Page 53 - BAA CAFR 2017

BIRMINGHAM AIRPORT AUTHORITY
NOTES TO THE FINANCIAL STATEMENTS

NOTE 10 PENSION PLAN (CONTINUED)

Actuarial Assumptions
The total pension liability was determined by an actuarial valuation as of July 1,
2016, using the following actuarial assumptions, applied to all periods included in
the measurement, with the results rolled forward to June 30, 2017:

Inflation 2.50%

Salary increases 2.50%, plus age (General Employees) or service
(Fire and Police) related salary scale based
on participant group.

Investment rate of return 7.50% including inflation, net of pension plan
investment expense

Pre-retirement mortality rates are based on the sex-distinct RP-2014 Blue Collar
Employee Mortality Table, set forward two years for males and four years for
females. Healthy annuitant mortality rates are based on the sex-distinct RP-2014
Blue Collar Healthy Annuitant Mortality Table, set forward two years for males
and four years for females. Disabled mortality rates are based on the sex-distinct
RP-2014 Disabled Retiree Mortality Table. All mortality tables are projected
generationally with Scale MP-2015.

The actuarial assumption used in the July 1, 2016 valuation were based on the
results of an experience study for the period July 1, 2010 to June 30, 2015.

The long-term expected rate of return on pension plan investments was determined
using a building-block method in which best-estimate ranges of expected future
real rates of return (expected returns, net of pension plan 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. Best estimates of arithmetic real rates of return for each major asset class
included in the System’s target asset allocation as of June 30, 2017 are summarized
in the following table:

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