VILLAGE OF GRAFTON NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2016 NOTE IV - OTHER INFORMATION (cont.) A. EMPLOYEES' RETIREMENT SYSTEM (cont.) Single discount rate. A single discount rate of 7.20% was used to measure the total pension liability. This single discount rate was based on the expected rate of return on pension plan investments of 7.20% and a long term bond rate of 3.56%. Because of the unique structure of WRS, the 7.20% expected rate of return implies that a dividend of approximately 2.1% will always be paid. For purposes of the single discount rate, it was assumed that the dividend would always be paid. The projection of cash flows used to determine this single discount rate assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on these assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments (including expected dividends) of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the village’s proportionate share of the net pension liability to changes in the discount rate. The following presents the village’s proportionate share of the net pension liability calculated using the discount rate of 7.20 percent, as well as what the village’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.20 percent) or 1-percentage-point higher (8.20 percent) than the current rate: 1% Decrease to Discount Rate (6.20%) Current Discount Rate (7.20%) 1% Increase to Discount Rate (8.20%) Village’s proportionate share of the net pension liability (asset) $4,465,402 $636,640 $(2,353,692) Pension plan fiduciary net position. Detailed information about the pension plan’s fiduciary net position is available in separately issued financial statements available at http://etf.wi.gov/publications/cafr.htm. At December 31, 2016, the village reported a payable to the pension plan of $62,311,which represents contractually required contributions outstanding as of the end of the year. B. RISK MANAGEMENT The village is exposed to various risks of loss related to torts; theft of, damage to, or destruction of assets; errors and omissions; workers compensation; and health care of its employees. All of these risks are covered through the purchase of commercial insurance, with minimal deductibles. Settled claims have not exceeded the commercial coverage in any of the past three years. There were no significant reductions in coverage compared to the prior year. C. COMMITMENTS AND CONTINGENCIES Claims and judgments are recorded as liabilities if all the conditions of Governmental Accounting Standards Board pronouncements are met. The liability and expenditure for claims and judgments are only reported in governmental funds if it has matured. Claims and judgments are recorded in the government-wide statements and proprietary funds as expenses when the related liabilities are incurred. 85