City of pomona
0 City of pomona
PARS 115 Trust – Pension Rate Stabilization Program (PRSP) January 22, 2024
Attachment 3
City of pomona
1 Pars 115 Trust Team
Trust Administrator & Consultant
39 Years of Experience
(1984-2023)
2,000+
Plans under
Administration
1,000+
Public Agency
Clients
$8 B
Assets under
Administration
Investment Manager
• Investment sub-advi sor to trustee U.S. Bank
• Investment policy assistance
• Uses open architecture
• Active and passive platform options
• Customized portfolios (with minimum asset level)
104
Years of Experience
(1919-2023)
$8.6 B
Assets under
Management &
Advisement
Trustee
• 5th largest commercial bank and one of the
nat
ion’s largest trustees for Section 115 trusts
• Safeguard plan assets
• Oversight protection as plan fiduciary
• Custodian of assets
160
Years of Experience
(1863-2023)
$10.3 T
Assets under
Custody &
Administration
500+
115 Trust Clients
• Serves as record-keeper, consultant,
and central point of contact
• Sub-trust accounting
• Coordinates all agency services
• Monitors plan compliance
(IR
S/GASB/State Government Code)
• Processes contributions/disbursements
• Hands-on, dedicated support teams
500 K+
Plan Participants
City of pomona
5 Combined Miscellaneous
& Safety Groups *
Valuation as of
June 30, 2021
Valuation as of
June 30, 2022 Change
Actuarial Liability $765.4 M $791.9 M 3.5% ↑
Assets $838.0 M $743.5 M 11.3% ↓
Unfunded Liability -$72.6 M $48.4 M 166.7% ↑
Funded Ratio 109.5% 93.9% 14.2% ↓
Employer Contribution Amount $7.2 M $8.0 M 11.8% ↑(FY 22-23) (FY 23-24) Employer Contribution Amount – Projected * --- $14.2 M 76.3% ↑(FY 29-30) Pension Funding Status
As of June 30, 2022, the City of Pomona’s CalPERS pension plan is funded as follows:
* Data through 2029-30 from Agency’s latest CalPERS actuarial valuation.
City of pomona
6 • Since 2015, GASB 68 has required
dis
closing Net Pension Liability on
financial statements as a line item
on the balance sheet
• Before the concept of pension
pr
efunding, the only way to reduce
retirement system unfunded
liabilities was to send additional
contributions in excess of annual
required employer contributions
• Pension trust prefunding assets
c
an be transferred to the retirement
system at the Agency’s direction,
which can help offset future rate
increases (i.e., pension rate
stabilization)
Background – Pension
CalPERS Changes
CalPERS has announced changes directly
affecting unfunded liability amounts and
employer contributions:
Lowering of Discount Rate 1
CalPERS is lowering the
discount rate from 7.0% to 6.8%.
The impact will be reflected in the
June 30, 2021 valuation reports.
Shortened Amortization Period 2
New actuarial liabilities are
amortized over 20 years instead of
30, increasing required annual
employer contribution amounts*
7.0%
6.8%
30 years
20 years
2 5-year ramp up in payments beginning
FY 15-16 with full impact in FY 19/20.
1 Contributions from policy changes beginning
FY 23-24.
City of pomona
2 Subaccounts
OPEB and Pension assets are
individually sub-accounted,
and can be divided by dept.,
bargaining group, or cost center.
Assets in the PARS Section 115
Combination Trust can be used
to address unfunded liabilities.
Financial Stability
Allows separate investment
strategies for OPEB and
Pension subaccounts.
Flexible Investing
OPEB and Pension assets
aggregate and reach lower fees
on tiered schedule sooner –
saving money!
Economies-of-ScaleAnytime Access
Trust funds are available
anytime; OPEB for OPEB
and Pension for Pension.
No set-up costs, no minimum
annual contribution amounts,
and no fees until assets are added.
No Set Up Cost or Minimums
Retiree Medical Benefits
Prefund OPEB GASB 75
OPEB
Reimburse agency; or
Pay benefits provider
Pension Rate Stabilization Program
Prefund Pension (PRSP) GASB 68
Pension
Reimburse agency; or
Pay retirement system
Assets can be used to: Assets can be used to:
prefund
either or both
General Fund
PARS IRS -Approved Section 115 Trust
City of pomona
9 Strategy Equity (%) 1 Year 3 Years 5 Years 10 Years
Capital
Appreciation 65-85% 12.95% 4.96% 5.24% 6.84%
Balanced 50-70% 10.59% 3.28% 4.39% 5.76%
Moderate 40-60% 9.22% 2.11% 3.84% 5.06%
Moderately
Conservative 20-40% 6.24% -0.27% 2.50% 3.56%
Conservative 5-20% 3.88% -2.07% 1.53% 2.44%
HighMark Capital Management
ACTIVE PORTFOLIO RETURNS
* Past performance does not guarantee future results.
As of September 30, 2023
City of pomona
11 Why Prefund Pension Obligations?
Complete Local Control over Assets
Agency has complete control over assets, including contributions, disbursements and the timing, amount, and risk tolerance level of investments
1. Pension Rate Stabilization
Assets can be transferred to the retirement system at the Agency’s direction, potentially reducing/eliminating large fluctuations in employer contribution amounts
2. Rainy Day Fund
Emergency source of funds when employer revenues are strained in difficult budgetary or economic times
3. Diversification
Allows for investment flexibility and offers the potential for assets to earn greater returns than the general fund; spread the risk vs. sending additional money to CalPERS
4. City of pomona
10 Plan Set-Up Fee: Ongoing Fees:
None 0.35% for assets under $5 million
0.25% for assets $5-10 million
0.20% for assets $10-15 million
0.15% for assets $15-50 million
0.10% for assets over $50 million
Program Fees
Plan Set-Up Fee: Ongoing Fees:
None 0.25% for assets $0-10 million
0.20% for assets $10-15 million
0.15% for assets $15-50 million
0.10% for assets over $50 million
* PARS does not receive any compensation from the investments or any commissions, back-end loads, or any other forms of compensation. ** Subject to change due to rebalancing.
Trust Administration/Consulting Fees*
Discretionary Trustee/Investment Management Fees*
City of pomona
13 Contacts
Jennifer M eza, CEBS
Senior Manager, C onsulting
(800) 540-6369 x141
[email protected]