The long-term expected rate of return was determined 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 net pension liability as of June 30, 2020, is based on the June 30, 2019, actuarial valuation rolled-forward. Deferred outflows and inflows related to differences between projected and actual earnings on plan investments are netted and amortized over a closed five-year period.

The target asset allocation and best estimates of arithmetic nominal rates of return for each major asset class are summarized in the following table:

Changes in Assumptions and Benefit Terms Since Prior Measurement Date – The Board of Trustees of KERS adopted new actuarial assumptions since June 30, 2018. These assumptions are documented in the report titled “Kentucky Retirement Systems 2018 Actuarial Experience Study for the Period Ending June 30, 2018”. The Total Pension liability as of June 30, 2020, was determined using these updated assumptions.

Asset Class Non-hazardous

Target Long-Term Nominal

Allocation Rate of Return

2021

U.S. Equity 15.75 % 4.50 %

International Equity 15.75 5.25

Core Bonds 20.50 (0.25)

Specialty Credit/High Yield 15.00 3.90

Real Estate 5.00 5.30

Opportunistic 3.00 2.25

Real Return 15.00 3.95

Private Equity 7.00 5.15

Cash Equivalents 3.00 (0.75)

Total

Asset Class Hazardous

Target Allocation Long-Term Nominal Rate of Return

2021

U.S. Equity 18.75 % 4.50 %

International Equity 18.75 5.25

Core Bonds 13.50 (0.25)

Specialty Credit/High Yield 15.00 3.90

Real Estate 5.00 5.30

Opportunistic 3.00 2.25

Real Return 15.00 3.95

Private Equity 10.00 5.15

Cash Equivalents 1.00 (0.75)

Total

38.