financial statements and required supplementary information. That report may be obtained by contacting the City Hall at 3880 Laverne Avenue North, Lake Elmo, Minnesota 55042. NOTE 5 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS Plan Description The City administers a single-employer defined benefit plan (the Plan) that provides health insurance to eligible employees and their spouses through the City’s health insurance plan. The OPEB plan has no assets accumulated in a trust that meets the requirements to be netted against OPEB liabilities. As of the most recent actuarial valuation date, there are 27 active employees electing coverage, 3 active employees not electing coverage, and no retirees electing coverage. Benefit and eligibility provisions are established through negotiations between the City and the City’s employees. The Plan does not issue a publicly available financial report. Benefits Provided At retirement, employees of the City receiving a retirement or disability benefit, or eligible to receive a benefit, from a Minnesota public pension plan may continue to participate in the City’s group insurance plan. Vesting requirements of three years if hired before July 1, 2010 or five years if hired on or after July 1, 2010 generally apply. The City is legally required to include any retirees for who it provides health insurance coverage in the same insurance pool as its active employees until the retiree reaches Medicare eligibility, regardless of whether the premiums are paid by the City or the retiree. Consequently, participating retirees are considered to receive a secondary benefit known as an “implicit rate subsidy.” This benefit arises from the assumption that the retiree is receiving a more favorable premium rate than they would otherwise be able to obtain if purchasing insurance on their own, due to being included in the same pool with the City’s younger and statistically healthier active employees. Contributions The City has historically funded these liabilities on a pay-as-you-go basis, in the amounts contractually required to satisfy the benefit terms discussed above. For the year ended December 31, 2024, the City did not make any direct contributions to the plan.