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6.C. - Page 107 of 196 <br />CITY OF REDWOOD CITY <br />NOTES TO THE BASIC FINANCIAL STATEMENTS <br />For the Fiscal Year Ended June 30, 2020 <br />NOTE 9 — EMPLOYEE BENEFITS (CONTINUED) <br />B. Post Employment Benefits, Continued <br />The long-term expected rate of return on OPEB plan investments was determined using a building- block <br />method in which expected future real rates of return (expected returns, net of OPEB plan investment expense <br />and inflation) are developed for each major asset class. These ranges are combined to produce the long-term <br />expected rate of return by weighting the expected future real rates of return by the target asset allocation <br />percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates <br />of return for each major asset class are summarized in the following table: <br />Investment Class <br />Global Equity <br />Fixed Income <br />Treasury Inflation -Protected Securities (TIPS) <br />Conmiodities <br />Real Estate Investment Trusts <br />TOTAL <br />Discount Rate <br />Target Allocation <br />59% <br />25% <br />5% <br />3% <br />8% <br />100% <br />Long -Term <br />Expected Real Rate <br />of Return <br />4.82% <br />1.47% <br />1.29% <br />0.84% <br />3.76% <br />The discount rate used to measure the total OPEB liability was 6.75 percent. The projection of cash flows <br />used to determine the discount rate assumed that District contributions will be made at rates equal to the <br />actuarially determined contribution rates. Based on those assumptions, the OPEB plan's fiduciary net position <br />was projected to be available to make all projected OPEB payments for current active and inactive employees <br />and beneficiaries. Therefore, the long-term expected rate of return on OPEB plan investments was applied to <br />all periods of projected benefit payments to determine the total OPEB liability. <br />75 194 <br />