Is Your Massachusetts OPEB Trust Trustworthy?

Categories: Hot Sheets,New England Developments,OPEB/GASB 45/75
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An increasing number of Massachusetts public agencies have “trusts” to set aside assets for OPEB benefits. But are these “trusts” compliant with federal and state laws and rules? Prior to funding OPEB benefits, Massachusetts municipalities, special districts, and regional school districts must ask three important questions:

1.  Is the trust compliant with Massachusetts law?

M.G.L. 32B Section 20 states that a compliant trust must:

  • Be free from creditors
  • Be used solely for retiree healthcare benefits
  • Apply Massachusetts Prudent Investor Law

2.  Is the trust compliant with GASB 43 and 45?

  • Contributions must be irrevocable
  • Dedicated to OPEB
  • Free from creditors

Only by meeting these three requirements can you count contributions as assets on financial statements, diversify investments, and increase the discount rate on your actuarial valuation to bring down liabilities.

3.  Is the trust compliant with Internal Revenue Service (IRS) law?

  • Does it meet IRS requirements to protect earnings, distributions, and contributions from taxation?
  • Does it have an IRS Private Letter Ruling?
  • Does it have a trust agreement that legalizes the trust for IRS purposes?
  • Is it an exclusive benefit trust with documents that put the interests of employees and retirees over that of the employer?

With all these requirements, many municipalities are finding that their OPEB trusts are in limbo – caught somewhere between Massachusetts, GASB, and IRS compliance.

That’s where PARS can help. Our trust meets all three requirements and we run the largest private OPEB trust program in the country with over 135 members from the west to the east coast and almost $1 billion in assets. A full-service approach to funding OPEB, we provide trust administration, trustee, custodian, legal compliance, investment advisory and investment management services to ensure your trust program is set up and managed correctly.

U.S. Bank, the largest OPEB trustee in the country works with PARS as the Trust Administrator to provide a trust solution for you – one that helps your public agency avoid the liabilities and risks associated with managing an OPEB trust. Eliminating legal set-up costs and staff burdens, we offer a ready-to-go IRS approved funding vehicle that is simple, cost effective and has been set up the right way.

Additional advantages of our trust include:

  • No upfront costs
  • No minimum contributions
  • No funding requirements or commitments
  • Legal, administrative, and investment economies of scale
  • Signature ready master trust documents that are compliant with GASB rules and federal and state laws
  • Protection from an IRS Private Letter Ruling which covers all participating members from day one of funding
  • Local control
  • Flexible, low cost investment options
  • Security of one of the largest banks and trustees in the nation, U.S. Bank
  • Experience of PARS, a specialist in OPEB trust administration and compliance

For more information, please contact Maureen Toal at 844.540.OPEB (6732),
or mtoal@pars.org.


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