City of Rocklin ▎ 1
City of Rocklin
PARS Section 115 Pension Rate Stabilization Program - Council Presentation September 26, 2023
City of Rocklin ▎ 2
Pars 115 Trust Team
Trust Administrator & Consultant
Investment Manager
• One of the worlds most respected investment
management companies
• Independent low-cost investment advisor
• Offers index based mutual funds with low expense
ratios
• Fees decrease as assets across Vanguard strategies
grow
48 Years of Experience
(1975-2023)
$8.4 T
Assets under
Management
Trustee
• 5th largest commercial bank and one of the
nation’s largest trustees for Section 115 trusts
• Safeguard plan assets, oversight protection
• Plan fiduciary
• Custodian of assets
160
Years of Experience
(1863-2023)
$9.0 T
Assets under Trust
Custody
39 Years of Experience
(1984-2023)
2,000+
Plans under
Administration
1,000+
Public Agency
Clients
$7.0 B
Assets under
Administration
500 K+
Plan Participants
500+
115 Trust Clients
• Serves as record-keeper, consultant, and
central point of contact
• Sub-trust accounting
• Coordinates all agency services
• Monitors plan compliance
(IRS/GASB/State Government Code)
• Processes contributions/disbursements
• Hands-on, dedicated support teams
City of Rocklin ▎ 3
Subaccounts
Pension and OPEB 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 Pension and
OPEB subaccounts.
Flexible Investing
Pension and OPEB assets
aggregate and reach lower fees
on tiered schedule sooner –
saving money!
Economies-of-ScaleAnytime Access
Trust funds are available
anytime; pension for
pension and OPEB for OPEB
No setup costs, no minimum
annual contribution amounts,
and no fees until assets are added.
No Set Up Cost or Minimums
Pension Rate Stabilization Program
Prefund Pension (PRSP) GASB 68
Pension
Reimburse agency; or
Pay retirement system
Retiree Medical Benefits
Prefund OPEB GASB 75
OPEB
Reimburse agency; or
Pay benefits provider
Assets can be used to: Assets can be used to:
prefund
either or both
General Fund
PARS IRS -Approved Section 115 Trust
City of Rocklin ▎ 4
PARS sample Client list – PRSP (304)
CITIES & TOWNS (144)
Alameda
Angels Camp
Atherton
Atwater
Benicia
Brisbane
Burlingame
Capitola
Carmel
Colma
Cupertino
Daly City
Del Rey Oaks
Dublin
Emeryville
Fort Bragg
Gilroy
Grass Valley
Half Moon Bay
Healdsburg
Hercules
Ione
Lakeport
Lodi
Los Altos Hills
Merced
Modesto
Monterey
Moraga
Morgan Hill
Napa
Novato
Oakley
Oroville
Pacifica
Palo Alto
Piedmont
Pinole
Pittsburg
Pleasant Hill
Pleasanton
Redwood City
Richmond
Rio Vista
Ripon
Rohnert Park
Ross
San Anselmo
San Leandro
San Ramon
Santa Clara
Sausalito
Seaside
Sutter Creek
Tiburon
Union City
Vallejo
West Sacramento
Woodland
Woodside
Yountville
Yuba City
Updated September 2023
City of Rocklin ▎ 5
Vanguard Investment Options
Pre-Established
Investment Options
All strategies have been
designed specifically by
Vanguard for PARS Section
115 Trust Programs.
Economies-of-Scale
All plan assets are combined
for economies of scale, but
there is no cross sharing of
earnings or liabilities.
Low Expense Ratios
Strategies are comprised of
index-based, mutual funds
selected for their low expense
ratios.
Expected Returns
5-Year, 4.88%
10-Year, 4.62% | 30-year 4.52%
Expected Returns
5-Year, 5.48%
10-Year, 5.81% | 30-year, 6.56%
Expected Returns
5-Year, 5.40%
10-Year, 5.55% | 30-year, 6.01%
Expected Returns
5-Year, 5.49%
10-Year, 5.94% | 30-year, 6.90%
Expected Returns from Vanguard's
Capital Markets Model (VCMM) as of
June 30, 2023
Fixed Income
100%
Fixed Income Conservative
Balanced Growth
Equity
40%Fixed
Income
60%
Equity
60%
Fixed
Income
40%
Equity
75%
Fixed
Income
25%
City of Rocklin ▎ 6
Strategy Equity (%) 1 Year 3 Years 5 Years 10 Years
Growth 75% 10.76% 7.51% 6.76% 7.85%
Balanced 60% 8.65% 5.34% 5.78% 6.60%
Conservative 40% 5.98% 2.59% 4.21% 5.04%
Fixed Income 0% 0.19% -3.18% 0.74% 1.66%
Vanguard Investment Returns As of June 30, 2023
Past performance does not guarantee future results; Returns are net of the fund expenses, and gross of advisory fees; PARS is not licensed to provide and does not offer investment advice or recommendations of any kind; All investment decisions in the PARS Section 115 Trust Programs are made at the sole discretion of the Agency, with or without the assistance of the Agency’s selected investment advisors and/or managers.
City of Rocklin ▎ 7
Vanguard Program Fees
Ongoing Fees:
0.05% for assets $0-25 million
0.04% for assets $25-50 million
0.03% for assets over $50 million
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
Ongoing Fees:
0.07% for assets $0-50 million
0.04% for assets $50-150 million
0.03% for assets $150-250 million
0.01% for assets $250-500 million
0.005% for assets over $500 million
Trust Administration/Consulting Fees
Investment Management Fees
Directed Trustee Fees
The current total blended fee
for Vanguard investment
management services is 0.02%
* PARS does not receive any compensation from the investments or any commissions, back-end loads, or any other forms of compensation; Vanguard investment management fees are based on the total assets of all participants in the four strategies; U.S. Bank’s fee schedule is based on combined assets in each of the Vanguard strategies City of Rocklin ▎ 8
City of Rocklin Fees (based oN assets of $1.3M)
Fee as a Percentage (%) Fee as a Dollar Amount ($)
PARS Trust
Administration/Consulting 0.25% (25 bps) $3,250
Vanguard Investment Management 0.02% (2 bps) $260
U.S. Bank Directed Trustee** 0.035% (3.5 bps) $455
Total Annual Fees 0.305% (30.5 bps) $3,965
*Vanguard Fees are 0.02% (2 bps) based on pooled asset totals as of 8/31/23 **U.S. Bank Fees are based on the combined assets within each selected investment portfolio (currently ranging from 0.0325-0.050% with an average of 0.035%).
City of Rocklin ▎ 9
Steps to Implementation
1 City Council adopts resolution authorizing City to join PARS Combo Trust and appoints Plan Administrator (PA)
2 City sends signed copy of resolution to PARS
3 PARS sends set of signature-ready documents to City
4 PARS coordinates meeting with City to discuss investment options and select strategy 5 City signs documents and returns to PARS
6 PARS works with Trustee/U.S. Bank to establish account 7 PARS notifies City account is ready and includes Contribution Instructions 8 City makes Contribution using Transmittal Form
9 PARS conduct annual reviews (unless more frequently desired) City of Rocklin ▎ 10
Why PARS?
Experienced, Knowledgeable Provider
Section 115 Trust Pioneer with 19 years of
experience - 115 Trust services for prefunding
pension is our core business, unlike our competitors.
1 PLR (Private Letter Ruling)
PARS is one of only two 115 Trust providers with a
PLR for pension-prefunding and OPEB; others have
unsuccessfully applied for pension trust PLR.
7 Exceptional In-Person Service
No other provider offers the same level of
individualized, comprehensive administrative and
consultative services that reduce workload and
costs for the City.
3 Generous Reimbursement Option
The PARS Trusts allows reimbursements up to two
years; many others only allow one year.
9 No Termination/Transfer Restrictions
PARS only requires 30 days; others may require up to
150 days/Board Approval.
5 Peace of Mind
We offer mutual indemnification clause in
agreements, unlike many of our competitors.
4 Market Leader
304 client agencies utilizing the PARS pension
prefunding trust (approximately 90 for
competitor closest in size).
6 Most Flexible Investment Options
We offer four Vanguard diversified
investment strategies with the additional
option for customization.
8 Trusted Partners
PARS works with one of top ten largest
national CPA firm; others may work with
lesser-known partners.
10 Operates Separate & Apart From CalPERS
Provides maximum autonomy and
diversification of providers for local control.
2 City of Rocklin ▎ 11
Questions?
Rachael Sanders, CEBS
Vice President, Consulting
(800) 540-6369 x121
[email protected]