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CITY OF PARIS, TEXAS <br />Notes to Financial Statements (Continued) <br />September 30, 2022 <br />IV. Detailed Notes on All Activities and Funds (Continued) <br />F. Employee Retirement Systems and Plans (Continued) <br />1. Texas Municipal Retirement System (Continued) <br />Actuarial Assumptions (Continued) <br />The long-term expected rate of return on pension plan investments is 6.75%. The pension plan's policy in <br />regard to the allocation of invested assets is established and may be amended by the TMRS Board of <br />Trustees. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as <br />well as the production of income, in order to satisfy the short-term and long-term funding needs of TMRS. <br />The long-term expected rate of return on pension plan investments was determined using a building-block <br />method in which best estimate ranges of expected future real rates of return (expected returns, net of <br />pension plan investment expense and inflation) are developed for each major asset class. These ranges are <br />combined to produce the long-term expected rate of return by weighting the expected future real rates of <br />return by the target asset allocation percentage and by adding expected inflation. The target allocation and <br />best estimates of arithmetic real rates of return for each major asset class are summarized in the following <br />table: <br />Asset Class <br />Global Public Equity <br />Core Fixed Income <br />Non -Core Fixed Income <br />Other Public and Private Markets <br />Real Estate <br />Hedge Funds <br />Private Equity <br />Total <br />Discount Rate <br />Target Allocation <br />Long -Term Expected Real <br />Rate of Return (Arithmetic) <br />35.0% <br />7.55% <br />6.0 <br />2.00 <br />20.0 <br />5.68 <br />12.0 <br />7.22 <br />12.0 <br />6.85 <br />5.0 <br />5.35 <br />10.0 <br />10.00 <br />100.0% <br />A single discount rate of 6.75% was used to measure the Total Pension Liability as of December 31, 2021. <br />This single discount rate was based on the expected rate of return on pension plan investments of 6.75%. <br />Based on the stated assumptions and the projection of cash flows the city's fiduciary net position and future <br />contributions were sufficient to finance the future benefit payments of current plan members for all <br />projection years. Therefore, the long-term expected rate of return on pension plan investments was applied <br />to all periods of projected benefit payments to determine the Total Pension Liability. The projection of cash <br />flows used to determine the single discount rate for the city assumed that the funding policy adopted by the <br />TMRS Board will remain in effect for all future years. Under this funding policy, the city will finance the <br />unfunded actuarial accrued liability over the years remaining for the closed period existing for each base in <br />addition to the employer portion of all future benefit accruals. <br />51 <br />