2025 Annual Comprehensive Financial Report

CITY OF SHAKOPEE

NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2025

NOTE 15 – POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)

C. Actuarial Methods and Assumptions (Continued)

The discount rate used to measure the total OPEB liability was 4.08 percent. Per GASB guidance, the single rate that produces the same present value of expected benefit payments as (1) the expected long-term rate of return on plan assets during the period when projected assets are sufficient to pay future retiree benefits, and (2) the 20-year municipal bond rate after assets are projected to be exhausted. The Fidelity 20 Year Municipal GO AA Index is used because it meets the GASB requirements and is based on a large amount of municipal security data. Mortality rates were based on the current actuarial assumptions for the pension plan in which the current or future retiree participates. The inflation rate used to measure the OPEB liability was 2.5 percent. Based on analysis of historical Consumer Price Index for All Urban Consumers (CPI-U) and 30-year Treasury Inflation-Protected Securities (TIPS) data, the Federal Open Market Committee target inflation rate, and the 2021 Survey of Capital Market Assumptions produced by Horizon Actuarial Services. Annual salary increases were based on the most recently disclosed assumption for the pension plan in which the employee participates.

D. Changes in the Total OPEB Liability

Total OPEB Liability

Balances at December 31, 2024 Changes for the Year:

$

3,200,481

Service cost

182,823 124,614

Interest Differences between expected and actual experience

3,257,147 (98,348) (155,799) 56,666 3,376

Changes in assumptions or other inputs Benefit payments Net Changes

Balances at December 31, 2025

$

Since the prior measurement date, the following benefit terms changed: The discount rate was changed from 3.77% as of 12/31/2023 to 4.08% as of 12/31/2024 based on updated 20-year municipal bond rates as of each measurement date.

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