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CITY OF SAN LEANDRO NOTES TO BASIC FINANCIAL STATEMENTS For The Year Ended June 30, 2024 NOTE 16 – OTHER POST EMPLOYMENT BENEFITS (Continued) Change of Assumptions – Effective with the June 30, 2023 valuation date (2024 measurement date) the salary rate was increased from 2.75% to 2.80%. The long-term expected rate of return on OPEB plan investments (comprised of capital appreciation and reinvestment of dividends, interest, and other distributions) is determined through a combination of historical rates of returns, valuation projections, and economic expectations. The expected return is then calculated by weighting the returns for each asset class according to the exposure as determined by HighMark’s current strategic allocation. Expected returns are developed and annually reviewed. The target allocation and best estimates of 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 23.00% 7.50% International Developed 4.00% 7.10% Emerging Markets 2.00% 7.40% REITs 1.00% 7.00% Short-Term Bonds 14.00% 3.70% Core Fixed Income 49.25% 4.70% High-Yield 1.75%6.80% Cash 5.00%2.70% Total 100.0% Discount Rate – The discount rate used to measure the total OPEB liability is 4.50% for fiscal year 2024. This is the expected long-term rate of return on City assets using a Moderately Conservative Highmark PLUS fund within the Public Agency Retirement Services (PARS). The projection of cash flows used to determine the discount rate assumed that the City contribution will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan's fiduciary net position is projected to cover all future OPEB payments. Therefore, the discount rate was set equal to the long-term expected rate of return. 87