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6.1.E. - Page 91 ,
<br /> Notes to the Basic Financial Statements
<br /> For the year ended June 30, 2015
<br /> NOTE 9—EMPLOYEE BENEFITS(CONTINUED)
<br /> The long-term expected rate of return on pension plan investments was determined using a building-
<br /> block method in which best-estimate ranges of expected future real rates of return (expected returns,
<br /> net of pension plan investment expense and inflation) are developed for each major asset class.
<br /> In determining the long-term expected rate of return, CaIPERS took into account both short-term and
<br /> long-term market return expectations as well as the expected pension fund cash flows. Using historical
<br /> returns of all the funds' asset classes, expected compound returns were calculated over the short-term
<br /> (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected
<br /> nominal returns for both short-term and long-term, the present value of benefits was calculated for
<br /> each fund. The expected rate of return was set by calculating the single equivalent expected return that
<br /> arrives at the same present value of benefits for cash flows as the one calculated using both short-term
<br /> and long-term returns. The expected rate of return was then set equivalent to the single equivalent
<br /> rate calculated above and rounded down to the nearest one quarter of one percent.
<br /> The table below reflects the long-term expected real rate of return by asset class. The rate of return
<br /> was calculated using the capital market assumptions applied to determine the discount rate and asset
<br /> allocation. These rates of return are net of administrative expenses.
<br /> Asset Class New Strategic Allocation Real Return Years 1-10(a) Real Return Years 11+161
<br /> Global Equity 47.00% 5.25% 5.71%
<br /> Global Fixed Income 19.00% 0.99% 2.43%
<br /> Inflation Sensitive 6.00% 0.45% 3.36%
<br /> Private Equity 12.00% 6.83% 6.95%
<br /> Real Estate 11.00% 4.50% 5.13%
<br /> Infrastructure and Forestland 3.00% 4.50% 5.09%
<br /> Liquidity 2.00% -0.55% -1.05%
<br /> Total 100%
<br /> (a) An expected inflation of 2.5%used for this period.
<br /> (b) An expected inflation of 3.0%used for this period.
<br /> Changes in the Net Pension Liability:
<br /> The changes in the Net Pension Liability for each Plan follow:
<br /> Miscellaneous Plan:
<br /> Increase(Decrease)
<br /> Total Pension Plan Fiduciary Net Net Pension
<br /> Liability Position Liability/(Asset)
<br /> $ $ $
<br /> Balance at June 30,2014 255,632,076 170,129,358 85,502,718
<br /> Changes in the year:
<br /> Service Cost 4,962,237 4,962,237
<br /> Interest on the total pension liability 18,925,939 18,925,939
<br /> Difference between actual and expected experience
<br /> Changes in assumptions
<br /> Changes in benefit terms
<br /> Contribution-employer 6,449,302 (6,449,302)
<br /> Contribution-employee 2,592,457 (2,592,457)
<br /> Net investment income 29,955,563 (29,955,563)
<br /> Benefit payments,including refunds of employee
<br /> contributions (11,534,695) (11,534,695)
<br /> Net changes 12,353,481 27,462,627 (15,109,146)
<br /> Balance at June 30,2015 267,985,557 197,591,985 70,393,572
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