2017.07.17 CC Packet - Laserfiche WebLink

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CITY OF HUGO, MINNESOTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. X Other Information (Continued) Pension Plans (Continued) Public Employees Retirement Association (PERA) - Defined Benefit (Continued) D. Actuarial Assumptions (continued) The following changes in actuarial assumptions occurred in 2016: • The assumed post-retirement benefit increase rate was changed from 1.0% per year through 2035 and 2.5% per year thereafter to 1.0% per year for all future years. • The assumed investment return was changed from 7.9% to 7.5%. The single discount rate was changed from 7.9% to 7.5%. • Other assumptions were changed pursuant to the experience study dated June 30, 2015. The assumed future salary increases, payroll growth, and inflation were decreased by 0.25% to 3.25% for payroll growth and 2.50% for inflation. The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness on a regular basis of the long-term expected rate of return 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 geometrical 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 Total Target Allocation 45% 15% 18% 20% 2% 100% Long -Term Expected Real Rate of Return 5.50% 6.00% 1.45% 6.40% 0.50%