DATE: APRIL 12, 2022
DEPARTMENT: Department of Finance
FROM: Mark Roberts, Director of Finance
TITLE: APPROVAL OF UPDATED PENSION TRUST AGREEMENTS and related documents RECOMMENDED MOTION:
Staff recommends the City Council approve a resolution:
approving the updated Adoption Agreement For The Post-Employment Benefits Trust between the City and PFM Assets Management LLC (“PFM”); approving the updated Trust Administrative Services Agreement between the City and PFM; authorizing the City Manager, Director of Finance, and Assistant Finance Director to execute the agreements and other documents required to establish a pension trust and receive trust administration and trust asset investment services on behalf of the City.
EXECUTIVE SUMMARY:
This staff report and attached resolution request approval of the attached Adoption Agreement For The Post-Employment Benefits Trust, Trust Administrative Services Agreement, and related documents, to update the name of the trustee for the City’s pension trust, which will be established upon execution of the documents.
BACKGROUND:
On March 20, 2018, the City Council approved a resolution authorizing an adoption agreement to establish a Section 115 trust and an agreement with PFM to provide administrative services for the trust. In addition, $3 million was allocated to a reserve for the initial funding of the trust.
On March 8, 2022, staff informed the Council it had discovered the trust had not yet been established and funded and the agreement with PFM and other necessary documents had not been executed. During the March 8th meeting, staff also informed Council it was reviewing the trust adoption agreement, PFM Agreement, and related documents, to determine whether they require updating. Having completed its review, staff has determined the updates required to the agreement, although not substantive with respect to the establishment and administration of the trust or management of the investment of trust assets, require Council approval.
DISCUSSION:
The primary change necessary to the Adoption Agreement For The Post-Employment Benefits Trust (“Adoption Agreement”) and Trust Administrative Services Agreement (“Trust Services Agreement”) is updating of the name of the trustee of the trust from Wells Fargo to Principal Bank. Wells Fargo and PFM were the parties to the Post-Employment Benefits Trust Agreement (“Trust Agreement”) established on July 1, 2015 and adopted by Council on March 20, 2018. However, Principal Financial Group, Inc., of which Principal Bank is a wholly owned subsidiary, acquired the Wells Fargo Institutional Retirement and Trust business in July 2019 and completed integration of the in June of 2021. Although the Trust Services Agreement provides for a successor to Wells Fargo as trustee, the Adoption Agreement does not. Since neither of the initial agreements was executed, however, approval of those and related documents reflecting Principal as the trustee is necessary.
Other changes are also included but are non-substantive and/or inure to the benefit of the City, including reduction of the rates of compensation for trust administration services.
CEQA CONSIDERATION:
Not a Project. The City of Salinas has determined the proposed action is not a project as defined by the California Environmental Quality Act (CEQA) (CEQA Guidelines Section 15378).
STRATEGIC PLAN INITIATIVE:
Authorization of the updated Adoption Agreement and Trust Services Agreement achieves the Council 2022-2025 Strategic Goals of Effective Government.
DEPARTMENT COORDINATION:
The City Attorney’s Office assisted the Department of Finance staff in the preparation of this staff report and resolution with its review of the trust-related documents.
FISCAL AND SUSTAINABILITY IMPACT:
Establishment of a pension trust will play an important role in the City’s fiscal sustainability, including allowing the City to accumulate funds to reduce the City’s unfunded pension liability and mitigate the impact of fluctuations in future pension costs.
ATTACHMENTS:
Adoption Agreement for the Post-Employment Benefits Trust (City, PFM, and Principal) Post-Employment Benefits Trust Agreement (PFM and Principal) Administrative Services Agreement (City and PFM)
Account Acceptance Agreement (City and Principal)
Resolution
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