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CITY OF ST. ANTHONY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 Disabled – RP 2000 healthy annuitant mortality table, white collar adjustment, set forward eight years for males and females. The long-term expected rate of return on pension plan investments was determined using a building- block method in which best-estimates of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These asset class estimates are combined to produce the portfolio long-term expected rate of return by weighting the expected future real rates of return by the current asset allocation percentage (or target allocation, if available) and by adding expected inflation. All results are then rounded to the nearest quarter percentage point. The best-estimate of expected future real rates of return were developed by aggregating data from several published capital market assumption surveys and deriving a single best-estimate based on the average survey values. These capital market assumptions reflect both historical market experience as well as diverse views regarding anticipated future returns. The expected inflation assumption was developed based on an analysis of historical experience blended with forward- looking expectations available in market data. Best estimates of geometric real and nominal rates of return for each major asset class included in the pension plan’s asset allocation as of the measurement date are summarized in the following table: Long-Term Expected Long-Term Expected Asset Class Real Rate of Return Nominal Rate of Return Domestic equity 5.58% 8.33% International equity 5.71% 8.46% Fixed income 2.27% 5.02% Real estate and alternatives 4.44% 7.19% Cash and equivalents 0.84% 3.59% Total (weighted ave, rounded to 1/4%) 6.00% DISCOUNT RATES The discount rate used to measure the total pension liability was 6.00%. The liability discount rate was developed using the alternative method described in paragraph 43 of GASB 67, which states that “if the evaluations required by paragraph 41 can be made with sufficient reliability without a separate projection of cash flows into and out of the pension plan, alternative methods may be applied in making the evaluations.” The determination of the discount rate assumed that the plan’s current overfunded status, combined with Minnesota statutory funding requirements, provide sufficient reliability that projected plan assets will be adequate to pay future retiree benefits. Therefore, the plan’s long-term expected return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 72