The City of Santa Clarita Selects PARS As OPEB Trust ProviderCategories: Hot Sheets
Santa Clarita discovered the size of its unfunded retiree healthcare liability by completing an actuarial report and then reporting the Other Post Employment Benefits (OPEB) obligation on its 2010-11 financial statements. The actuarial valuation outlined different scenarios that would enable the City to fund its GASB 45 liability.
In April 2011, the City issued a Request for Proposal and interviewed six firms offering OPEB trust services. After thorough review, PARS was selected as the program that best fit the City of Santa Clarita’s needs.
The City will save approximately $15.5 million annually by taking action now and pre-funding the OPEB liability, rather than continuing the pay-as-you-go approach.
“PARS provided the flexibility we were looking for in an OPEB Trust. Their program allows us to be actively involved in selecting the investment strategy to develop a balance of acceptable risk versus return and still maintain local control.” –Ken Striplin, Assistant City Manager, City of Santa Clarita
The PARS GASB 45 Pre-Funding Program
PARS has established a cost-effective multiple-employer irrevocable trust that complies with GASB 45. Each employer’s contributions benefit only its own employees. There is no cross-sharing of either liability or investment earnings, and separate employer accounts are maintained. Once set aside, the money can only be used to pay OPEB –related expenses, including retiree healthcare and actuarial studies.
Another distinguishing feature of the PARS OPEB Pre-Funding Program is the development of an Investment Policy Statement by HighMark Capital Management, Investment Manager for the Program, based on the parameters set by the City. The Investment Policy Statement:
- Establishes reasonable expectations, objectives and guidelines in the investment of the plan’s assets
- Creates the framework for a well-diversified asset mix that can be expected to generate acceptable long-term returns at a level of risk suitable to the City
- Defines the responsibilities of City staff and the investment advisor
- Encourages effective communication between the investment advisor and City staff
- Helps determine strategic and tactical goals
- Describes prohibited asset classes
PARS’ GASB 45 Pre-Funding Program provides a full suite of services to help agencies address their retiree healthcare obligations, including:
- Consulting and analytical services – coordinate actuarial valuation process and prepare reports with high quality actuarial firms
- Implementation services – implement an IRS-approved Section 115 Irrevocable GASB 45-compliant trust, prepare documents and provide training and support for staff
- Investment services – offer an open-architecture platform with a diversified array of strategies, a customized Investment Policy Statement and detailed monthly reports
- Ongoing trust administration – ensure trust compliance with current and future federal and state laws, coordinate periodic audits of the trust, facilitate actuarial valuation updates and funding modifications, and coordinate distribution payments to healthcare providers or reimburse the City
The PARS Advantage
For almost 30 years, PARS has designed and delivered hundreds of individualized solutions that have saved almost 700 public agencies millions of dollars. Our success can be attributed to our unique approach:
- We craft customized, mutually-beneficial retirement solutions for agencies and their workforces
- We guide agencies through the process, showing them how to achieve bottom-line results
- We help to define the goals and objectives for each agency
Contact a PARS consultant today,
We look forward to hearing from you!
800.540.6369 x 127
Copyright 2012 PARS.
The contents of this publication reflect PARS’ understanding of the facts. Before taking any action based on this information, we recommend that you consult professional advisors regarding your agency’s specific objectives and circumstances.