55D - RESO - RETIREMENT SRVS - Laserfiche WebLink

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Resolution to establish an Irrevocable Trust with Public Agency Retirement Services June 21, 2016 Page 2 Statements as of June 30, 2015. Specifically, Cities are required to disclose their unfunded pension obligations for their defined benefit plans (CaIPERS) within their Balance Sheet. The City's unfunded pension obligations as of June 30, 2015 totaled approximately $417 million. However, the City's overall net position approximated a positive $800 million after implementing the unfunded pension liability as required by GASB 68. Upon approval by City Council for the City's Surplus Allocation Plan, the City elected to establish a Pension Stability Reserve (Reserve) totaling $500,000. The Reserve was established to offset and /or pre -fund the City's unfunded pension obligations. Additionally, the funds were assigned and reflected in the City's Comprehensive Annual Financial Report as of June 30, 2015. Staff has continued to research measures which would reduce the City's unfunded Pension obligations and as a result identified the establishment of an Irrevocable Trust (Trust) with a third -party (Exhibit 1 and 2). Establishment of a Trust provides the following benefits for both Pension and Other Post - Employment Obligations (OPEB): • Establishment of Plan demonstrates the City's efforts in maintaining fiscal responsibility. • Local Control over Assets — The Trust can be accessed at any time so long as it is utilized to pay the City's pension obligations. • Lower Net Pension Liability (NPL) — Contributions placed in the trust reduces the City's unfunded pension liability. Additionally, assets placed in the Trust will directly reduce the City's NPL for financial reporting purposes in accordance with GASB 68. • Pension Rate Stabilization — Assets may be transferred to the City's existing CaIPERS plan (Miscellaneous or Safety) at the City discretion, which would reduce or eliminate large fluctuations in Employer contributions to CaIPERS. • Investment Flexibility— The City maintains oversight of the investment manager (HighMark Capital Management, Inc.) and the portfolio's risk tolerance along with diversification of plan assets are in accordance with California Government Code section 53216. • Improve the City's Credit Rating — Rating agencies, such as Standard & Poor's, reflect favorably on cities that develop a strategy and establish a corresponding Trust to offset unfunded pension liabilities. On an annual basis, staff will continue to identify City funds that are eligible for transfer to Public Agency Retirement Services (PARS). Council approval will be sought for future contributions to the Trust. STRATEGIC PLAN ALIGNMENT Approval of this item supports the City's effort to meet Goal #4 — City Financial Stability, Objective #1 (maintain a stable, efficient and transparent financial environment). 55D -2