Agenda - Council Work Session - 06/09/2026

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NOTE 10 — DEFINED BENEFIT PENSION PLANS — STATE-WIDE (CONTINUED) The following changes in actuarial assumptions occurred in 2025: 1. GERF • The combined service annuity loading factors increased from 15% to 19% for vested terminated members and from 3% to 44% for non -vested, terminated members. • The assumed post -retirement benefit increase changed from 1.25% to 1.5% 2. PEPFF • Assumed rates of salary increases were reduced slightly. • Assumed rates of retirement were adjusted, resulting in an overall increase in unreduced (full) retirements and an overall increase in reduced (early) retirements. • Assumed rates of withdrawal were modified; the new rates will increase predicted terminations, especially in the first few years of employment. • Assumed rates of disabled retirement were significantly increased, especially for ages over 30. • Continued use of Pub-2010 Public Safety Mortality Table with rates adjusted to better fit observed experience. • Percent married assumption for female retirees lowered from 70% to 65%. • Minor changes were made to form of payment assumptions for retirees. • Minor changes were made to assumptions made with respect to missing participant data. • The combined service annuity load changed from 33% to 13% for vested, terminated members and from 2% to 38% for non -vested, terminated members. The following changes in plan provisions occurred in 2025: 1. GERF • The post -retirement benefit increase formula changed to 100% of the Social Security annual increase, between 1% and 1.75%, beginning January 1, 2026. If the funded ratio (on a market value of assets basis) is less that 85% for the last two consecutive annual valuations or is less than 80% in the most recent actuarial valuation, the maximum is reduced to 1.5%. Previously, the benefit increase was 50% of the Social Security annual increase, between 1% and 1.5%. • The 1% additional employer contribution is eliminated when the plan reaches 98% funded status (on an actuarial value of assets basis); this contribution was previously scheduled to stop when the plan reached 100% funded status. 2. PEPFF • The period of time needed for benefit recipients to receive their first benefit increase was reduced by one year (from 36 months to 24 months for a full increase). • The January 1, 2026 benefit increase changed from 1% to 3%; subsequent January 1 increases will be 1%. • The threshold to end the $9 million annual state aid contribution changed from the earlier of July 1, 2048 or 90% funded for both PERA PEPFF and MSRS State Patrol for three consecutive years to 100% funded for both PERA PEPFF and MSRS State Patrol for three consecutive years (on an actuarial value of assets basis). • The threshold to end the additional $9 million annual state aid contribution changed from the earlier of July 1, 2048 or 100% funded for a minimum of three consecutive years to 110% funded for a minimum of three consecutive years (on an actuarial value of assets basis). • An additional $17.7 million in direct state aid will be paid annually each October 1 beginning October 1, 2025 through June 30, 2048. • Joint and survivor actuarial equivalent factors were updated to reflect changes in assumptions. 88