The allocation of investment assets within the Health Care portfolio is approved by the Board as outlined in the annual investment plan. Assets are managed on a total return basis with a long‐term objective of continuing to offer a sustainable health care program for current and future retirees. The OPERS’s primary goal is to achieve and maintain a fully funded status for benefits provided through the defined benefit pension plans. Health care is a discretionary benefit. The long‐term expected rate of return on health care investment assets was determined using a building‐block method in which best‐estimate ranges of expected future real rates of return 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, adjusted for inflation. Best estimates of geometric real rates of return were provided by the Board’s investment consultant. For each major asset class that is included in the Health Care portfolio’s target asset allocation as of December 31, 2023, these best estimates are summarized in the following table:

Discount Rate

A single discount rate of 5.70 percent was used to measure the total OPEB liability (asset) on the measurement date of December 31, 2023; however, the single discount rate used at the beginning of the year was 5.22 percent. Projected benefit payments are required to be discounted to their actuarial present value using a single discount rate that reflects (1) a long‐term expected rate of return on OPEB plan investments (to the extent that the health care fiduciary net position is projected to be sufficient to pay benefits), and (2) a tax‐exempt municipal bond rate based on an index of 20‐year general obligation bonds with an average AA credit rating as of the measurement date (to the extent that the contributions for use with the long‐term expected rate are not met). This single discount rate was based on the actuarial assumed rate of return on the health care investment portfolio of 6.00 percent and a municipal bond rate of 3.77 percent (Fidelity Index’s “20‐year Municipal GO AA Index.) The projection of cash flows used to determine this single discount rate assumed that employer contributions will be made at rates equal to the actuarially determined contribution rate. Based on these assumptions, the health care fiduciary net position and future contributions were sufficient to finance health care costs through the year 2070. As a result, the actuarial assumed long‐term expected rate of return on health care investments was applied to projected costs through the year 2070, and the municipal bond rate was applied to all health care costs after that date.

Sensitivity of the Proportionate Share of the Net OPEB Liability (Asset) to Changes in the Discount Rate

The following table presents the City’s proportionate share of the net OPEB liability (asset) calculated using the single discount rate of 5.70 percent, as well as what the City’s proportionate share of the net OPEB liability would be if it were calculated using a discount rate that is one‐percentage‐point lower (4.70 percent) or one‐percentage‐point higher (6.70 percent) than the current rate: