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CITY OF ST. ANTHONY, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2017 <br /> <br /> <br /> <br /> <br /> Best estimates of geometric real and nominal rates of return for each major asset class included in <br />the pension plan’s asset allocation as of the measurement date are summarized in the following <br />table: <br /> <br />Long-Term Expected Long-Term Expected <br />Asset Class Real Rate of Return Nominal Rate of Return <br />Domestic equity 5.39% 8.14% <br />International equity 5.20% 7.95% <br />Fixed income 1.98% 4.73% <br />Real estate and alternatives 4.25% 7.00% <br />Cash and equivalents 0.79% 3.54% <br />Total (weighted avg.) 6.66% <br />Reduced for assumed investment expense (0.99%) <br />Net assumed investment return (rounded to 1/4%) 5.75% <br /> <br />DISCOUNT RATES <br /> <br /> The discount rate used to measure the total pension liability was 5.75%. The liability discount rate <br />was developed using the alternative method described in paragraph 43 of GASB 67, which states <br />that “if the evaluations required by paragraph 41 can be made with sufficient reliability without a <br />separate projection of cash flows into and out of the pension plan, alternative methods may be <br />applied in making the evaluations.” The determination of the discount rate assumed that the plan’s <br />current overfunded status, combined with Minnesota statutory funding requirements, provide <br />sufficient reliability that projected plan assets will be adequate to pay future retiree benefits. <br />Therefore, the plan’s long-term expected return on plan investments was applied to all periods of <br />projected benefit payments to determine the total pension liability. <br /> <br />73