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PENINSULA AIRPORT COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
32
Note 8—Defined benefit pension plan (continued)
Public Safety Employees:
Mortality Rates (Preretirement, postretirement, healthy, and disabled) – Updated to a more current
mortality table (RP-2014 projected to 2020)
Retirement Rates – Increased age 50 rates at older ages and lowered rates at older ages
Withdrawal Rates – Adjusted rates to better fit experience at each year age and service through nine
years of service
Disability Rates – Adjusted rates to better fit experience
Line of Duty Disability – Decreased rate from 60% to 45%
Discount Rate – Decrease rate from 7.00% to 6.75%
Long-Term Expected Rate of Return – The long-term expected rate of return on pension 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 pension System 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
32.00%
6.70%
2.14%
Fix income
16.00%
5.40%
0.86%
Credit strategies
16.00%
8.10%
1.30%
Real assets
15.00%
7.20%
1.08%
Private equity
15.00%
8.70%
1.31%
PIP - private investment partnership
1.00%
8.00%
0.08%
Diversifying strategies
6.00%
5.80%
0.35%
Cash
2.00%
3.00%
0.06%
Leverage
-3.00%
3.50%
-0.11%
100.00%
7.07%
Inflation
2.50%
*Expected arithmetic nominal return
9.57%
* The above allocation provides for a one-year return of 9.57%. 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 System, 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 7.04%,
including expected inflation of 2.5%. On June 15, 2023, the VRS Board elected a long-term rate of return of
6.75%, which was roughly at the 45th percentile of expected long-term results of the VRS fund asset allocation
at that time, providing a median return of 7.04%, including expected inflation of 2.50%.
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