Staff Report
City Council
Item No. 2.B
Meeting Date: October 22, 2025
From: Kevin Biersack, Financial Services Director
Title: Internal Revenue Code (IRC) Section 115 Trust Plan Policy RECOMMENDATION:
To approve the IRC Section 115 Investment Trust Plan Policy for the City’s OPEB and authorize its implementation with Shuster Advisory Group, LLC in coordination with the City Treasurer and the Financial Services Director.
BACKGROUND:
On June 25, 2025, the City Council approved Resolution 2025-19 to transfer approximately $16 Million+ from the California Public Employees Retirement System (CalPERS) California Employers’ Retiree Benefit Trust (CERBT) fund to an IRC Section 115 Trust Plan for the city’s Other Post Employment Benefits (OPEB). This Trust will be administered by Shuster Advisory Group, LLC, an independent investment advisory firm and fiduciary, who provides governmental and institutional retirement plan consulting services as well as private wealth management. Shuster Advisory Group, LLC currently serves as the fiduciary investment advisor and plan consultant for the City’s 457(b) and 401(a) plans. The services provided have a low-cost, transparent structure with a white glove approach.
DISCUSSION:
The city’s OPEB obligations represent a long-term liability requiring careful financial planning and disciplined investment management. To support this effort, staff recommends the adoption of an OPEB Investment Policy for assets held in the City’s IRC Section 115 Trust Plan. These assets are managed with the support of Shuster Advisory Group, LLC, an independent SEC-registered investment advisor.
This proposed Investment Policy Statement (IPS) establishes a structured framework for the investment of OPEB Trust funds. It defines the City’s investment objectives, risk tolerance, time horizon, and liquidity needs—ensuring investment decisions are aligned with the City’s fiduciary duty and long-term funding goals. Under the policy, investment discretion is delegated to Shuster Advisory Group in accordance with the advisory agreement. The advisor will implement a balanced, globally diversified investment strategy aimed at growing trust assets to help offset both current and future OPEB liabilities.
Under this policy, the City delegates investment discretion to Shuster Advisory Group, LLC consistent with the terms of the advisory agreement. The advisor will manage the portfolio using a balanced investment strategy, with a long-term perspective focused on growing assets to help offset the City’s current and future OPEB liabilities. The balanced approach reflects a moderate risk tolerance and includes a globally diversified mix of equities, bonds, and other asset classes. The investment asset allocation by category, range and target policy is summarized below:
Equity Fixed Income Cash
40%-60% 38%-58% 0-12%
Policy: 50% Policy: 48% Policy: 2%
In addition to outlining investment strategy, this IPS clearly defines the roles and responsibilities of all parties involved. The City, acting as Plan Sponsor and Administrator, is responsible for confirming the policy’s accuracy, monitoring service providers, and ensuring ongoing compliance under the guidance of the Financial Services Director and the elected City Treasurer. The Custodian handles valuation, income collection, and transaction settlement, while the Trustee holds assets in trust and tracks their valuation. Shuster Advisory Group supports the development and maintenance of the IPS, manages daily investment activity, monitors performance, and provides regular reporting and recommendations.
By adopting this OPEB investment policy and strategy, the City reinforces its commitment to responsible fiscal stewardship and strengthens its approach to meeting long-term OPEB obligations.
FISCAL IMPACT:
No fiscal impact.
FIVE-YEAR STRATEGIC PLAN:
Goal C - FISCAL STABILITY AND SUSTAINABILITY
Objective: Cathedral City has economically prospered by facilitating the investment of private dollars in high quality development which benefits the community. We remain financially solvent by instituting prudent fiscal policies and transparent financial practices.
Action C-7 – Continually review and streamline internal financial policies, procedures, and practices to remove unnecessary controls without sacrificing accountability and transparency
ATTACHMENTS:
1. Cathedral City 115 50-50 Balanced OPEB Policy
2. Chapter 20330 A&F OPEB Policy_Oct2025