PARS Combination Trust Comes to Massachusetts

Categories: New England Developments,OPEB/GASB 45/75,PARS News,Pension Rate Stabilization
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First-of-its-kind trust enables prefunding OPEB and pension

Public Agency Retirement Services (PARS) offers the nation’s ONLY IRS Section 115 Post Employment Benefits (PEB) trust, that enables municipalities for the first time to set aside funds for both pension and/or OPEB liabilities in one trust. PARS pioneered this program in 2015 with a first of its kind IRS Private Letter ruling. It has rapidly grown in popularity – now over 400 local governments and $3 billion in assets.

Offered in partnership with U.S. Bank and Vanguard, the Trust can:

  1. Pay directly to your retirement system or health benefit provider
  2. Reimburse your agency for pension or retiree healthcare related costs
  3. Fund OPEB, or pension, or both trust accounts

Advantages of prefunding with PARS’ Combination Trust include:

  • Diversified Investing – Assets in the trust can be diversified which is likely to result in better longer term returns than your general fund or reserve account
  • Stabilize Rates – When pension or retiree healthcare rates go up, trust funds can be used to smooth out the increases
  • Improve Funding Ratio – Trust assets can be tapped to keep the funding ratio from dipping below a certain level
  • Rainy Day Fund – Distributions can be made to provide budgetary support during adverse financial conditions
  • Secure from Diversion – Funds in the Trust are protected from other uses
  • Favorable Credit Rating – Rating agencies look more favorably on public agencies that actively manage their retirement obligations
  • Economies of Scale – Total assets are combined for fee reduction purposes if funding both the pension and OPEB account

Why Use PARS’ Trust and Not Your Own Retirement System?

Additional contributions made beyond the required annual amount are typically amortized over a number of years, with agencies having limited control. Therefore, a side trust with PARS provides greater flexibility and might work better for your needs.