BOROUGH OF SOMERVILLE
Discount Rate - The discount rate used to measure the total pension liability was 7.00% as of June 30, 2022. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers and the nonemployer contributing entity will be based on 100% of the actuarially determined contributions for the State employer and 100% of actuarially determined contributions for the local employers. Based on those assumptions, the plan’s fiduciary net position was projected to be available to make projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all projected benefit payments to determine the total pension liability.
Sensitivity of Net Pension Liability – the following presents the net pension liability of PFRS calculated using the discount rates as disclosed above as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate:
| At 1% Decrease (6.00%) |
At Current Discount Rate (7.00%) |
At 1% Increase (8.00%) |
|
|---|---|---|---|
| PFRS | $16,765,264 | $12,218,618 | $8,433,514 |
Plan Fiduciary Net Position – The plan fiduciary net position for PFRS at June 30, 2022 was $30,708,653,410.
Collective Local Group balances at June 30, 2022 are as follows:
| Collective deferred outflows of resources | $2,163,793,985 |
| Collective deferred inflows of resources | 2,805,919,493 |
| Collective net pension liability | 13,483,472,009 |
| Borough’s Proportion | 0.1067468000% |
Collective pension expense (benefit) for the Local Group for the measurement period ended June 30, 2022 is $165,943,124. The average of the expected remaining service lives of all plan members is 6.22, 6.17, 5.90, 5.92, 5.73, 5.59, 5.58, 5.53 and 6.17 years for 2022, 2021, 2020, 2019, 2018, 2017, 2016, 2015 and 2014, respectively.
Chapter 83, P.L. 2016 requires the State to make pension contributions on a quarterly basis: at least 25% by September 30, at least 50% by December 31, at least 75% by March 31, and at least 100% by June 30. As such, contributions are assumed to be made on a quarterly basis.
Local employer’s contributions are expected to be paid on April 1st, 21 months after the associated valuation date.
The Fiduciary Net Position (FNP) includes Local employers’ contributions receivable as reported in the financial statements provided by the Division of Pensions and Benefits. In determining the discount rate, the FNP at the beginning of each year does not reflect receivable contributions as those amounts are not available at the beginning of the year to pay benefits. Local contributions expected to be paid the April 1st, following the valuation are discounted by the interest rate used at the valuation date.