2025 Annual Comprehensive Financial Report

CITY OF SHAKOPEE

NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2025

NOTE 15 – POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)

B. Funding Policy

Retirees and their spouses contribute to the health care plan at the same rate as City employees. This results in the retirees receiving an implicit rate subsidy. Contribution requirements are established by the City, based on the contract terms with Medica. The required contributions are based on projected pay-as-you-go financing requirements. For the year ended December 31, 2025, the City’s average contribution rate was 19.03 percent of covered-employee payroll. For the year 2025, the City contributed $105,096 to the Plan.

C. Actuarial Methods and Assumptions

The total OPEB liability in the December 31, 2023 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified: The City’s total OPEB liability of $3,257,147 was measured as of December 31, 2024, and the total OPEB liability used to calculate the total OPEB liability was determined by an actuarial valuation as of December 31, 2023. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities, consistent with the long-term perspective of the calculations.

Discount Rate

4.08% 4.08% N/A 2.50%

Expected Long-Term Investment Return 20-Year Municipal Bond Yield

Inflation Rate Medical Trend Rate

6.90% in 2024 gradually decreasing over several decades to an ultimate rate of 3.9% in 2075 and later years

The Actuarial Standards Board provides coordinated guidance for measuring pension and retiree group benefit obligations through a series of Actuarial Standards of Practice (ASOPs). ASOP No. 27, Selection of Economic Assumptions for Measuring Pension Obligations, requires that the actuary disclose the rationale used in selecting each non-prescribed economic assumption and any changes to non-prescribed economic assumptions. All non-prescribed economic assumptions are summarized below.

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