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CITY OF PLEASANTON <br /> <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />FOR THE YEAR ENDED JUNE 30, 2022 <br /> <br />  <br />Note 12: Post-Employment Health Care Benefits (Continued) <br /> <br />c. Net OPEB Liability <br /> <br />Actuarial Methods and Assumptions – The City’s net OPEB liability was measured as of <br />June 30, 2021, and the total OPEB liability used to calculate the net OPEB liability was <br />determined by an actuarial valuation dated June 30, 2021, that was rolled forward using <br />standard update procedures to determine the June 30, 2022 total OPEB liability as of June <br />30, 2022, based on the following actuarial methods and assumptions: <br /> <br />Actuarial Assumptions <br />Valuation Date June 30, 2021 <br />Measurement Date June 30, 2021 <br />Actuarial Assumptions: <br />Discount Rate 6.25% <br />Inflation 2.50% <br />Payroll Growth Aggregate - 3% <br />Mortality Improvement <br />Medical Trend <br />Current actives - 100% <br />Medicare - 5.65% for 2023, decreasing to an ultimate rate <br />of 3.75% in 2076 and later years <br />Healthcare Participation for Future <br />Retirees Current retirees - 100% if in payment status - 30% will <br />re-elect at age 65 if not currently in payment <br />Mortality, Retirement, Disability, <br />Termination <br />Merit - CalPERS 2000-2019 experience study <br />Post-retirement mortality projected fully generational with <br />Scale MP-2021 <br />Non-Medicare - 6.5% for 2023, decreasing to an ultimate <br />rate of 3.75% in 2076 and later years <br /> <br />The long-term expected rate of return on OPEB plan investments was determined using <br />a building-block method in which expected future real rates of return (expected returns, <br />net of OPEB plan investment expense and inflation) are developed for each major asset class. <br />These ranges are combined to produce the long-term expected rate of return by weighting <br />the expected future real rates of return by the target asset allocation percentage and by <br />adding expected inflation. The target allocation and best estimates of arithmetic real rates of <br />return for each major asset class are summarized in the following table: <br /> <br />Target <br />Allocation <br />Long-Term <br />Expected Real Rate <br />of Return <br />Global Equity 59.00%4.56% <br />Fixed Income 25.00%0.78% <br />TIPS 5.00%-0.08% <br />Commodities 3.00%1.22% <br />REITS 8.00%4.06% <br />Total 100.00% <br />Assumed Long-Term Rate of Inflation - 2.50% <br />Assumed Long-Term Net Rate of Return, Rounded - 6.25% <br />Asset Class <br /> <br />111