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Indian River County, Florida Board of County Commissioners Notes To Financial Statements Year Ended September 30, 2017 NOTE 12 - RETIREMENT PLAN - Continued Pension Plan - Continued Long -Term, Expected Rate of Return: The long-term expected rate of return on pension plan investments are not based on historical returns, but instead are based on a forward-looking capital market economic model. The allocation policy's description of each class was used to map the target allocation to the asset classes shown below. Each asset class assumption is based upon a consistent set of underlying assumptions and includes an adjustment for the inflation assumption. The target allocation and best estimates of arithmetic and geometric real rates of return for each major asset class are summarized in the following table: Discount Rate for Pension Plan: The discount rate used to measure the total pension liability was 7.10%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that the Board's contributions will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Pension Plans' fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees if future experience follows assumptions and the actuarially determined contribution is contributed in full each year. Therefore, the discount rate for calculation of the total pension liability is equal to the long-term expected rate of return. 296 Compound Annual Annual Target Arithmetic (Geometric) Standard Asset Class Allocation Return Return Deviation Cash 1% 3.0% 3.0% 1.8% Fixed Income 18% 4.5% 4.6% 4.2% Global Equity 53% 7.8% 6.6% 17.0% Real Estate (Property) 10% 6.6% 5.9% 12.8% Private Equity 6% 11.5% 7.8% 30.0% Strategic Investments 12% 6.1% 5.6% 9.7% Total 100% Assumed inflation -mean 2.6% 1.9% Discount Rate for Pension Plan: The discount rate used to measure the total pension liability was 7.10%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that the Board's contributions will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Pension Plans' fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees if future experience follows assumptions and the actuarially determined contribution is contributed in full each year. Therefore, the discount rate for calculation of the total pension liability is equal to the long-term expected rate of return. 296