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NOTE 8 — DEFINED BENEFIT PENSION PLANS — STATE-WIDE (CONTINUED) E. Actuarial Assumptions The total pension liability in the June 30, 2018, actuarial valuation was deteiniined using an individual entry -age noinial actuarial cost method and the following actuarial assumptions: Inflation 2.50% per year Active Member Payroll Growth 3.25% per year Investment Rate of Return 7.50% Salary increases were based on a service -related table. Mortality rates for active members, retirees, survivors and disabilitants for all plans were based on RP-2014 tables for males or females, as appropriate, with slight adjustments to fit PERA's experience. Cost of living benefit increases after retirement for retirees are assumed to be 1.25 percent per year for GERF and 1 percent per year for PEPFF. Actuarial assumptions used in the June 30, 2018, valuation were based on the results of actuarial experience studies. The most recent six -year experience study in the GERF was completed in 2015. The most recent four-year experience study for PEPFF was completed in 2016. Economic assumptions were updated in 2017 based on a review of inflations and investment return assumptions. The following changes in actuarial assumptions occurred in 2018: 1. GERF: • The mortality projection scale was changed from MP-2015 to MP-2017. • The assumed post -retirement benefit increase was changed from 1.0 percent per year through 2044 and 2.5 percent per year thereafter, to 1.25 percent per year. 2. PEPFF: • The mortality projection scale was changed from MP-2016 to MP-2017. • As set by statute, the assumed post -retirement benefit increase was changed from 1.0 percent per year through 2064 and 2.5 percent per year thereafter, to 1.0 percent for all years, with no trigger. The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness on a regular basis of the long-teiiii expected rate of return using a building-block method in which best -estimate ranges of expected future rates of return are developed for each major asset class. These ranges are combined to produce an expected long-teiiii rate of return by weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Long -Term Expected Real Rate Asset Class Target Allocation of Return Domestic Stocks 36% 5.10% International Stocks 17% 5.30% Bonds 20% 0.75% Alternative Assets 25% 5.90% Cash 2% 0.00% Total 100% 84