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-42- NOTE 6 – DEFINED BENEFIT PENSION PLAN – STATE-WIDE (CONTINUED) The State Board of Investment, which manages the investments of the 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 geometric real rates of return for each major asset class are summarized in the following table: Asset Class Domestic stocks 39 % 5.10 % International stocks 19 5.30 % Bonds 20 0.75 % Alternative assets 20 5.90 % Cash 2 – % Total 100 % Allocation Target Real Rate of Return Long-Term Expected F. Discount Rate The discount rate used to measure the total pension liability in 2017 was 7.50 percent. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at rates set in Minnesota Statutes. Based on these assumptions, the fiduciary net position of the GERF was projected to be available to make all projected future benefit payments of current plan members. 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. G. 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 Discount Rate Discount Rate 6.50%7.50%8.50% The City’s proportionate share of the GERF net pension liability 2,277,450$ 1,468,305$ 805,873$ H. Pension Plan Fiduciary Net Position Detailed information about the GERF’s fiduciary net position is available in a separately issued PERA financial report. That report may be obtained on the PERA website at www.mnpera.org; by writing to the PERA at 60 Empire Drive, Suite 200, St. Paul, Minnesota 55103; or by calling (651) 296 -7460 or (800) 652-9026.