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05-28-24-R
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05-28-24-R
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NOTE 7 — DEFINED BENEFIT PENSION PLAN — STATE-WIDE (CONTINUED) <br />F. Actuarial Methods and Assumptions <br />The total pension liability in the June 30, 2023, 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 7.00 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 7.00 percent was deemed to be within that range of reasonableness for financial reporting <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. <br />Mortality rates for the General Employees Plan are based on the Pub-2010 General Employee Mortality <br />Table. The tables are adjusted slightly to fit the PERA's experience. <br />Actuarial assumptions for the General Employees Plan are reviewed every four years. The most recent <br />four-year experience study for the General Employees Plan was completed in 2022. The assumption <br />changes were adopted by the Board and became effective with the July 1, 2023 actuarial valuation. <br />The following change in actuarial assumptions and plan provisions occurred in 2023: <br />GERF <br />CHANGES IN ACTUARIAL ASSUMPTIONS <br />• The investment return assumption and single discount rate were changed from 6.50 percent to <br />7.00 percent. <br />CHANGES IN PLAN PROVISIONS <br />• An additional one-time direct state aid contribution of $170.1 million will be contributed to the <br />Plan on October 1, 2023. <br />• The vesting period of those hired after June 30, 2010, was changed from five years of allowable <br />service to three years of allowable service. <br />• The benefit increase delay for early retirements on or after January 1, 2024, was eliminated. <br />• A one-time, noncompounding benefit increase of 2.50 percent minus the actual 2024 adjustment <br />will be payable in a lump sum for calendar year 2024 by March 31, 2024. <br />G. Discount Rate <br />The discount rate used to measure the total pension liability in 2023 was 7.00 percent. The projection of <br />cash flows used to determine the discount rate assumed that contributions from plan members and <br />employers will be made at rates set in Minnesota Statutes. Based on these assumptions, the fiduciary net <br />position of the General Employees Fund was projected to be available to make all projected future benefit <br />payments of current plan members. Therefore, the long-term expected rate of return on pension plan <br />investments was applied to all periods of projected benefit payments to determine the total pension <br />liability. <br />-41- <br />
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