TO: Board of Supervisors
FROM: Ryan J. Alsop, Chief Executive Officer
REPORT BY: Becky Craig, Assistant Chief Executive Officer
SUBJECT: Section 115 Trust Investment Policies and Annual Report
RECOMMENDATION
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Approve and authorize Section 115 Pension and OPEB Trust Investment Policy Statements with PFM Asset Management and receive a report of the Trust’s performance. (No Fiscal Impact)
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BACKGROUND
The County established a Section 115 Trust (‘Trust’) in 2018 to fund pension and other post-employee benefits (‘OPEB’), including qualifying health and dental coverages for retirees. The Trust’s assets are reported in the annual financial statements to offset the unfunded liabilities. An established oversight committee is comprised of the Chief Executive Officer, Assistant CEO, County Counsel, Auditor Controller, Treasurer Tax Collector, and Chief Human Resources Officer. The committee receives quarterly financial performance reports and meets annually to advise the CEO who serves as the Trust’s Plan Administrator.
The financial advisor recommends, and the committee supports, revisions to the investment policies to better define asset categories, to adjust the target investment mix within the equities category, and to clean up other miscellaneous language. The investment policies further the County’s practice of transparent, efficient, and data-driven financial management that models public trust and accountability.
Public Agency Retirement Services (PARS) administers the accounts and PFM Asset Management is the financial advisor. CalPERS prepares bi-annual actuarial reports calculating pension liability and minimum payments. The County contracts for bi-annual actuarial reports calculating the OPEB liability and payments. The most recent OPEB report is attached; the pension reports are available upon request.
The actuarial consultant projected the County’s OPEB Actual Accrued Liability at 6/30/2025 to total $130 million and the offsetting Trust Assets to total $131 million. The assets actually totaled $137.6 million at 6/30/2025, reflecting an over-funding of $7 million or 5%. The OPEB liability is funded at or above 100%. With full funding, the County can choose to disburse excess monies from the Trust to fund a portion of the county’s share of retiree health insurance premium payments. Any disbursement from the Trust for OPEB payments would reduce the County’s annual calculated budgetary allocation. The committee continues to discuss measurement parameters for disbursements.
Staff will continue evaluating whether to recommend offsetting the outstanding net pension liability with additional Trust contributions.
Requested action: Approve and authorize Section 115 Pension and OPEB Trust Investment Policy Statements with PFM Asset Management.
FISCAL IMPACT
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Is there a Fiscal Impact? |
No |
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Strategic Initiative: |
Elevate County Service and Workforce Excellence |
ENVIRONMENTAL IMPACT
ENVIRONMENTAL DETERMINATION: The proposed action is not a project as defined by 14 California Code of Regulations 15378 (State CEQA Guidelines) and therefore CEQA is not applicable.