City of Rowlett Joins the PARS OPEB Trust Program

Categories: Hot Sheets,OPEB/GASB 45/75,Texas Developments
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Twenty minutes northeast of downtown Dallas, surrounded by 30 miles of Lake Ray Hubbard shoreline, sits the City of Rowlett. In addition to its lovely locale, Rowlett’s reputation as one of the safest cities and “best places to live” has contributed to its population increase of more than eightfold since 1980. Recently completed expansions to the George Bush Turnpike and Dallas Area Rapid Transit (DART) through city borders have made this suburban community an even more enticing place to call home.

The PARS Solution for GASB 45/75 Compliance & OPEB Liabilities

When the Governmental Accounting Standards Board (GASB) first released Statement 45 detailing new OPEB accounting standards, the City of Rowlett was one of the many forward-thinking government entities that took notice. Smartly, Rowlett began requesting biennial actuarial reports and placed current OPEB liabilities on their financial reports. After a few report cycles, the data clearly showed steadily rising OPEB costs and liabilities that would need to be addressed.

Having worked together previously on other retirement solutions, the City reached out to PARS for more information about the PARS OPEB Trust Program, an IRS-approved, GASB-compliant multiple employer Section 115 Trust solution. PARS explained that choosing to prefund into an irrevocable trust such as the PARS Trust is: seen as best practice by the Government Finance Officers Association (GFOA); viewed favorably by credit rating companies; can result in improved actuarial valuation; allows agencies local control over assets in the trust; and the ability to diversify investments and match risk tolerance levels to fiscal goals. Perhaps most importantly, the Program helps agencies reduce their OPEB liability and improve their balance sheet. In Rowlett’s case, prefunding would lower the City’s liability by 25% with further reduction achieved as trust assets grow.

Following Through on a Commitment

A government entity’s OPEB costs begin building the day their employees become eligible for retiree medical benefits. OPEB liability is the difference between what has been promised by providing these benefits versus what is funded.

Before GASB 45, which requires agencies to report their OPEB liability as a footnote on their financial statements, entities did not have to disclose their liability. The recently released GASB 75 Statement, which goes into effect in 2017, takes reporting to the next level by requiring OPEB liability be clearly shown as a line item on balance sheets.

Developing an OPEB prefunding plan of action now is simply the most responsible way to provide for future retiree medical costs and address the associated liability. In their staff report for the City Council to consider adopting the PARS OPEB Trust Program, Rowlett emphasized the potential financial savings, how OPEB liability works and why it needed to be addressed right away.

The Rowlett City Council agreed on the need for a solution and their choice of the PARS OPEB Trust Program. Impressed with the savings as well, the Council voted to adopt the PARS Program and began prefunding soon after.


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