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PENINSULA AIRPORT COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
41
Note 10—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, 2025, net OPEB
liability amounts for the GLI VRS OPEB program are as follows (amounts expressed in thousands):
Group Life
Insurance
Program
Total OPEB liability
4,196,055
$
Plan fiduciary net position
3,080,133
Employers’ net OPEB liability
1,115,922
$
Plan fiduciary net position as a percentage of total OPEB liability
73.41%
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
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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