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CITY OF ROSEVILLE, MINNESOTA NOTES TO FINANClAL STATEMENTS December 31, 2015 D. Contributions Minnesota Statutes Chapter 424A.092 specifies minimum support rates required on an annual basis. The minimum support rates from the municipality and from State aids are determined as the amount required to meet the normal cost plus amortizing any existing prior service costs over a ten year period. The City's obligation is the financial requirement for the year less state aids. Any additional payments by the City shall be used to amortize the unfunded liability of the relief association. The Association is comprised of volunteers: therefore, there are no payroll expenditures (i.e. there are no covered payroll percentage calculations). During the year, the City recognized as revenue and as an expenditure an on behalf payment of $ 220,012 made by the State of Minnesota for the Relief Association. E. Net Pension Liability The City's net pension liability was measured as of December 31, 2015 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. Actuarial assumptions: The total pension liability in the December 31, 2015 actuarial valuation was determined using the following actuarial assuinptions, applied to all periods included in the measurement: Inflation rate 2. 75 % Discount rate 6.75% percent average, including inflation Investment Rate of Return 6.75% percent , net of pension plan investment expense including inflation The value of death benefits is similar to the value of the retirement pension. Because of low retirement ages, the plan assumes no pre-retirement mortality. Post-retirement mortality does not apply as the benefit structure and form of payment do not reflect lifetime benefits. The long-term return on assets has been set based on the plan's target investment allocation along with long-term return expectations by asset class. When there is sufficient historical evidence of market outperformance, historical average returns may be considered. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan's target asset allocation as of the measurement date are summarized in the following table: Asset Class Domestic equity International equity Fixed income Real estate and alternatives Cash and equivalents Total Target Allocation 64.50% 5.74% 27.54% 0.00% 2.22% 71 100% Long-Term Expected Real Rate of Return 5.25% 5.25% 1.75% 3.75% 0.25%