The City of Lemon Grove, in the midst of metropolitan San Diego County, has proudly maintained its small town feel. Boasting “The Best Climate on Earth” for over 100 years, this motto can be seen displayed across the base of their landmark giant lemon statue in the middle of Main Street.

Much like the City itself, the K-8 Lemon Grove School District has remained tight-knit for more than 100 years. With lengthy history comes extensive experience, and so District officials have made it a point to avoid letting retirement liabilities get out of hand. In 2009, Lemon Grove School District joined the CSBA PARS GASB 45 Solutions Program, which resulted in their unfunded OPEB liabilities dropping as assets built up in the pre-funding trust. With their OPEB liabilities set on a positive trajectory, officials next turned their attention to rising pension costs, which were quickly becoming an even larger issue.

Pension Rate Stabilization Program Addresses Rising Pension Costs

Through due diligence, Lemon Grove officials determined the District would be facing nearly doubling CalPERS and CalSTRS retirement costs by 2020 — resulting in a projected $2.2 million cost increase. Looking for ways to alleviate this looming financial burden, District officials were pleased to hear about the PARS Pension Rate Stabilization Program (PRSP) and how, through the program, a pre-funding framework could be put in place for their pension liabilities, much like what had been established for their OPEB obligations. Lemon Grove officials appreciate that with the PARS PRSP, assets can be diversified and grow to offset their pension liabilities. Funds within the trust can be accessed at any time to pay any pension-related costs, which gives the District flexibility and local control to make contributions and disbursements entirely at their discretion.

Building Up Secure Assets

Beside convenience, Lemon Grove officials value that prefunding pension benefits through the PARS PRSP addresses long-term liability by lowering Net Pension Liability (NPL), creating a rainy-day fund for emergency pension costs, and helping the District build up assets that can be used to “stabilize” future pension rate increases. The program also offers the District further peace of mind on this newer funding concept, due to its exclusive favorable Private Letter Ruling from the IRS.

In early September 2015, Lemon Grove School District passed a resolution to become the first school district to join the PARS Pension Rate Stabilization Program and can now move money in the general fund over to the trust at their discretion.

To find out what a long-term OPEB & Pension pre-funding strategy would do for your district, contact PARS at 800.540.6369 x179 or info@pars.org for a complimentary proposal.