The target asset allocation and best estimates of arithmetic nominal rates of return for each major asset class are summarized in the following table:
| Non-hazardous | ||
| Target Allocation | Long-Term Nominal Rate of Return | |
|---|---|---|
| Asset Class | ||
| 2017 | ||
| Combined Equity | 50% | 5.30% |
| Intermediate Duration Fixed Income | 11 | 1.00 |
| Custom KRS Fixed Income | 11 | 3.33 |
| Core Real Estate | 5 | 4.25 |
| Diversified Hedge Funds | 10 | 4.00 |
| Private Equity | 2 | 8.00 |
| Diversified Inflation Strategies | 8 | 3.15 |
| Cash Equivalents | 3 | (0.25) |
| Total | 100% | |
Changes in Assumptions and Benefit Terms Since Prior Measurement Date - The final TPL as of June 30, 2016 reflects a decrease in the assumed investment rate of return and discount rate from 7.50% to 6.75% for the Non-Hazardous plan.
Changes Since Measurement Date - The following changes in assumptions and benefit terms will be comprehended at the next measurement date of June 30, 2017. The impact on the University's financial statements from this change is not known.
Discount rate - The discount rate used to measure the total pension liability was 6.75% (Non-Hazardous) for the June 30, 2016 actuarial valuation. The projection of cash flows used to determine the discount rate assumed that local employers would contribute the actuarially determined contribution rate of projected compensation over the remaining 27-year amortization period of the unfunded actuarial accrued liability. The actuarial determined contribution rate is adjusted to reflect the phase in of anticipated gains on actuarial value of assets over the first four years of the projection period. Projected inflows from investment earnings were calculated using the long-term assumed investment return of 6.75% for Non-Hazardous for the June 30, 2016 actuarial valuation. The long-term assumed investment rate of return was applied to all periods of projected of benefit payments to determine the total pension liability.
33.