Another Texas municipality joins the PARS OPEB TrustCategories: Hot Sheets,OPEB/GASB 45/75
The City of Allen recently adopted the PARS 115 Trust for GASB 45 compliance
In the fall of 2006, the City of Allen had prepared the first of three actuarial studies concerning their retiree OPEB liability. Last year, the City’s updated actuarial valuation showed that the number of retirees and active employees electing to stay on the plan was growing significantly. The City’s unfunded liability ballooned from $240,000 to $2,736,000. The “pay-as-you-go” approach that the City had been using no longer seemed to be the right choice and the City decided it must pre-fund to lower the liability long-term.
Looking to the City of Garland
The City has an interlocal agreement with the City of Garland, which had already selected the PARS OPEB Trust through a long and detailed formal RFP process. The City of Allen reviewed vendor responses from the proposals submitted and ultimately decided that PARS was the best choice as well.
Kevin Hammeke, City of Allen’s Finance Director comments, “After considering our options, the program that appeared to be best suited to the City’s needs was the PARS OPEB Trust program. PARS provides the most flexibility, an experienced senior portfolio manager, an easy implementation process, and great customer service. Based upon the information submitted in the RFP to the City of Garland and our own personal meetings and phone conversations with PARS, all of the PARS OPEB Trust program professionals have been very responsive to their customers.”
Pre-fund Over PAYGO
Many Texas municipalities and counties are beginning to realize the benefits that come along with pre-funding into an OPEB trust versus the “pay-as-you-go” approach. Pre-funding OPEB liabilities into an irrevocable OPEB trust will allow an agency to recognize a larger discount rate because the trust is expected to generate a larger return on investment than the general fund. This larger discount rate combined with a compatible diversified investment strategy available with the PARS OPEB Trust will help to reduce the Annual Required Contribution (ARC) and unfunded liability.
The PARS OPEB Trust
Many local government agencies are joining the PARS OPEB Trust program to comply with the GASB 45 standard. The advantages of the PARS approach are:
- 15 years of successful OPEB trust experience, along with Union Bank as Trustee and Investment Manager
- IRS-approved and state-compliant 115 trust
- Investment authority under Texas law validated by prominent Texas legal counsel
- Maximum fiduciary protection
- Investment flexibility, including conservative and customized investment strategies
- Ongoing compliance by Texas legal counsel
- Separate accounts for each agency; no cross-sharing of earnings or liabilities
- Senior portfolio manager dedicated to your account
- Assistance with investment policy development
- Easy implementation process
- Annual independent trust audit
- Highest degree of personal service
- 90-day termination option with no early termination fees
- Local Texas representation
Over the last 28 years, PARS has designed and delivered over 1,100 individualized retirement solutions for more than 600 public agencies. We are on the cutting edge of design and administering post-retirement healthcare funding solutions for Texas local governments. PARS first began administering post-retirement healthcare trusts in 1996. Since that time, we have consulted with numerous public agencies on GASB 45 issues and designed and developed three trailblazing multiple-employer IRC Section 115 trusts.
Like the City of Allen, you can take advantage of PARS’ experience and innovation, along with Union Bank’s strength and protections. Please call today for a no-cost, detailed proposal showing investment strategies, risk tolerances, funding options, fees, etc.
We look forward to hearing from you!