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CITY OF PARIS, TEXAS Notes to Financial Statements (Continued) September 30, 2023 IV. Detailed Notes on All Activities and, Funds (Continued) F. Employee Retirement Systems and Plans (Continued) 1. Texas Municipal Retirement System (Continued) Actuarial Assumptions (Continued) The long-term expected rate of return on pension plan investments is 6.75%. The pension plan's policy in regard to the allocation of invested assets is established and may be amended by the TMRS Board of Trustees. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production of income, in order to satisfy the short-term and long-term funding needs of TMRS. The long-term expected rate of return on pension plan investments was determined by weighting the expected return for each major asset class by the respective target asset allocation percentage. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Discount Rate A single discount rate of 6.75% was used to measure the Total Pension Liability as of December 31, 2022. This single discount rate was based on the expected rate of return on pension plan investments of 6.75%. Based on the stated assumptions and the projection of cash flows the City's fiduciary net position and future contributions were sufficient to finance the future benefit payments of current plan members for all projection years. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the Total Pension Liability. The projection of cash flows used to determine the single discount rate for the City assumed that the funding policy adopted by the TMRS Board will remain in effect for all future years. Under this funding policy, the city will finance the unfunded actuarial accrued liability over the years remaining for the closed period existing for each base in addition to the employer portion of all future benefit accruals. 52 Long -Term Expected Real Asset Class Asset .�....._ Target i Allocation R Rate ofof Return (Arithmetic) .... �._ Global Equity 35.0% 7.70% Core Fixed Income 6.0 4.90 Non -Core Fixed Income 20.0 8.70 Other Public and Private Markets 12.0 8.10 Real Estate 12.0 5.80 Hedge Funds 5.0 6.90 Private Equity 10.0 11.80 Total 100.0% Discount Rate A single discount rate of 6.75% was used to measure the Total Pension Liability as of December 31, 2022. This single discount rate was based on the expected rate of return on pension plan investments of 6.75%. Based on the stated assumptions and the projection of cash flows the City's fiduciary net position and future contributions were sufficient to finance the future benefit payments of current plan members for all projection years. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the Total Pension Liability. The projection of cash flows used to determine the single discount rate for the City assumed that the funding policy adopted by the TMRS Board will remain in effect for all future years. Under this funding policy, the city will finance the unfunded actuarial accrued liability over the years remaining for the closed period existing for each base in addition to the employer portion of all future benefit accruals. 52