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CITY OF SAN LEANDRO <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />For The Year Ended June 30, 2018 <br />I NOTE 14 -OTHER POST EMPLOYMENT BENEFITS (Continued) ! <br />B. Net OPEB Liability <br />Actuarial Methods and Assumptions -The City's net OPEB liability was measured as of June 30, 2018 <br />and the total OPEB liability used to calculate the net OPEB liability was determined on actuarial valuation <br />date that was rolled forward using standard update procedures to determine the total OPEB liability as of the <br />measurement date, based on the following actuarial methods and assumptions: <br />Actuarial Assumptions June 30, 2018 Measurement Date <br />Valuation Date • June 30, 2017 <br />Actuarial Cost Method • Fntry Age Normal Level Percentage of Payroll <br />Funding Policy • City contnbutes full Actuarial Determined Contnbution <br />Discount Rate • 5.5 % <br />General Inflation • 2.5% per annum <br />Mortality, Retirement, Disability, <br />Termination • Same as CalPERS <br />Salary Increases • 2.875% <br />• Additional merit-based on CallPERS merit salary increase tables. <br />Healthcare Cost Trend • 7.0% in the first year, trending down to 3.84% over 58 years <br />The long-term expected rate of return on OPEB plan investments ( comprised of capital appreciation and <br />reinvestment of dividends, interest, and other distributions) is determined through a combination of <br />historical rates of returns, valuation projections, and economic expectations. The expected return is then <br />calculated by weighting the returns for each asset class according to the exposure as determined by <br />HighMark' s current strategic allocation. Expected returns are developed and annually reviewed. The target <br />allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in <br />the following table: <br />Long-Term <br />Target Expected Real <br />Asset Class Allocation Rate of Return <br />Equity 30.35% <br />Large Cap 14.76% 6.70% <br />Mid Cap 2.25% 7.00% <br />Small Cap 5.14% 7.90% <br />Real Estate 0.82% 5.70% <br />International 5.25% 7.30% <br />Emerging Markets 2.13% 9.70% <br />Fixed income 66.33% <br />Short-term 12.03% 3.80% <br />Intermediate-term 54.30% 4.60% <br />Cash 3.32% 2.10% <br />Total 100.0% <br />Discount Rate -The discount rate used to measure the total OPEB liability is 5.50%. This is the expected <br />long-term rate of return on District assets using a Moderately Conservative Highmark PLUS fund within the <br />Public Agency Retirement Services (PARS). The projection of cash flows used to determine the discount <br />rate assumed that the City contribution will be made at rates equal to the actuarially determined contribution <br />rates. Based on those assumptions, the OPEB plan's fiduciary net position is projected to cover all future <br />OPEB payments. Therefore, the discount rate was set equal to the long-term expected rate of return. <br />82 547