2023 Annual Comprehensive Financial Report

CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2023

NOTE 14 – PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) F. Actuarial Assumptions

The investment return assumption and single discount rate were changed from 6.5 percent to 7.00 percent. Changes in Plan Provisions An additional one-time direct state aid contribution of $170.1 million will be contributed to the Plan on October 1, 2023. Changes in Actuarial Assumptions Actuarial assumptions for the General Employees Plan are reviewed every fo u r years. The most recent four-year experience study in the General Employees Plan was completed in 2022. The assumption changes were adopted by the Board and become effective with the July 1, 2023 actuarial valuation. The most recent four-year experience study for the Police and Fire Plan was completed in 2020 and w as adopted by the Board and became effective with the July 1, 2021 actuarial valuation. The following page shows the changes in actuarial assumptions that occurred in 2023. General Employees Fund The vesting period of those hired after June 30, 2010, was changed from five years of allowable service to three years of allowable service. The benefit increase delay for early retirements on or after January 1, 2024, was eliminated. A one-time, non-compounding benefit increase of 2.5 percent minus the actual 2024 adjustment will be payable in a lump sum for calendar year 2024 by March 31, 2024. The total pension liability in the June 30, 2023, actuarial valuation was determined using an individual entry-age normal actuarial cost method. The long-term rate of return on pension plan investments used in the determination of the total liability is 7.0 percent. This assumption is based on a review of inflation and investments return assumptions from a number of national investment consulting firms. The review provided a range of return investment return rates deemed to be reasonable by the actuary. An investment return of 7.0 percent was deemed to be within that range of reasonableness for financial reporting Inflation is assumed to be 2.25 percent for the General Employees Plan and the Police and Fire Plan. Benefit increases after retirement are assumed to be 1.25 percent for the General Employees Plan, 1% for the Police and Fire Plan. Salary growth assumptions in the General Employees Plan range in annual increments from 10.25 percent after one year of service to 3.0 percent after 27 years of service. In the Police and Fire Plan, salary growth assumptions range from 11.75 percent after one year of service to 3.0 percent after 24 years of service. Mortality rates for the General Employees Plan are based on the Pub-2010 General Employee Mortality Table. Mortality rates for the Police and Fire Plan is based on the Pub-2010 Public Safety Employee Mortality tables. The tables are adjusted slightly to fit PERA’s experience.

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