City of Novato and Town of Atherton Adopt the PARS OPEB Trust to Reduce Retiree Health Care LiabilityCategories: Hot Sheets,OPEB/GASB 45/75
By now OPEB is a familiar term to local officials. It involves an unfunded liability for post-employment benefits promised to retirees from the public sector. Although agencies are not required to pre-fund this obligation (GASB 45), many have chosen to adopt a trust in order to offset this liability on their financial reports. The City of Novato and Town of Atherton recently turned to PARS, the leading private provider in OPEB trust services, to reduce their liability.
CITY OF NOVATO
As part of the FY 2012/13 budget, the City council approved a strategy to begin pre-funding the City’s annual required OPEB contribution. According to the City’s Staff Report, after researching three OPEB trust providers, they selected PARS based on the following factors:
- PARS’s trust is in compliance with Internal Revenue Code and received a favorable private letter ruling letter from the IRS.
- The fiduciary responsibility and liability would be transferred to U.S. Bank as discretionary trustee.
- City retains investment control with input on asset allocation, risk tolerance and discount rate for the OPEB investments. The investment manager will execute this strategy.
- A high level of professionalism and customer service according to reference checks.
TOWN OF ATHERTON
Last year, the Town of Atherton reviewed the two major OPEB trust programs in California, after determining that other providers and/or trust vehicles were not deemed acceptable to the Town’s needs. PARS was selected because they are able “to provided a flexible plan that can be tailored to handle the needs of the Town,” according the City Council Staff Report. The Town’s City Council Staff Report also states, “PARS allows agencies to structure the investment options to meet the Plan goals and does not require a specific term commitment. PARS provides monthly investment reports…To date, over 100 public agencies are participating in the PARS Public Agencies Post-Retirement Health Care Plan to pre-fund their OPEB obligation.”
ADVANTAGES OF WORKING WITH PARS
Flexibility in investment, benefit, and design choices
Security in safeguarding your assets in Section 115 Trust
Control at the local level
Savings from labor and benefit costs
Service from an experienced and dedicated team at PARS and HighMark Capital Management
Integrity based on a long term commitment to helping serve the public interest