Introducing A New Innovative OPEB Trust Investment ProgramCategories: New England Developments,OPEB/GASB 45/75,PARS In the News
Western Massachusetts OPEB Trust Program
HCG is expanding its services to the community by launching the Western Massachusetts Other Post Employment Benefits (OPEB) Trust. The program saves public entities time and money in funding their retiree healthcare obligations. The Western MA OPEB Trust is open to all public entities in Berkshire, Franklin, Hampden, Hampshire, and Worcester counties.
“The Western MA OPEB Trust will save communities time, money, and effort on funding retiree healthcare obligations,” says Todd Ford, executive director, HCG. “Through this innovative program, Western MA communities can immediately begin to fund their OPEB liabilities with no upfront costs and very low management fees usually only seen by much larger cities.”
The turn-key Western MA OPEB Trust is available to municipalities, regional schools, and other public entities. It offers trust administration, investment management, trustee/custodian, trust documentation, compliance monitoring, reporting, and recordkeeping services. As trust assets grow, the costs decrease for all participating members.
HCG has partnered with Public Agency Retirement Services (PARS), which serves as Trust Administrator and Vanguard Institutional Advisory Services (Vanguard), which manages investment pools specially designed for the trust program – with very low investment management fees that decrease as assets grow across all pools. The trust program was carefully crafted to meet strict federal tax and government accounting standards, Massachusetts law, and has a favorable Private Letter Ruling from the Internal Revenue Service covering all employers that join.
“We are very excited to partner with HCG to offer Western Massachusetts this cutting-edge, economies-of-scale trust solution,” says Maureen Toal, senior vice president, PARS. “A public entity would need to bring $250 million in assets to Vanguard on its own to obtain the same fee schedule that each member of the Western MA OPEB Trust receives, no matter the size of its contribution.”
In addition to PARS and Vanguard, U.S. Bank, the nation’s 5th largest bank, will safeguard each members’ assets by serving as corporate trustee/custodian. Together, this collaborative approach will ensure that Western MA OPEB Trust members have access to the highest quality program available both in Massachusetts and nationwide.
OPEB refers to benefits, with the exception of pensions, that retired public employees receive after employment. These benefits include: health, dental, vision and life insurance, and in some cases, dependent coverage. Per guidelines established by the Governmental Accounting Standards Board (GASB), public entities began a decade ago to actuarially value these liabilities and report them on their annual financial statements for the first time. Last year, the Commonwealth of Massachusetts OPEB liability was approximately $16 billion. The liabilities for counties, cities, towns, regional school districts, and special districts was $46.7 billion as of September of 2016, according to the Massachusetts Public Employees Retirement Administration Commission (PERAC).
HCG supports communities by empowering local, sustainable and efficient economies. The organization helps cities and towns, schools, nonprofits and businesses get the most value by pooling their buying power. HCG’s Hampshire Power provides electricity services, including green and locally produced electricity. The HCG Purchasing Co-op makes it easy for towns, cities and nonprofits to save money, time, and effort on major and everyday purchases. And HCG supports communities with its own, uniquely effective service organizations: RSVP of the Pioneer Valley and the Hampshire-Franklin Tobacco-Free Community Partnership. Every cent HCG earns goes back to supporting the communities of Western Massachusetts. HCG is funded by its own revenue.
PARS was established in 1984 to design and administer retirement plan/trust solutions exclusively for public agencies. PARS received IRS approval on the first IRC section 115 multiple-employer OPEB trust program back in 2004. PARS is one of the largest, private providers of OPEB trust services in the nation with over 270 clients and over $1.5 billion in OPEB assets. It is known regionally for administering trust programs for Plymouth County, MA and the Rhode Island Interlocal Risk Management Trust.