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PENINSULA AIRPORT COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
32
Note 11—Other postemployment benefits – VRS Group Life Insurance (GLI) Program (continued)
Net OPEB Liability – The net OPEB liability represent the program’s total OPEB liability determined in accordance
with U.S. GAAP, less the associated fiduciary net position. As of the measurement date June 30, 2023, net OPEB
liability amounts for the GLI VRS OPEB program are as follows (amounts expressed in thousands):
Group Life
Insurance
Program
Total OPEB liability
3,627,085
$
Plan fiduciary net position
2,467,989
Employers’ net OPEB liability
1,159,096
$
Plan fiduciary net position as a percentage of total OPEB liability
67.21%
The total liability is calculated by the VRS actuary and each plan’s fiduciary net position is reported in the VRS
financial statements. The net OPEB liability is disclosed in accordance with the requirements of U.S. GAAP in the
VRS notes to the financial statements and required supplementary information.
Long-Term Expected Rate of Return – The long-term expected rate of return on VRS investments was determined
using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return
(expected returns, net of OPEB investment expense and inflation) are developed for each major asset class.
These ranges are combined to produce the long-term expected rate of return by weighting the expected future
real rates of return by the target asset allocation percentage and by adding expected inflation. The target asset
allocation and best estimate of arithmetic real rates of return for each major asset class are summarized in the
following table:
Weighted
Arithmetic
Average
Long-Term
Long-Term
Target
Expected
Expected
Asset Class (Strategy)
Allocation
Rate of Return
Rate of Return
Public equity
34.00%
5.71%
1.94%
Fix income
15.00%
2.04%
0.31%
Credit strategies
14.00%
4.78%
0.67%
Real assets
14.00%
4.47%
0.63%
Private equity
14.00%
9.73%
1.36%
MAPS - multi-asset public strategies
6.00%
3.73%
0.22%
PIP - private investment partnership
3.00%
6.55%
0.20%
100.00%
5.33%
Inflation
2.50%
*Expected arithmetic nominal return
7.83%
*
The above allocation provides for a one-year return of 7.83%. However, one-year returns do not take into
account the volatility present in each of the asset classes. In setting the long-term expected rate of return for
the VRS, stochastic projections are employed to model future returns under various economic conditions. The
results provide a range of returns over various time periods that ultimately provide a median return of 6.94%,
including expected inflation of 2.50%. On October 10, 2019, the VRS Board elected a long-term rate of return
of 6.75%, which was roughly at the 40th percentile of expected long-term results of the VRS fund asset
allocation at that time, providing a median return of 7.11%, including expected inflation of 2.50%.
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