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CITY OF ATHENS, TENNESSEE
NOTES TO FINANCIAL STATEMENTS
June 30, 2023

Note 8. Employee Retirement Plans (continued)
Primary Government (Board of Education employees): (continued)

Teacher Retirement Plan (continued)

Actuarial assumptions. The total pension liability in the June 30, 2022, actuarial valuation
was determined using the following actuarial assumptions, applied to all periods included in

the measurement:

Inflation 2.25%

Salary increases Graded salary ranges from 8.72% to 3.44% based on age,
including inflation, averaging 4.00%

Investment rate of return 6.75%, net of pension plan investment expenses,
including inflation

Cost of living adjustment 2.125%

Mortality rates are based on actual experience including an adjustment for some anticipated
improvement.

The actuarial assumptions used in the June 30, 2022, actuarial valuation were based on the results of
an actuarial experience study performed for the period July 1, 2016, through June 30, 2020. The
demographic assumptions were adjusted to more closely reflect actual and expected future
experience.

The long-term expected rate of return on pension plan investments was established by the TCRS
Board of Trustees in conjunction with the June 30, 2020, actuarial experience study. A blend of
future capital market projections and historical market returns was used in a building-block method
in which a best estimate of expected real rates of return (expected retums, net of pension plan
investment expense and inflation) is developed for each major asset class. These best estimates 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 of 2.25
percent. The best estimates of geometric real rates of return and the TCRS investment policy target
asset allocation for each major asset class are summarized in the following table:

Long-Term Expected
Asset Class Real Rate of Return Target Allocation
U.S. equity 4.88 % 31%
Developed market international equity 5.37 14
Emerging market international equity 6.09 4
Private equity and strategic lending 6.57 20
U.S. fixed income 1.20 20
Real estate 4,38 10
Short-term securities 0.00 1

100 %

The long-term expected rate of return on pension plan investments was established by the TCRS
Board of Trustees as 6.75 percent based on a blending of the three factors described above.

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