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CITY OF PLEASANTON NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2022 Note 11: Defined Benefit Pension Plan (Continued) Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses. The table below reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. The target allocation shown was adopted by the Board effective July 1, 2014. Asset Class New Strategic Allocation Real Return Years 1-10(b) Real Return Years 11+(c) Global Equity 50.00% 4.80% 5.98% Fixed Income 28.00% 1.00% 2.62% Inflation Assets - 0.77% 1.81% Private Equity 8.00% 6.30% 7.23% Real Assets 13.00% 3.75% 4.93% Liquidity 1.00% - -0.92% Total 100.00% (a) In the CalPERS ACFR, fixed income is included in Global Debt Securities; Liquidity is included in short-term investments; Inflation Assets are included in both Global Equity Securities and Global Debt Securities. (b) An expected inflation of 2.0% used for this period. (c) An expected inflation of 2.92% used for this period. Pension Plan Fiduciary Net Position - Detailed information about the pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports. Note 12: Post-Employment Health Care Benefits a. Plan Description and Benefits Provided Through its post-employment health care plan, the City provides post-retirement health care benefits, in accordance with certain employee agreements, to all employees who retire directly from the City. The plan benefit provisions and obligations to contribute are established, or may be amended, by City Council action. The effective date and benefit varies based upon the employee’s classification and related memorandum of understanding (MOU). 107