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CITY OF ST. ANTHONY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2015 30, 2008, with an update of economic assumptions in 2014. The experience study for PEPFF was for the period July 1, 2004, through June 30, 2009. There are no changes in actuarial assumptions in 2015. The long-term expected rate of return on pension plan investments is 7.9%. The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness of the long-term expected rate of return on a regular basis using a building-block method in which best- estimate ranges of expected future rates of return are developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Target Long-Term Expected Asset Class Allocation Real Rate of Return Domestic Stocks 45% 5.50% International Stocks 15% 6.00% Bonds 18% 1.45% Alternative Assets 20% 6.40% Cash 2% 0.50% DISCOUNT RATE The discount rate used to measure the total pension liability was 7.9%. The projection of cash flows used to determine the discount rate assumed that employee and employer contributions will be made at the rate specified in statute. Based on that assumption, each of the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. PENSION LIABILITY SENSITIVITY The following presents the City’s proportionate share of the net pension liability for all plans it participates in, calculated using the discount rate disclosed in the preceding paragraph, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate 1 percentage point lower or 1 percentage point higher than the current discount rate: 1% Decrease in 1% Increase in Discount Rate (6.9%) Discount Rate (7.9%) Discount Rate (8.9%) City's proportionate share of the GERF net pension liability $2,795,025 $1,777,604 $937,370 City's proportionate share of the PEPFF net pension liability 6,134,254 3,147,368 679,680 70