Page 103 - 2018 Comprehensive Annual Financial Report - City of Winston-Salem

Investments
Investment Policy. City Council has adopted an Investment Policy for all City funds inclusive of the investment of the retirement
fund. The City Manager, with recommendation from the Chief Financial O cer and City Treasurer, has the authority, with the
assistance of nancial consultants, to select and employ asset managers to direct investment activities of WSPORS in accordance
with the Investment Policy. The City has nine equity managers, two xed income managers, and four index funds, whose
performance is measured against appropriate market indices. Financial consultants are approved by City Council to assist the City
in the selection and oversight of asset managers. Alex. Brown a Division of Raymond James serves as the nancial consultant that
helps select and monitor the performance of WSPORS equity and xed income asset managers.

Asset allocation is a strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment
portfolio. Based on the principle that asset types perform di erently in di erent market and economic conditions, asset allocation
is an important factor in determining returns for an investment portfolio. Target asset allocations are set by ranges by the Chief
Financial O cer and City Treasurer with the assistance of the nancial consultant and adjusted within those ranges from time to
time to adjust for market conditions.
Concentrations. The pension plan does not hold 5% or more of the pension plan’s duciary net position (other than those issued
or explicitly guaranteed by the U.S. government) in any one organization.
Rate of Return. For the year ended June 30, 2018, the annual money-weighted rate of return on pension plan investments, net of
pension plan investment expense was 10.94%. The money-weighted rate of return expresses investment performance, net of
investment expense, adjusted for the changing amounts actually invested.

Net Pension Liability
The components of the net pension liability of the City as of June 30, 2018 are as follows:

Total pension liability $ 190,758,321
Plan duciary net position (159,101,398)
Net pension liability $ 31,656,923
Plan duciary net position as a percentage of total pension liability 83.4%

At June 30, 2018, the City reported a net pension liability of $31,656,923. The net pension liability was measured as of June 30, 2018.
The total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of January 1, 2018.
The total pension liability was then rolled forward to the measurement date of June 30, 2018.
Actuarial Assumptions. The total pension liability was determined by an actuarial valuation as of January 1, 2018, using the
following actuarial assumptions, applied to all periods included in the measurement:
In ation rate 2.75%
Salary increases 3.75% to 6.25%, based on years of service
Investment rate of return 7.25%, net of investment expense and including in ation
Interest on contributions 4.00% per year

Mortality rates were based on RP 2000 Tables, with 1 year setback for Males and apply projection scale BB to 2027 for future
improvements in life expectancy, 50% of these rates apply for preretirement deaths.
Post Disability Mortality – RP 2000 (Disabled Retirees Table)
The actuarial method was entry age.

The actuarial assumptions used in the January 1, 2018 valuation were based on the results of an actuarial experience study covering
the 2012 to 2016 time period. All assumptions were reviewed in 2017.

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