WS - D - Tiffin FS - FY 2023

City of Tiffin Notes to Basic Financial Statements NOTE 4 – PENSION PLAN (CONTINUED) F. Actuarial Assumptions The long-term expected rate of return on IPERS' investments was determined using a building-block method in which best-estimate ranges of expected future real rates (expected returns, net of investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Long-Term Target Expected Real Asset Class Allocation Rate of Return Domestic equity 22.0 % 3.75 % International equity 17.5 4.79 Global smart beta equity 6.0 4.16 Core plus fixed income 20.0 1.66 Public credit 4.0 3.77 Cash 1.0 0.77 Private equity 13.0 7.57 Private real assets 8.5 3.55 Private credit 8.0 3.63 Total 100.0 % G. Discount Rate The discount rate used to measure the total pension liability was 7.00%. The projection of cash flows used to determine the discount rate assumed employee contributions will be made at the contractually required rate and contributions from the City will be made at contractually required rates, actuarially determined. Based on those assumptions, IPERS' fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on IPERS' investments was applied to all periods of projected benefit payments to determine the total pension liability. H. Sensitivity of the City 's Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the City's proportionate share of the net pension liability calculated using the discount rate of 7.00%, as well as what the City's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1% lower (6.00%) or 1% higher (8.00%) than the current rate. 1% Decrease in Current 1% Increase in Discount Rate Discount Rate Discount Rate (6.0%) (7.0%) (8.0%) City's proportionate share of the net pension liability $ 752,308 $ 403,789 $ 96,648 24