KENTUCKY STATE UNIVERSITY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024

NOTE 10 OTHER POSTEMPLOYMENT BENEFITS PLANS (OPEB) (CONTINUED)

(Kentucky Employees Retirement System (KERS) OPEB Plan (Continued)) Total OPEB Liability (Continued)

Discount Rate Assumptions

• Discount Rate: The discount rate used to measure the total Nonhazardous OPEB liability was 5.94%, which was increased from the 5.72% discount rate used in the prior year. The discount rate used to measure the total Hazardous OPEB liability was 5.94%, which was increased from the 5.59% discount rate used in the prior year.
• Projected Cash Flows: The projection of cash flows used to determine the discount rate assumed the local employers and plan members would contribute the actuarially determined contribution rate of projected compensation each future year calculated in accordance with the current funding policy.
• Municipal Bond Rate: The discount rate determination used a municipal bond rate of 3.86% as reported in Fidelity Index's "20-Year Municipal GO AA Index" as of June 30, 2023.
• Long-Term Rate of Return and Assumed Asset Allocations: The long-term expected rate of return was determined by using a building block method in which best estimate ranges of expected future real rates of returns are developed for each asset class. The ranges are combined by weighting the expected future real rate of return by the target asset allocation percentage. The target allocation and best estimates of arithmetic real rate of return for each major asset class is summarized in the table below. The current long-term inflation assumption is 2.30% per annum for both the nonhazardous and hazardous plan. The target asset allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

The long-term expected rate of return on pension plan assets was established by the KRS Board of Trustees at 6.25% based on a blending of the factors described above.

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