2016.07.05 CC Packet - Laserfiche WebLink

Home

CITY OF HUGO, MINNESOTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. Other Information (Continued) C. Pension Plans (Continued) Public Employees Retirement Association (PERA) - Defined Benefit (Continued) D. Actuarial Assumptions (continued) 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: Asset Class Domestic Stocks International Stocks Bonds Alternative Assets Cash E. Discount Rate Target Allocation 45% 15% 18% 20% 2% Long -Term Expected Real Rate of Return 5.50% 6.00% 1.45% 6.40% 0.50% 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. 59