2019 & 2020-COH - DWS Financial Statements and Supplementary Information With Independent Auditor's Report

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County of Hawaii Department of Water Supply (A component unit of the County of Hawaii, State of Hawaii) NOTES TO FINANCIAL STATEMENTS June 30, 2020 and 2019 NOTE G - EMPLOYEE BENEFITS (Continued) The actuarial assumptions used in the actuarial valuation as of June 30, 2019 was based on the results of an actuarial experience study as of June 30, 2018, with most of the assumptions based on the period from July 1, 2013 through June 30, 2018. The actuarial assumptions used in the actuarial valuation as of June 30, 2018 was based on the results of an actuarial experience study for the five-year period ended June 30, 2015. The long-term expected rate of return on pension plan investments, based on ERS' investment consultant, 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. The target allocation and best estimates of geometric real rates of return for each major asset class as of June 30, 2019 and 2018 are summarized in the following tables: Discount Rate - The discount rate used to measure the net pension liability at June 30, 2020 and 2019 was 7.00%. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current contribution rate and that contributions from the Department will be made at statutorily required rates, actuarially 37 June 30, 2019 Long -Term Long -Term Strategic Allocation Target Expected Expected Real (Risk -Based Classes) Allocation Rate of Return Rate of Return* Broad growth 63.00% 7.65% 5.40% Crisis risk offset 20.00% 5.15% 2.90% Real return 10.00% 4.55% 2.30% Principal protection 7.00% 3.00% 0.75% 100.00% *Uses an expected inflation of 2.25% June 30, 2018 Long -Term Long -Term Strategic Allocation Target Expected Expected Real (Risk -Based Classes) Allocation Rate of Return Rate of Return* Broad growth 63.00% 7.10% 4.85% Crisis risk offset 20.00% 4.60% 2.35% Real return 10.00% 4.10% 1.85% Principal protection 7.00% 2.50% 0.25% 100.00% *Uses an expected inflation of 2.25% Discount Rate - The discount rate used to measure the net pension liability at June 30, 2020 and 2019 was 7.00%. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current contribution rate and that contributions from the Department will be made at statutorily required rates, actuarially 37