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Indian River County, Florida <br /> Notes To Financial Statements <br /> Year Ended September 30, 2015 <br /> NOTE 15 -RETIREMENT PLAN - Florida Retirement System (FRS) - Continued <br /> Pension Plan- Continued <br /> • The assumed inflation rate was decreased from 3.00 percent in the July 1, 2013 valuation to 2.60 <br /> percent in the July 1, 2014. valuation in order to bring the rate in line with the combined Social. <br /> Security intermediate long-term and lower near-term assumptions. <br /> • The salary increase assumption, including inflation was decreased by 0.75 percent from 4.00 <br /> percent to 3.25 percent. The decrease was due to two factors, a decrease in inflation as <br /> previously explained and a decrease in real wage growth. The decrease in real wage growth was <br /> made to better align with the trailing 10-year growth in payroll as well as to be in a reasonable <br /> range based on observed national data and the Social Security Administration's forward-looking <br /> assumption sets. <br /> • The mortality assumption was changed to incorporate Projection Scale BB in the July 1, 2014 <br /> actuarial valuation, in place of the Projection Scale AA previously used. The use of Scale BB <br /> allowed FRS to use a standard Society of Actuaries mortality table for each membership <br /> class/gender group without additional adjustment. <br /> Long-term Expected Rate of Return: The long-term expected rate of return on pension plan investments <br /> are not based on historical returns, but instead are based on a forward-looking capital market economic <br /> model. The allocation policy's description of each class was used to map the target allocation to the <br /> asset classes shown below. Each asset class assumption is based upon a consistent set of underlying <br /> assumptions and includes an adjustment for the inflation assumption. The target allocation and best <br /> estimates of arithmetic and geometric real rates of return for each major asset class are summarized in <br /> the following table: <br /> Compound <br /> Annual Annual <br /> Target Arithmetic (Geometric) Standard <br /> Asset Class Allocation Return Return Deviation <br /> Cash 1% 3.2% 3.1% 1.7% <br /> Fixed Income 1.8% 4.8% 4.7% 4.7% <br /> Global Equity 53% 8.5% 7.2% 17.7% <br /> Real Estate(Property) 10% 6.8% 6.2% 12.0% <br /> Private Equity 6% 11.9% 8.2% 30.0% <br /> Strategic Investments 12% 6.7% 6.1% 11.4% <br /> Total100% <br /> Assumed inflation-mean 2.6% 1.9% <br /> 96 <br />