Plymouth County, MA Establishes OPEB Trust (PCOT)Categories: New England Developments,OPEB/GASB 45/75,PARS In the News
Office of Plymouth, MA County Commissioners,
Press Release, January 26, 2015
Innovative Program for Funding Retiree Healthcare Benefits
Available to Public Entities within the Region
On January 15, 2015, Plymouth County Commissioners Daniel A. Pallotta, Sandra M. Wright, and Gregory M. Hanley voted unanimously to approve a first-of-its-kind program that will enable municipalities and other public entities in Plymouth County and the surrounding counties to cost-effectively reduce their retiree healthcare obligations. The Plymouth County OPEB Trust, otherwise known as “PCOT,” will bring collective investment, legal, and administrative economies of scale to participating members that seek to fund future Other Post Employment Benefits or “OPEB” liabilities.
At the January meeting, the Commissioners also voted to make the County the first member of PCOT by committing to contribute funds to the trust and by designating Plymouth County Treasurer, Thomas J. O’Brien as the Plan Administrator. Treasurer O’Brien was selected for his financial acumen, success in providing high performing, cost-efficient programs, and leadership on OPEB and pension issues. As other entities follow the County’s lead and join PCOT, assets in the trust will grow, thereby decreasing the costs of the program for all members.
Public entities within Plymouth, Barnstable, Bristol, and Norfolk counties have the opportunity to participate in PCOT. The County Treasurer and an Investment Committee, comprised of representatives from participating communities and their unions, will provide oversight of the trust and investment program. Public Agency Retirement Services (PARS) will serve as trust administrator and consultant, while U.S. Bank will serve as the trustee and investment manager.
“I want to commend the Commissioners for their incredible foresight in creating PCOT. They understand the need to help our municipalities protect their limited financial resources. This is one more example of how they are creating new ways to provide that invaluable assistance. I am also thrilled to be working with PARS and U.S. Bank, who are nationally recognized experts in this industry,” said Treasurer O’Brien.
Most municipalities, regional school districts, and special districts in Massachusetts have not been able to pre-fund their retiree healthcare obligations into an irrevocable trust, although they must quantify and account for the liability on their financial statements due to federal accounting rules that took effect in 2009. Massachusetts General Law Chapter 32b Section 20 made OPEB trusts such as PCOT possible when enacted in 2011. While some municipalities have established their own trusts, PCOT is one of the first and also the largest regional multiple employer trusts in the state, available to over 100 public entities in Southeastern Massachusetts.
Up-front legal and administrative costs, investment fees, and minimum contribution requirements can make properly establishing an irrevocable trust difficult and expensive for many public entities. PCOT offers a “one stop shop” for comprehensive OPEB trust services and includes investment management, trustee/custodian, compliance, administration, and trust documentation in order to limit costs, risks, and burdens on a city, town, or district. The trust program was carefully crafted to meet strict federal tax and government accounting standards and has been formally approved by the Internal Revenue Service.
“We are very excited to partner with Plymouth County and Treasurer O’Brien to design an innovative funding vehicle for looming retiree health care costs,” said Maureen Toal, Senior Vice President of PARS. “The County’s program is on the forefront at the state and national level with its cutting-edge, multiple employer trust solution for local governments.”
About OPEB: Other Post Employee Benefits (OPEB) refers to benefits, with the exception of pensions, that public employees receive when they retire. These benefits include: health, dental, vision and life insurance and, in some cases, dependent coverage. Per guidelines established by the federal Governmental Accounting Standards Board Statement 45, entities are required to report their annual OPEB obligations, unfunded liabilities, and assumptions on their annual statements. The Commonwealth of Massachusetts OPEB liability is approximately $16 billion and the liabilities for counties, cities, towns, regional school districts, and special districts total approximately $30 billion.
About PARS and U.S. Bank: Public Agency Retirement Services (PARS), PCOT Trust Administrator, was established in 1984 to design and administer retirement trust solutions exclusively for public agencies. PARS has more than 680 local government clients with over 375,000 plan participants in nine states. PARS has designed and administers some of the largest OPEB multiple trusts in the nation with 140 clients and almost $1 billion in assets. U.S. Bank, PCOT Trustee, is the nation’s fifth largest bank and manages over $3 billion in OPEB assets.
For more information on PCOT, please contact:
Tom O’Brien, Plymouth County Treasurer, at (508) 830-9130, firstname.lastname@example.org