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-41- <br />NOTE 7 – DEFINED BENEFIT PENSION PLAN – STATE-WIDE (CONTINUED) <br />A total of $72,373 reported as deferred outflows of resources related to pensions resulting from city <br />contributions subsequent to the measurement date will be recognized as a reduction of the net pension <br />liability in the year ending December 31, 2023. Other amounts reported as deferred outflows and <br />deferred inflows of resources related to pensions will be recognized in pension expense as follows: <br />Pension <br />Year Ending Expense <br />December 31,Amount <br />2023 184,579$ <br />2024 160,432$ <br />2025 (81,648)$ <br />2026 166,884$ <br />E.Long-Term Expected Return on Investments <br />The Minnesota State Board of Investment, which manages the investments of the PERA, prepares an <br />analysis of the reasonableness on a regular basis of the long-term expected rate of return using a <br />building-block method in which best-estimate ranges of expected future rates of return are developed for <br />each major asset class. These ranges are combined to produce an expected long-term rate of return by <br />weighting the expected future rates of return by the target asset allocation percentages. The target <br />allocation and best-estimates of geometric real rates of return for each major asset class are summarized <br />in the following table: <br />Asset Class <br />Domestic equity 33.50 %5.10 % <br />International equity 16.50 5.30 % <br />Fixed income 25.00 0.75 % <br />Private markets 25.00 5.90 % <br />Total 100.00 % <br />Allocation <br />Target <br />Real Rate of Return <br />Long-Term Expected <br />F.Actuarial Methods and Assumptions <br />The total pension liability in the June 30, 2022, actuarial valuation was determined using an individual <br />entry-age normal actuarial cost method. The long-term rate of return on pension plan investments used in <br />the determination of the total liability is 6.50 percent. This assumption is based on a review of inflation <br />and investments return assumptions from a number of national investment consulting firms. The review <br />provided a range of return investment return rates deemed to be reasonable by the actuary. An investment <br />return of 6.50 percent was deemed to be within that range of reasonableness for financial rep orting <br />purposes. <br />Inflation is assumed to be 2.25 percent for the General Employees Plan. Benefit increases after retirement <br />are assumed to be 1.25 percent for the General Employees Plan. <br />Salary growth assumptions in the General Employees Plan range in annual increments from 10.25 percent <br />after one year of service to 3.00 percent after 27 years of service.