EXHIBIT A
CITY OF ST. HELENA | REQUEST FOR PROPOSALS | SECTION 115 TRUST FOR PENSION SERVICES PAGE 17
If Consultant, or any officer, employee, agent or subcontractor of Consultant, provides any information or work product in violation of this Agreement, then City shall have the right to reimbursement and indemnity from Consultant for any damages, costs and fees, including attorneys’ fees, caused by or incurred as a result of Consultant’s conduct.
Consultant shall promptly notify City should Consultant, its officers, employees, agents or subcontractors be served with any summons, complaint, subpoena, notice of deposition, request for documents, interrogatories, request for admissions or other discovery request, court order or subpoena from any party regarding this Agreement and the work performed thereunder. City retains the right, but has no obligation, to represent Consultant or be present at any deposition, hearing or similar proceeding. Consultant agrees to cooperate fully with City and to provide City with the opportunity to review any response to discovery requests provided by Consultant.
However, this right to review any such response does not imply or mean the right by City to control, direct, or rewrite such response.
SECTION 13 – SUSPENSION OF WORK
City may, at any time, by ten (10) days written notice suspend further performance by Consultant. All suspensions shall extend the time schedule for performance in a mutually satisfactory manner and Consultant shall be paid for Services performed and reimbursable expenses incurred prior to the suspension date.
SECTION 14 – COMPLIANCE WITH LAW
Consultant shall keep itself informed of and comply with all applicable federal, state and local laws, statutes, codes, ordinances, regulations and rules in effect during the term of this Agreement. Consultant shall obtain any and all licenses, permits and authorizations necessary to perform the Services set forth in this Agreement. Neither City, nor any elected or appointed boards, officers, officials, employees or agents of City, shall be liable, at law or in equity, as a result of any failure of Consultant to comply with this section.
SECTION 15 – COMPLIANCE WITH CIVIL RIGHTS
During the performance of this contract, Consultant agrees as follows:
Equal Employment Opportunity. In connection with the execution of this Agreement, Consultant shall not discriminate against any employee or applicant for employment because of race, religion, color, ancestry, age, sexual orientation, gender, gender identity and gender expression as protected categories specifically and expressively in that category, physical handicap, medical condition, marital status, sex, or national origin. Such actions shall include, but not be limited to, the following: employment, promotion, upgrading, demotion, or transfer; recruitment or recruitment advertising; layoff or termination; rate of pay or other forms of compensation; and selection for training including apprenticeship.
Nondiscrimination Civil Rights Act of l964. Consultant will comply with all federal regulations relative to nondiscrimination to federally-assisted programs.
Agenda Item #13.2.
EXHIBIT A
CITY OF ST. HELENA | REQUEST FOR PROPOSALS | SECTION 115 TRUST FOR PENSION SERVICES PAGE 18
Solicitations for Subcontractors including Procurement of Materials and Equipment. In all solicitations, either by competitive bidding or negotiations, made by Consultant for work to be performed under a subcontract, including procurement of materials or leases of equipment, each potential subcontractor, supplier, or lessor shall be notified by Consultant of Consultant’s obligations under this Agreement and the regulations relative to nondiscrimination.
SECTION 16 – COMPLIANCE WITH CALIFORNIA LABOR CODE
REQUIREMENTS
A. Consultant is aware of the requirements of California Labor Code Sections 1720 et seq. and 1770 et seq., which require the payment of prevailing wage rates and the performance of other requirements on certain “public works” and “maintenance” projects (“Prevailing Wage Laws”). If the services are being performed as part of an applicable “public works” or “maintenance” project, as defined by the Prevailing Wage Laws, and if the total compensation is $1,000 or more, Consultant agrees to fully comply with such Prevailing Wage Laws. Consultant shall defend, indemnify and hold the City, its officials, officers, employees and agents free and harmless from any claims, liabilities, costs, penalties or interest arising out of any failure or alleged failure to comply with the Prevailing Wage Laws. It shall be mandatory upon the Consultant and all subconsultants to comply with all California Labor Code provisions, which include but are not limited to prevailing wages (Labor Code Sections 1771, 1774 and 1775), employment of apprentices (Labor Code Section 1777.5), certified payroll records (Labor Code Sections 1771.4 and 1776), hours of labor (Labor Code Sections 1813 and 1815) and debarment of contractors and subcontractors (Labor Code Section 1777.1). The requirement to submit certified payroll records directly to the Labor Commissioner under Labor Code section 1771.4 shall not apply to work performed on a public works project that is exempt pursuant to the small project exemption specified in Labor Code Section 1771.4.
B. If the services are being performed as part of an applicable “public works” or “maintenance” project, then pursuant to Labor Code Sections 1725.5 and 1771.1, the Consultant and all subconsultants performing such services must be registered with the Department of Industrial Relations. Consultant shall maintain registration for the duration of the Project and require the same of any subconsultants, as applicable. Notwithstanding the foregoing, the contractor registration requirements mandated by Labor Code Sections 1725.5 and 1771.1 shall not apply to work performed on a public works project that is exempt pursuant to the small project exemption specified in Labor Code Sections 1725.5 and 1771.1.
C. This Agreement may also be subject to compliance monitoring and enforcement by the Department of Industrial Relations. It shall be Consultant’s sole responsibility to comply with all applicable registration and labor compliance requirements. Any stop orders issued by the Department of Industrial Relations against Consultant or any subcontractor that affect Consultant’s performance of services, including any delay, shall be Consultant’s sole responsibility. Any delay arising out of or resulting from such stop orders shall be considered Consultant caused delay and shall not be compensable by the City. Consultant shall defend, indemnify and hold the City, its officials, officers, employees and agents free and harmless from any claim or liability arising out of stop orders issued by the Department of Industrial Relations against Consultant or any subcontractor.
Agenda Item #13.2.
EXHIBIT A
CITY OF ST. HELENA | REQUEST FOR PROPOSALS | SECTION 115 TRUST FOR PENSION SERVICES PAGE 19
SECTION 17 – AUDIT AND INSPECTION OF RECORDS
A. Records of Consultant’s direct labor costs, payroll costs, and reimbursable expenses pertaining to this project covered by this Agreement will be kept on a generally recognized accounting basis and made available to City if and when required for a period of up to 3 years from the date of Consultant’s final invoice.
B. Consultant shall maintain all documents and records prepared by or furnished to Consultant during the course of performing the Services for at least three (3) years following completion of the Services. Such records include, but are not limited to, correspondence, internal memoranda, technical reports and investigations, calculations, books and accounts, accounting records documenting its work under its Agreement, and invoices, payrolls, records and all other data related to matters covered by this Agreement.
C. Consultant shall permit City to audit, examine and make copies, excerpts and transcripts from such records, and the Consultant shall in no event dispose of, destroy, alter, or mutilate said books, records, accounts, and data in any matter whatsoever for three (3) years after City makes the final or last payment or within three (3) years after any pending issues between City and Consultant with respect to this Agreement are closed, whichever is later.
SECTION 18 – LIMITATION OF LIABILITY
A. Consultant agrees that any liability of City arising in connection with this Agreement shall be limited exclusively to the City-entity identified as the “City” under this Contract. Under no circumstance shall any other City-entity be liable to Consultant under any theory, whether in contract, tort, or otherwise, and Consultant waives unconditionally any such claims. Consultant hereby waives and release other City-entities from any liability under this Agreement.
B. Notwithstanding any other provision of this Agreement, in no event shall City be liable, regardless of whether any claim is based on contract or tort, for any special, consequential, indirect or incidental damages, including, but not limited to, lost profits or revenue, arising out of or in connection with this Agreement or the Services performed hereunder.
SECTION 19 – COOPERATION BY CITY
All public information, data, reports, records, and maps as are existing and available to City as public records, and which are necessary for carrying out the work as outlined in the Exhibit A, “Scope of Services”, shall be furnished to Consultant in every reasonable way to facilitate, without undue delay, the work to be performed under this Agreement.
Agenda Item #13.2.
EXHIBIT A
CITY OF ST. HELENA | REQUEST FOR PROPOSALS | SECTION 115 TRUST FOR PENSION SERVICES PAGE 20
SECTION 20 – NOTICES
All notices required or permitted to be given under this Agreement shall be in writing and shall be personally delivered, sent by facsimile, email, or first-class mail, addressed as follows:
To City: City Manager
1088 College Avenue
St. Helena, California 94574
To Consultant:
Notice shall be deemed effective on the date personally delivered or transmitted by facsimile, email, or, if mailed, three (3) days after deposit in the custody of the U.S. Postal Service.
SECTION 21 – TERMINATION
City may terminate this Agreement, with or without cause, at any time by giving ten (10) days written notice of termination to Consultant. If such notice is given, Consultant shall cease immediately all work in progress.
If either Consultant or City fail to perform any material obligation under this Agreement, then, in addition to any other remedies, either Consultant, or City may terminate this Agreement immediately upon written notice.
Upon termination of this Agreement by either Consultant or City, all property belonging to City which is in Consultant’s possession shall be delivered to City. Consultant shall furnish to City a final invoice for work performed and expenses incurred by Consultant, prepared as set forth in this Agreement.
SECTION 22 – ATTORNEYS’ FEES
If litigation or other proceeding is required to enforce or interpret any provision of this Agreement, the prevailing party in such litigation or other proceeding shall be entitled to an award of reasonable attorneys’ fees, costs and expenses, in addition to any other relief to which it may be entitled. In addition, any legal fees, costs and expenses incurred to enforce the provisions of this Agreement shall be reimbursed to the prevailing party.
SECTION 23 – ENTIRE AGREEMENT
This Agreement, including the attached Exhibits, is the entire, complete, final and exclusive expression of the parties with respect to the matters addressed therein and supersedes all other agreements or understandings, whether oral or written, or entered into between Consultant and City prior to the execution of this Agreement. No statements, representations or other Agenda Item #13.2.
EXHIBIT A
CITY OF ST. HELENA | REQUEST FOR PROPOSALS | SECTION 115 TRUST FOR PENSION SERVICES PAGE 21
agreements, whether oral or written, made by any party which are not embodied herein shall be valid and binding unless in writing duly executed by the parties or their authorized representatives.
SECTION 24 – SUCCESSORS AND ASSIGNS
This Agreement shall be binding on the heirs, executors, administrators, successors and assigns of the parties. However, this Agreement shall not be assigned by Consultant without written consent of the City.
SECTION 25 – CONTINUITY OF PERSONNEL
Consultant shall make every reasonable effort to maintain the stability and continuity of Consultant’s staff assigned to perform the Services required under this Agreement. Consultant shall notify City of any changes in Consultant’s staff assigned to perform the Services required under this Agreement, prior to any such performance.
SECTION 26 – DEFAULT
In the event that Consultant is in default under the terms of this Agreement, the City shall not have any obligation or duty to continue compensating Consultant for any work performed after the date of default and may terminate this Agreement immediately by written notice to Consultant.
SECTION 27 – WAIVER
Waiver by any party to this Agreement of any term, condition, or covenant of this Agreement shall not constitute a waiver of any other term, condition, or covenant. Waiver by any party of any breach of the provisions of this Agreement shall not constitute a waiver of any other provision, or a waiver of any subsequent breach or violation of any provision of this Agreement.
Acceptance by City of any work or Services by Consultant shall not constitute a waiver of any of the provisions of this Agreement.
SECTION 28 – LAW TO GOVERN; VENUE
This Agreement shall be interpreted, construed and governed according to the laws of the State of California. In the event of litigation between the parties, venue in state trial courts shall lie exclusively in the County of Napa. In the event of litigation in a U.S. District Court, venue shall lie exclusively in the Northern District of California, in San Francisco.
SECTION 29 – SEVERABILITY
If any term, condition or covenant of this Agreement is declared or determined by any court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions of this Agreement shall not be affected thereby and the Agreement shall be read and construed without the invalid, void or unenforceable provision(s).
Agenda Item #13.2.
EXHIBIT A
CITY OF ST. HELENA | REQUEST FOR PROPOSALS | SECTION 115 TRUST FOR PENSION SERVICES PAGE 22
SECTION 30 – THIRD PARTY BENEFICIARIES
Consultant’s subconsultants shall agree to be bound to the terms of the Agreement to the extent of their scope of Services, including but not limited to, terms regarding indemnity and dispute resolution, and shall agree that City is deemed an express third-party beneficiary of their subconsultant agreements. Nothing contained in this Agreement, however, shall operate to confer such or similar rights or benefits on persons or entities not party to this Agreement.
SECTION 31 – STATUTES OF LIMITATION
As between the parties to this Agreement, any applicable statute of limitations for action arising out of, pertaining to, or relating to any act or failure to act in connection with this Agreement shall commence to run on the date of City’s issuance of the final Certificate for Payment, or termination of this Agreement, whichever is earlier, except for latent defects and/or deficiencies, for which the applicable statute of limitation shall begin to run upon discovery of the defect and/or deficiency and its cause.
SECTION 32 – SPECIAL PROVISIONS
This Agreement is subject to the following special provisions: none.
IN WITNESS WHEREOF, the parties hereto have accepted, made, and executed this Agreement upon the terms, conditions, and provisions above stated, the day and year first above written.
Consultant: City:
By: ________________________________ By: ________________________ Name: Name: Anil Comelo
Title: Title: City Manager
Approved as to Form:
By: _________________________________
Name: Ethan Walsh
Title: City Attorney
Agenda Item #13.2.
City of St. Helena
Subject: Establishment, Administration and Management
Services of a Section 115 Trust for Pension
Proposer: PARS (Public Agency Retirement Services)
Date Due: April 29, 2024
Agenda Item #13.2.
Table of Contents
1 3
5 11
24 26
28 PART 1: Cover Letter & Executive Summary
PART 2: Firm Qualifications and Experience
PART 3: Consultant Identification and Team
PART 4: Proposed Project Workplan
PART 5: Total Cost and Hourly Rate
6: Considerations
7: Additional Information
Appendix:
Private Letter Ruling (PLR)
Client List
Staff Reports
Net Returns Comparison
Investment Portfolios
Agenda Item #13.2.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
PARS | Public Agency Retirement Services Page 1
PART 1. EXECUTIVE SUMMARY
PARS (Public Agency Retirement Services), in collaboration with U.S. Bank and PFM Asset Management (PFMAM) propose a comprehensive solution for the extablishment, administration and management services for the City of St. Helena’s Internal Revenue Code (IRC) Section 115 Pension Prefunding Trust needs. Utilizing PARS’ industryleading Pension Rate Stabilization Program (PRSP), the City can prefund its pension liabilities into an IRS-approved Section 115 trust which provides economies of scale for investment, administrative, and trustee services, while at the same time minimizing staff burdens and costs.
We proudly offer an IRS-approved irrevocable funding vehicle to protect the City’s assets and implement the Section 115 trust program within 90 days of contract execution. In partnership with City staff, our team will help you develop an Investment Policy for the Section 115 Trust Pension Fund and prepare asset allocation guidelines for the trust based on the City’s investment objectives and risk tolerance, and in compliance with the City’s Investment Policy. In addition, PARS will:
• Provide a full-service program that includes trust administration, trustee and investment management services.
• Provide assurance of portfolio compliance with applicable policies and laws. • Provide education and presentations regarding the pension trust program to City staff and Council. • Provide quarterly and annual comparative performance analyses and evaluation reports of the investments of the trust.
• Coordinate all contributions into the trust and process any requests for appropriate distribution.
PARS Experience
For more than four decades, PARS has designed and administered niche retirement trust and plan solutions exclusively for local governments. This is our core business and where we dedicate our resources and expertise.
Our objective is to offer local governments the control and flexibility to meet their individual needs while administering programs that have saved millions of dollars in public resources. Since inception in 1984, PARS has provided thousands of public agencies with superior retirement benefits while reducing operating costs and administrative burdens. Our continual corporate growth and standard of high-quality service has led to the following key accomplishments:
• Pioneer and market leading Section 115 trust provider with over 537 participating agencies in the nation
• Development of the first multiple employer Section 115 Trust Program for pension prefunding in California and the nation (2015)
• Vast experience providing integrated retirement trust and plan solutions to agencies • Largest Section 115 Trust provider for pension and OPEB liabilities in California and nationwide • Only one of two providers with Private Letter Ruling (PLR) for pension-prefunding A full copy of the PARS Private Letter Ruling (PLR) can be viewed in the Appendix under “Private Letter Ruling.”
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
PARS | Public Agency Retirement Services Page 2
Turnkey Solutions Provider
PARS has developed a unique, comprehensive program that combines the following services:
• Trust administration and recordkeeping
• Signature-ready trust documents
• Trustee and custodial services
• Fiduciary investment advisory and management services • State and federal compliance monitoring
• Annual audits and GASB 67/68 reporting assistance
• In-person, individualized services no matter size of assets or agency The Best Approach for the City
As the post-employment benefits trust pioneer, we bring to the City the following key advantages:
• Local control, separate and apart from CalPERS, provides the City with greater diversification and autonomy of investments and providers.
• 40-year veteran in the administration of retirement plans and trusts for over 1,000 public agency clients and 2,000 plans.
• Flexible, discretionary investment options designed by PFMAM specifically for prefunding pension and liabilities.
o The City can select from five model portfolios as well as a customized option, all of which can be actively or passively managed.
• Fiduciary protection from U.S. Bank, 5th largest bank and dominant Section 115 trustee in the nation. • IRS-approved trust with the first favorable Private Letter Ruling (PLR) which provides immediate and guaranteed tax-exempt status on investment earnings to the City. IRS is no longer issuing PLRs. • Strong, historical investment returns that are GIPS-compliant. o We provide true, historical 1, 3, and 5-year return information, not hypothetical, composite, “what-if” scenarios.
• No startup costs, minimum contribution requirements, transaction/trading fees, or ongoing compliance costs —there is no red tape or fees to enter or leave the trust. • Hands-on, individualized attention and advisory services from a highly experienced PARS/PFMAM service team with a long, successful track record working with California cities like City of St. Helena.
Listed below are the primary service team members responsible for managing the City’s account:
o Ryan Nicasio, Senior Vice President, PARS
o Mitch Barker, Senior Consultant, PARS
o Ashley Baires, Client Service Coordinator, PARS
o Phillip Muschetto, Senior Vice President, PARS
o Dennis Mullins, Senior Institutional Client Portfolio Manager, PFMAM o Ryan Maxey, Vice President, Relationship Manager, U.S. Bank Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
PARS | Public Agency Retirement Services Page 3
PART 2. FIRM QUALIFICATIONS AND EXPERIENCE
The proposal should state the size of the Firm, the size of the Firm’s staff, the location of the office from which the work on this engagement is to be performed.
Your account will be serviced by our consultant team based out of Orange County, California. PARS currently consists of 65 dedicated individuals who are trained and educated to work on our client’s IRS approved Section 115 trusts. Our highly qualified team proudly meets the requirements specified in this document and ensures consistency of service throughout your relationship with us. Should a member of the designated team change for any reason, we will notify you of written approval – per your request.
PARS Physical Address: 4350 Von Karman Ave, Suite 100
Newport Beach, CA 92660
For the Firm’s office assigned responsibility for the Section 115 Trust for Pension Services, list the most significant engagements (maximum of 5) performed in the last five (5) years that are similar in organizational type, size and complexity to the engagement described in this request for proposal. These engagements should show experience with local governments establishing, administering, and management services of a Section 115 Trust for Pension. Indicate the scope of work, date engagement partners, total hours, and the name and telephone number of the principal client contact and, if available, a link to the final published report.
The following are significant engagements of which PARS currently provides Section 115 pension and OPEB prefunding trust services.
Reference Contact Services Provided
Napa County
1195 Third Street
Napa, CA 94559
Tracy Schulze
Auditor & Controller
(707) 299-1733
[email protected]
• Trust administration, trustee,
investment management, reporting,
compliance monitoring, document
management and consulting services
for the County’s PARS Pension and
OPEB account.
• Total Hours: N/A
• Date of Engagement: October 30,
2018 - current
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
PARS | Public Agency Retirement Services Page 4
Town of Yountville
6550 Yount Street
Yountville, CA 94599
Celia King
Finance Director
(707) 944-8851
[email protected]
• Trust administration, trustee,
investment management, reporting,
compliance monitoring, document
management and consulting services
for the Town’s PARS Pension and
OPEB account.
• Total Hours: N/A
• Date of Engagement: December 5,
2017 – current
City of Fairfield
1000 Webster Street
Fairfield, CA 94533
David Gassaway
City Manager
(707) 428-7400
[email protected]
• Trust administration, trustee,
investment management, reporting,
compliance monitoring, document
management and consulting services
for the City’s PARS Pension account.
• Total Hours: N/A
• Date of Engagement: May 1, 2002 -
current
City of Healdsburg
401 Grove Street
Healdsburg, CA 95448
Andrew Sturmfels
Assistant City Manager
(707) 431-3570
[email protected]
• Trust administration, trustee,
investment management, reporting,
compliance monitoring, document
management and consulting services
for the City’s PARS Pension account.
• Total Hours: N/A
• Date of Engagement: July 15, 2017 -
current
Town of Tiburon
1505 Tiburon Blvd
Tiburon, CA 94920
Greg Chanis
Town Manager
(415) 435-7373
[email protected]
• Trust administration, trustee,
investment management, reporting,
compliance monitoring, document
management and consulting services
for the Town’s PARS Pension and
OPEB account.
• Total Hours: N/A
• Date of Engagement: May 4, 2016 -
current
A full PARS Section 115 trust client list can be viewed in the Appendix under “Client List.” A copy of the staff reports from each of the agencies can be viewed in the Appendix under “Staff Reports.”
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
PARS | Public Agency Retirement Services Page 5
PART 3. CONSULTANT IDENTIFICATION AND TEAM
The Firm shall identify the principal supervisory and management staff, including engagement partners, managers, other supervisors, and specialists, who would be assigned to the rate study.
PARS places a heavy emphasis on strong customer service and will dedicate a team of individuals to the ongoing administration and management of the City’s trust account. Ryan Nicasio will lead the following individuals who will serve as the primary consultant team members to the City. This team will be supported by a larger group working behind the scenes at PARS, PFMAM and U.S. Bank corporate offices and headquarters.
Ryan Nicasio, Senior Vice President, PARS
Role:
As Senior Vice President, Ryan consults with public sector entities of various markets including municipalities, counties, education and special districts.
Experience:
With over 25 years of experience at PARS, Ryan also manages the Plan Compliance, Plan Implementation, and Analysis Divisions for the company. His experience with the complexities of the accounting and valuation processes and overall experience in the retirement industry carry over to his consulting role with clients. Ryan specializes in being a trusted sales consultant in the various markets he serves and is also a recognized speaker at various conferences and tradeshows.
Education/Credentials:
Ryan holds a Bachelor of Arts (BA) degree in Economics with a minor in Mathematics from the University of California, San Diego. In addition, Ryan achieved a Certified Employee Benefits Specialist (CEBS) designation from the International Foundation of Employee Benefits and the Wharton School of Business at the University of Pennsylvania.
Mitch Barker, Senior Consultant, PARS
Role:
As Senior Consultant, Mitch is an integral part of the consulting team. His primary area of focus is providing 115 trust consulting to California cities, counties and special district markets. He will work in conjunction with Ryan to ensure the highest level of service is provided to the City.
Experience:
In his previous role as Executive Vice President with almost 20 years of experience at PARS, Mitch oversaw the company’s Consulting Division and was a lead consultant in the California and Texas municipal markets. Mitch helped develop our successful Section 115 Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
PARS | Public Agency Retirement Services Page 6
Trust for prefunding pension/OPEB and has worked with more than 150 agency clients to set up their pension/OPEB trust accounts. In his current role as Senior Consultant, Mitch continues to be a key contact for many of his municipal clients and lends his expertise to clients, staff and our financial partners.
Mitch’s knowledge of retirement plans, healthcare and public sector financial management strategies has helped him structure plans that save public agencies money and meet their long-term goals of lowering unfunded liabilities.
Education/Credentials:
Mitch holds a Bachelor of Science (BS) in Biomedical Sciences from Texas A&M University.
Ashley Baires, Client Services Coordinator, PARS
Role:
As Client Services Coordinator, Ashley oversees the building and retaining of excellent relationships with existing clients and cultivating relationships with prospective clients. She will work closely with your staff to develop ongoing reporting, training and provide any additional support you may require.
Experience:
Ashley has over one year of experience working with various cities and other public entities in PARS’ Client Services Department and over four years of experience in local government.
She has a strong understanding of post-employment benefits trusts, defined benefits, and defined contribution programs. Ashley serves as the primary Client Services Coordinator to over 150 clients throughout California. Ashley has participated in numerous conferences and benefits fairs across California and takes these opportunities to service clients and build relationships.
Education/Credentials:
Ashley holds a Bachelor of Science (BS) degree in Health Science from California State Univeristy, Fullerton.
Phillip Muschetto, Senior Vice President, Plan Accounting, PARS Role:
As Vice President of Plan Accounting, Phillip is responsible for monitoring all contributions and distributions. He performs periodic accounting and reporting for the City’s 115 Trust account and oversees the annual trust wide audit performed on the PARS Trust.
Experience:
Phillip joined PARS 18 years ago and is currently responsible for updating and allocating monthly transactions within the PARS database to more than 1,000 plans. He oversees the reconciliation of all contributions, distributions, earnings, and expenses.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
PARS | Public Agency Retirement Services Page 7
Education/Credentials:
Phillip has a bachelor’s degree in finance from California State University, Long Beach, and a master’s degree in business administration with an emphasis in Accounting from National University.
Dennis Mullins, CFA, Senior Institutional Client Portfolio Manager, PFMAM Role:
Serving PARS Section 115 trust clients for a decade, Dennis works directly with local governments and their staff as a Senior Portfolio Manager. Dennis currently manages a team that oversees investment services for all U.S. Bank-PARS clients.
Experience:
Dennis is a senior portfolio manager for PFMAM’s OCIO Team. He is responsible for providing customized investment solutions, making use of strategic and tactical asset allocation, income, and growth strategies, including equities, fixed income, commodities, and real estate, using both traditional and alternative investments. Dennis joined PFMAM effective July 1, 2023, as part of the consolidation of the U.S. Bank institutional asset management group and PFMAM.
Dennis has worked in the financial services industry for over 30 years. Prior to joining PFMAM, he worked at U.S. Bank for 12 years. In his role at U.S. Bank, Dennis had extensive experience working alongside PARS with their clients.
Education/Credentials:
Dennis has a bachelor’s degree in accounting from Wright State University. He is also licensed as a Chartered Financial Analyst (CFA).
Ryan Maxey, Vice President, Relationship Manager, U.S. Bank Role:
Ryan serves as a relationship manager for a select group of Institutional Trust and Custody Division clients, including PARS. Ryan is responsible for overseeing complex relationships to ensure each PARS client’s unique needs are met. He works with various client types including government entities, corporations, foundations, endowments, and insurance companies.
Experience:
He joined U.S. Bank in 2012 after working for a number of years at Union Bank and brings more than 20 years of experience to his clients.
Education/Credentials:
Ryan holds a bachelor’s degree in Business Administration from Eastern Oregon University.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
PARS | Public Agency Retirement Services Page 8
The Firm should also provide information on direct Section 115 Trust for Pension services experience, including the scope of services requested by the City,
Pension Services Experience and Scope of Services
As a pioneer and leading provider of the Pension Rate Stabilization Program and other 115 Trust services, PARS has significant expertise in the technical and management requirements of trust administration. The City’s lead PARS consultant, Ryan Nicasio, will oversee the contract process and administration of the trust account and provide the following services:
• Provide sample staff report(s) to relieve agency burden. • Analyze and review various funding options.
• Assist the City in running various funding scenarios, factoring in considerations such as contribution amount(s), time horizon, anticipated investment returns, expected withdrawals, etc. • Assist with developing and/or modifying funding policies. • PARS has a database of “funding policy” examples from hundreds of member agencies and will walk the City through a variety of strategies for consideration. • After reviewing funding strategies, PARS will share detailed staff reports that align with the City of St.
Helena’s objectives, so that the City may build upon other agencies’ policies. • PARS may also provide examples of Council presentations detailing funding/withdrawal plans. • Analysis and discussion of actuarial issues and valuations. • Annual updates of the projected City’s CalPERS future employer contribution rates and funding status to help aid discussion of timing of contributions/withdrawals. • Will similarly discuss any changes to GASB, or other reporting changes. • Development of materials and presentations to assist the City with general education, funding options and policies, etc.
• On-site reviews to discuss funding modifications and investment strategies based on changing program, and/or budgetary circumstances.
• Discussion of plan and trust design options
o Example, if the City finds value in sub-accounting for different employee groups, cost centers, etc.
PARS (trust administrator), U.S. Bank (trustee), and PFMAM (investment advisor/manager) will work together to provide the City with Section 115 pension trust administration and investment management services, as identified in the RFP including:
Offer an IRS-approved irrevocable funding vehicle to protect the City’s assets.
Implement the Trust program within 90 days of executing contracts: PARS will provide signature ready implementation documents which enable implementation to be completed within 5-7 business days of executed plan documents received in good order by PARS.
In partnership with City staff, develop an Investment Policy for the Section 115 Pension Trust Fund and prepare asset allocation guidelines for the trust based on the City’s investment objectives and risk tolerance, and in compliance with the City’s Investment Policy Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
PARS | Public Agency Retirement Services Page 9
The construction of a City’s investment policy statement (IPS) varies depending on each client’s needs.
Dennis Mullins, the City’s assigned portfolio manager, will provide an IPS specific to the City’s time horizon, risk tolerance level, and liquidity needs; the IPS serves as the groundwork for all investment decisions moving forward. Dennis will also work with the City to develop an asset strategy that will meet the City’s tolerance and risk levels, while also reaching the investment goals.
Provide a full-service program that includes trust administration, trustee, and investment management services.
Provide assurance of portfolio compliance with applicable policies and laws. PARS has an in-house department dedicated to monitoring major changes to state law, (such as PEPRA) and how it impacts our clients/plan design features.
Provide education and presentations regarding the pension trust program to City staff and the City Council: PARS will meet with City Staff as needed to provide education and presentations regarding the pension trust program.
Provide quarterly and annual comparative performance analyses and evaluation reports of the investments of the trust.
Coordinate all contributions into the trust and process any requests for appropriate distribution.
The Firm should also provide information on each person, and information on relevant continuing professional education for the past three (3) years and membership in professional organizations relevant to the performance of this service.
Please refer to the beginning of PART 3 for individual team member resumes.
PARS, U.S. Bank and PFMAM all take ongoing education, industry-relevant and professional organization training membership very seriously. Continuous education, industry publications, professional associations, online resources, internal training programs, networking at conferences, maintaining CEBS certifications and designations and research and analysis are a few ways we do this.
Together our firms invest in continuous training and development programs to upskill and reskill staff members throughout the agreement term. This ensures that they stay abreast of industry developments and maintain high-quality performance. PARS maintains an extremely low turnover rate, so that you will benefit from having the same staff overtime.
In addition to a rigorous training and development program, we participate in regular monitoring and reviews and employ feedback mechanisms both for internal communications and for client-facing external communications.
Ryan Nicasio earned his Certified Employee Benefit Specialist (CEBS) accreditation from the Wharton School of Business at the University of Pennsylvania after starting his career with PARS. He attends regular conferences and sessions from associations such as the League of California Cities, Government Finance Officers Association, International City/County Management Association, and the California Society of Municipal Finance Officers to understand the needs of California cities. He attends/watches regular City Council meetings for some of the largest pension plans to understand the challenges faced by governmental agencies. He sits on committees, seminars and special presentations that discuss updates on local governments. To stay apprised of relevant local government issues, Ryan regularly receives newsletters from private and public external organizations, as well as from PARS’ in-house Public Affairs team that tracks essential industry updates. In addition, PARS training is Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
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reevaluated on a yearly basis to ensure he is attuned to the latest matters regarding government agencies.
The Firm should also indicate how the quality of staff over the term of the agreement will be assured.
The quality of staff over the term of the agreement will be assured by our rigorous training, ongoing performance reviews and professional development opportunities. We find it is crucial to the success of our clients that we have strategies in place for recruiting and retaining the most talented staff. Our senior professionals represent hundreds of years of experience.
Their combined energy brings to your plan familiarity with similar projects and a depth of knowledge when faced with a new challenge. This valuable insight helps to ensure the plan is executed smoothly. Our long-term employees provide stability and consistency. The continuity this provides minimizes any disruptions of service to you.
Our staff is also very accessible to you. The City staff will have cell phone and office contact information for both Ryan and Ashley. You will be notified in writing if any member of your core team changes.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
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PART 4. PROPOSED PROJECT WORKPLAN
1. Provide a plan as to how you will administer the requested services outlined in this RFP.
PARS has a detailed understanding of the technical and management requirements of the trust. Below is a list of trust administration, trustee and investment management services that are provided as part of the PARS PRSP, which meet all the services outlined in the RFP’s required scope of services. Please note there are no additional costs for any of these services.
Trust Administration (PARS)
PARS will provide the City with a full-service, collaborative approach to help address your long-term pension liabilities. We will work in close conjunction with your staff to implement a program that meets the City’s unique needs. PARS takes pride in our hands-on approach that has proven successful for four decades.
As the largest and longest serving trust administrator for pension prefunding trusts in California and the nation, we will bring our unmatched expertise to the City. As our core business is focused on retirement trusts for local governments, the City will receive support from a service team that understands your long-term goals and needs.
Our full-service program is designed for ease of administration and to limit the workload of staff, with the following services being provided:
• Signature-ready implementation documents which enable implementation to be completed within 5-7 business days of executed plan documents being received by PARS. • Ongoing document management and compliance monitoring in conjunction with PARS attorneys, Pillsbury Winthrop Shaw Pittman LLC.
• Maintenance of detailed accounting records, including any sub-accounting, which includes individual recordkeeping of the City’s contributions, earnings, and assets. • Reconciliation of contributions to the trust account. • Coordination of distributions from the City’s trust account, which includes receiving distribution documentation and directing the trustee to make distributions. • Monthly, quarterly, and annual reporting to the City including online portal and reporting and any customized reports as requested.
• All necessary forms, handbooks, training, and technical support. • Administrative training meeting at implementation as well as ongoing training as necessary. • Onsite client service reviews to ensure the City’s ongoing satisfaction with the program. • Participation at meetings and assistance in education/presentation preparation for City’s Council or staff when requested.
• Attendance at City’s Council meetings when contract is scheduled for approval and for ongoing updates of the plan.
• Coordination of annual trust-wide audit.
• Preparation and submission of documents as required by the City’s auditors for GASB 67/68 reporting.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
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U.S. Bank National Association
U.S. Bank National Association (U.S. Bank) will serve in a dual capacity for the City’s engagement as: 1) investment advisor and manager (with PFMAM serving as the subadvisor for this account), and 2) trustee and custodian to reduce investment and trustee fiduciary risks and burdens for the City. 1 On January 1, 2024, HighMark Capital Management, Inc., (“HighMark”) consolidated its advisory and subadvisory accounts under PFMAM, a U.S. Bank affiliate. This change was the result of an evaluation of the optimal and most efficient ways to integrate each advisory business to serve institutional clients following U.S. Bancorp’s acquisition of HighMark’s parent company, MUFG Union Bank, National Association December 1, 2022. PFMAM is a registered investment adviser with more than 40 years of investment advisory experience in advising public and non-profit sector institutions with $176.3 billion in total assets under management, including $27.6 billion in discretionary multi-asset class portfolios (as of December 31, 2023). This transition joins the talents and resources of both HighMark and PFMAM to provide asset management services to clients. PFMAM brings to the City joint fiduciary oversight, access to institutional third-party investment strategies across multiple asset classes, and the efficient and timely execution of investment ideas.
U.S. Bank will serve as the trustee and custodian to the assets. Established in 1863, U.S. Bank is the fifth largest commercial bank in the country.2 U.S. Bank has offices throughout the nation, including many in California. This division, which provides advisory, trustee, and investment management services to PARS clients, prides itself on the following qualifications:3
• Trustee for 1,300+ PARS clients including all Section 115 trust clients. U.S. Bank has been serving as trustee/custodian for PARS Section 115 trusts since 2004 • Sixth largest custodian in the United States with more than 5,900 IT&C clients in 25 locations • Serves 640 Section 115 Trust clients nationally
• Provides trust and investment services to over 1,800 government clients • Over 125 years in institutional trust and custody business • Has provided investment management and advisory services since 1914 • One of the largest trustees of Section 115 trust assets in the country—market value of over $10 billion
• Manages over $450 billion in institutional client assets U.S. Bank first began providing trustee/investment services for Section 115 Trusts in 2004 when it took on a large school board association trust with PARS as the administrator. 1 Investment advisor and management services provided by PFMAM, and trustee and custodian provided by U.S. Bank, are pursuant to separate agreements with separate fees.
2 As of December 31, 2023, as provided by the Federal Reserve: https://www.federalreserve.gov/releases/lbr/current/ 3 Source: GCTSBI stats book on Tableau. All statistical data as of April 15, 2024.
Agenda Item #13.2.
City of St. Helena
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PFMAM
U.S. Bank’s investment management subadvisor for the PARS relationship, PFMAM, is a leading provider of independent investment advisory services to public entities and other institutional investors with $25.2 billion in discretionary multi-asset class assets as of September 30, 2023.1 Of that amount, PFMAM manages $18.2 billion in assets for public agencies.
PFMAM’s predecessor firm was founded in 1978 to provide independent financial advisory services to the public sector and began providing investment advisory services to tax-exempt clients in 1980. PFMAM was created in 2001 as the legal entity through which it continued to provide investment advisory services. In 2003, their legacy firm acquired Spagnola-Cosack, Inc., a multi-asset class investment consulting firm co-founded in 1992 by Managing Director John Spagnola. This acquisition expanded their service offering to provide independent investment services to public and multi-employer pension plans, endowments and foundations (“E&Fs"), other post-employment benefit (“OPEB”) trusts and other multi-asset class portfolios. Along with their legacy firm, PFMAM have been advising public plans since 1992.2 In December 2021, PFMAM was purchased by U.S. Bancorp Asset Management (“USBAM”), a subsidiary of U.S.
Bank National Association ("U.S. Bank"). PFMAM is a direct subsidiary of USBAM, which is a direct subsidiary of U.S. Bank. USBAM and U.S. Bank are, respectively, indirect and direct subsidiaries of U.S. Bancorp. By becoming a division of USBAM, PFMAM retains a certain level of autonomy as an independent registered investment advisor and provides new opportunities for clients through a greater level of scale in resources, access to capital and the broad array of U.S. Bank’s products and services, and technology to advance the services it provides to clients.
The U.S. Bank Annual Report includes in-depth information on all affiliations and subsidiaries of U.S. Bank and can be found at the following link: https://ir.usbank.com/investorrelations/financial-information/annual-reports.
In addition to the acquisition of PFMAM, U.S. Bancorp also acquired MUFG Union Bank, National Association (MUB), which included the acquisition of MUB’s subsidiary, HighMark Capital Management, Inc. As part of U.S.
Bank's goal to strengthen resources and streamline the OCIO offerings, HighMark assets and institutional asset management personnel transitioned to PFMAM as of January 1, 2024. 1 Source: “Largest Money Managers: 2022.” Pensions & Investments, June 12, 2023. Money Manager data as of December 31,2022.
2 Public retirement plan services provided by Spagnola-Cosack, Inc. prior to acquisition by PFMAM.
2. Describe the firm’s approach and timeframes to completing the services described in Section III. Scope of Services.
Approach
PARS’ proposed trust solution for the City’s pension prefunding needs is a Section 115, IRS-approved irrevocable multiple employer trust, which brings investment and administrative economies of scale to the City and our other clients. The program is formulated as an aggregation of individual employer plans, which means there is no sharing of assets or risks. This model follows the same concept that PARS has utilized successfully for its retirement plan trust clients since 1990 and is currently being used by some of the largest cities, special Agenda Item #13.2.
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authorities/districts, counties, and school districts in the country. The following describes how we will administer the defined services:
• Consulting – Responsible for marketing, consulting, analysis, and actuarial coordination work. Lead consultants are focused on different types of public agencies and plans, and on average have over 15 years of experience.
• Client Services – Responsible for ongoing account management and supporting lead consultants. Client Services Coordinators help coordinate meetings and reviews, monitor contributions/distributions, and provide ongoing technical support to City staff.
• Accounting and Administration – Responsible for accounting, sub-accounting, recordkeeping, and reporting of all trust and plan accounts and providing monthly and annual statements. This division also handles maintenance and operation of recordkeeping, computer, and software systems, as well as integration with the trustee and the annual trust-wide audit. • Implementation/Compliance – Responsible for trust/plan implementation, document preparation, IRS interface, working with PARS’ attorneys, and overseeing state and federal trust/plan compliance. • Public Affairs – Responsible for monitoring state and federal legislative and regulatory developments that impact our Section 115 trusts.
• Corporate – The President and Chief Financial Officer run this division and provide oversight for corporate and operational functions of the entire company.
Timeframe
The PARS pension prefunding trust program utilizes a streamlined implementation process and “ready-to-use” trust which is designed to minimize the workload of City staff from the beginning. PARS provides signature ready documents created through a robust legal document development process that have been carefully reviewed by numerous law firms, including PARS’ attorneys, Pillsbury Winthrop Shaw Pittman LLC. Our services were designed to reduce costs to clients and/or their legal counsels. We have experience helping clients successfully implement and contribute funds in a short timeframe. For instance, once the trust has been adopted and plan documents have been returned to PARS in good order, the City’s account can be set up to receive contributions within 5-7 business days.
For the City to implement its Section 115 trust account with PARS, the following basic steps will need to be taken:
• The City selects PARS as its provider
• PARS provides City with a sample staff report, sample resolution, and draft Administrative Services Agreement to adopt the Trust
• PARS and City staff discuss implementation (to be executed within 30 days), review goals, finalize specific plan provisions, and negotiate Administrative Services Agreement • The Council formally adopts a resolution to join the PARS Public Agencies Post-Employment Benefits Trust, executes Administrative Services Agreement and appoints a position of employment to serve as the Trust's Plan Administrator via resolution
• Once PARS receives a signed copy of the resolution and Administrative Services Agreement, PARS provides the City with signature-ready trust program documents for review and execution by the appointed Plan Administrator
Agenda Item #13.2.
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Establishment, Administration and Management Services of a Section 115 Trust for Pension
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• PARS service team members meet with City staff to discuss all aspects of the trust (including investment goals/objectives) and provide any necessary training to your technical/administrative staff • The Plan Administrator appointed by the City signs the required documents before returning them to PARS
• U.S. Bank sets up the City’s account within receipt of fully executed documents • PARS provides contribution instructions to the City, and the City can make its first contribution at timing of its discretion
• PARS continues to assist with GASB 67 and 68 statements and reporting • PARS provides comparative analysis reports as requested by the City
3. Describe the firm’s approach to onboarding and transitioning a new client.
PARS embraces a hands-on onboarding process and will work closely with City staff from the onset to analyze and implement a trust program that will help the City address its rising pension liabilities.
Comprehensive implementation assistance provided by Ryan Nicasio and team includes conducting in-person and/or virtual meetings with City staff as needed to ensure proper account setup. Ryan will review with the City the recent CalPERS actuarial data to gain a thorough understanding of the City of St. Helena’s current and future liabilities.
If selected as the City’s 115 trust provider, PARS will prepare all necessary documents for the adoption of the trust and provide City staff with the supporting sample Staff Reports, Resolution, and Administrative Services Agreement. Once PARS receives a copy of the signed Resolution, our Plan Implementation Team will then followup with all signature-ready documents and will be happy to walk the City through those documents and/or address any questions.
Prior to adoption of the trust, PARS can assist with communication to the Council regarding the trust's funding and investment program. If needed, Ryan and the PARS team is available to meet directly with the City Council and can help prepare materials/presentations to provide to Council.
Upon execution of the legal documents, PARS will work directly with the Trustee, U.S. Bank, to ensure prompt set-up of the account. Once the account is open and able to accept contributions, the PARS team will then send contribution instructions and an Administrator’s Handbook and will facilitate a meeting with staff for review.
Beyond these initial set-up stages, the PARS team will continue to provide ongoing support with analysis, reporting, accounting, compliance monitoring, document management, actuarial and audit support, as well as trustee and custodial services.
4. Include thorough discussions of methodologies you believe are essential to accomplishing this project including your firm’s philosophy, including your approach to managing Section 115 trust programs.
PARS will work closely with City staff from the outset to analyze and implement a trust program that will help the City address its rising pension liabilities and OPEB liabilities. Lead Consultant, Ryan, will oversee implementation and administration of the City’s trust account and can provide the following consulting services from the initial program development phase onward:
• “Ready-to-use” trust and trust documents
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
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• Development of sample staff report(s) to relieve agency burden • Analysis and review of various funding options
• PARS’ Analysis Department can assist the City in running various funding scenarios, factoring in considerations such as contribution amount(s), time horizon, anticipated investment returns, expected withdrawals, etc.
• Assistance with developing and/or modifying funding policies • PARS has a database of “funding policy” examples from hundreds of member agencies and will walk the City through a variety of strategies for consideration • After review of funding strategies, PARS can share detailed staff reports that align with the City of St.
Helena’s objectives, so that the City may build upon other agencies’ policies • PARS also has examples of Council presentations detailing funding/withdrawal plans • Analysis and discussion of actuarial issues and valuations • Annual updates of projected City’s CalPERS future employer contribution rates and funding status to help aide discussion of timing of contributions/withdrawals • Will similarly discuss any changes to GASB, or other reporting changes • Monitoring of legislation, laws, and regulations impacting pension pre-funding • PARS has an in-house department dedicated to monitoring major changes to state law, (such as PEPRA) and how it impacts our clients/plan design features
• Development of materials and presentations to assist the City and its Council with general education, funding options and policies, etc.
• On-site reviews to discuss funding modifications and investment strategies based on changing program, and/or budgetary circumstances
• Discussion of plan and trust design options
o For example, if the City finds value in sub-accounting for different employee groups, cost centers, etc.
PARS’ corporate philosophy is to provide comprehensive, efficient, secure, flexible, and individualized service while at the same time allowing each client to maximize local control. Our focus on the following five areas will ensure City of St. Helena can achieve its pension funding goals:
Simple Turn-Key Trust Administration
Our program is designed to be “turnkey” every step of the way to simplify the duties of City staff. PARS will provide consulting, plan design, compliance monitoring, document preparation/management, actuarial coordination, plan installment, trust administration, recordkeeping, reporting, plan communications/education services, and assistance with (at minimum) annual meetings. As Trust Administrator, PARS will also provide ongoing client services and serve as the liaison between the City, PFMAM, and U.S. Bank.
Personalized Service
PARS understands that a personalized approach is the most successful method for administration and will assign specific members of the PARS team to work directly with the City of St. Helena. PARS Senior Vice President, Ryan Nicasio, will provide the City with personalized attention as the primary point of contact for services, and will be supported by a team that has extensive Section 115 trust experience. PARS feels that interaction with clients, as well as clear and transparent investment reporting, is key to the plan’s success.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
PARS | Public Agency Retirement Services Page 17
User Friendly Trust Approach
Our program was designed as a one-stop shop with ease of administration. We have no minimum fees, contribution requirements, transaction fees, trading fees or termination costs/restrictions. We also provide fully vetted, signature-ready trust documents that will enable the City’s trust account to be set up quickly and easily.
Local Control
PARS seeks to maximize local control, by giving client agencies sole and exclusive control of their plan without the interference of an outside retirement board, legislature, or state body. Through the PARS Section 115 Trust, the administrative burden for City staff is low, yet the City will still be able to determine its: (a) investment options and (b) funding methods.
Experienced, Knowledgeable Provider
By joining the PARS Section 115 Trust, the City will be utilizing a program provider whose sole focus is on niche retirement plan and trust administration for public agencies such as the City of St. Helena. We are experts in the retirement trust industry and have spent over three decades working to fine-tune our trust approach to ensure we offer the best possible program available. Our dedication and knowledge of our clients’ needs is the reason why we are the single largest provider in both California and the nation for pension-prefunding trusts. a. What are your approaches to rebalancing or reallocating asset classes, styles, and sectors? How do you add value to this process?
PFMAM’s research has shown that the asset allocation decision is the most important factor in determining the performance of the portfolio. A fundamental understanding of asset classes helps mitigate the risk of constantly shifting the portfolio in reaction to daily movements in the markets, which can result in buying high and selling low—the exact opposite of what investors should do. PFMAM does not believe recent performance is an indicator of what to expect from various asset classes over long periods of time; instead, they believe macroeconomic data and the drivers of asset class returns (such as dividends, real earnings growth, and inflation) should be the focus, and they develop our internal CMAs as such.
Strategic asset allocation involves defining which asset classes to include in the portfolio and the long-term allocation to each. Ideally, PFMAM wants investments that generate a reasonable return and are driven by different factors with low correlations. While strategic asset allocation is the primary driver of investment returns over time, they do not believe that we should allocate the same percentage to each asset class regardless of valuation. Hence, tactical asset allocation is the temporary deviation from the strategic asset allocation based on current valuation of the various asset classes. From time to time, investment opportunities present themselves to over- or under-weight specific asset classes. If PFMAM believes that equities are temporarily cheap and fixed income expensive, they would recommend shifting some assets from fixed income to equities while remaining within the strategic asset allocation ranges defined in the investment policy.
Asset Allocation Guidelines
Outlined below are the principal steps PFMAM uses to determine asset allocation based upon the City’s investment objectives and risk tolerance parameters:
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
PARS | Public Agency Retirement Services Page 18
1. Engaging in a Portfolio Planning Survey. At the beginning of the engagement, PFMAM will complete a detailed Portfolio Planning Survey to facilitate a discussion about the asset classes to determine which ones are permitted in the final overall allocation.
2. Compiling Capital Market Assumptions, which are determined by PFMAM’s Outsourced Chief Investment Officer (“OCIO”) Investment Committee (“Investment Committee”) through a comprehensive and ongoing process. The assumptions are for intermediate- and long-term returns in a wide range of asset classes and use a wide variety of economic data to assess PFMAM’s expectations for asset classes.
The next steps will be completed in collaboration with the City:
3. Determining Asset Allocation Structure. PFMAM will use information from the Portfolio Planning Survey and the CMAs to design an asset allocation for the portfolio. PFMAM uses a modeling program to conduct a detailed asset/liability modeling study. Each model uses the latest historical data on asset class investment returns, volatility, and correlation with other asset classes along with PFMAM’s CMAs, and liabilities based on the most recent actuarial valuation to determine an “optimal” portfolio.
4. Performance and Evaluation. PFMAM will assess the portfolio’s investment performance compared to stated manager and portfolio benchmarks and a group of governmental peers. In this step, PFMAM will also look to validate asset allocation, client objectives and liquidity needs. PFMAM will proactively implement changes geared toward mitigating risks and taking advantage of opportunities to help improve expected performance. b. Describe the investment options available. Please provide 1, 3, and 5-year return history and underlying expense ratios for each fund/portfolio. Do your total portfolio returns comply with Global Investment Performance Standards?
Yes. The below reported returns for the pre-established portfolios complies with CFA Institute (formerly AIMR) Global Investment Performance Standards (“GIPS®”) for rate calculation Actively Managed Portfolios (as of 12/31/2023)
Strategy 1 Year 3 Year 5 Year Expense Ratio
Capital Appreciation 17.32% 4.22% 9.71% 0.43%
Balanced 15.39% 2.89% 8.25% 0.42%
Moderate 13.98% 2.08% 7.17% 0.42%
Mod. Conservative 11.05% 0.35% 4.95% 0.40%
Conservative 8.81% -0.96% 3.30% 0.40%
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
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Passively Managed (Index) Portfolios (as of 12/31/2023) Strategy 1 Year 3 Year 5 Year Expense Ratio
Balanced 14.31% 3.06% 7.97% 0.09%
Moderate 12.74% 2.14% 6.85% 0.08%
Mod. Conservative 9.89% 0.23% 4.64% 0.07%
Conservative 7.63% -1.17% 2.95% 0.05%
A full breakdown of net performance can be viewed in the Appendix under “Net Returns Comparison.” Performance information can also be viewed in Appendix under “Investment Portfolios.” c. How are portfolios managed (e.g. by team, individual manager)? PFMAM believes that all their clients deserve the highest quality service and personalized attention. As such, discretionary OCIO clients at PFMAM are managed by teams including of an OCIO Investment Committee that implements the investment strategy and has discretion for manager selections within the context of the approved strategy and each client’s investment policy and analysts who handle the transactional requirements of the Pension funds.
Additionally, PFMAM believes in providing their clients with continuity of service. PFMAM’s team approach helps ensure that multiple senior investment professionals are knowledgeable about each client’s portfolio, actively participate in discussions about investment strategies and have access to portfolio positions at all times.
PFMAM’s Portfolio Management Process
PFMAM’s experienced Investment Committee, which is comprised of eight members of the team who each work in specialized areas of the global marketplace and average 29 years of industry experience, has oversight for all client portfolios. With guidance from their Portfolio Construction and Manager Research subcommittees, the Investment Committee meets formally at least monthly and provides macro-level direction for their OCIO strategies, acting as the investment and portfolio risk oversight team for investment decisions. A unique aspect of the Investment Committee is the intellectual diversity expressed amongst the members ranging from Fixed Income Portfolio Managers, consulting, manager research, and alternative investments.
This diversity of thought and experience allows their group to look at the market from various perspectives, gaining a more holistic point of view.
The Investment Committee focuses on three primary duties as it pertains to implementing and overseeing investment strategies:
• Strategic and tactical asset allocation;
• Active/passive management mix, and;
• Manager/fund selection and monitoring.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
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Both their Portfolio Construction and Manager Selection subcommittees provide research to their Investment Committee. They are made up of individuals with an average of over 20 years of varied experience within the Asset Management industry.
d. Describe your firm’s in-house technical and research capabilities. Are outside sources used by the firm on a regular basis?
PFMAM’s Investment Research Group, which is led by Director of Manager Research Alex Gurvich, Ph.D., is a dedicated team of specialists who monitor both the markets and investment managers and frequently interact with the universe of managers monitored. PFMAM believes this is the best approach since it:
• Insulates their clients from conflicts of interest;
• Provides full transparency; and helps ensure that decisions are fully researched, vetted and made without bias in alignment with their clients’ goals and objectives.
Maintaining an internal research team provides focused, deep and specific investment knowledge that PFMAM is able to apply directly to client engagements. What makes PFMAM’s manager selection process unique is that select members from the Investment Committee work with the team from the screening process to the final selections to help weed out “false positives,” minimize behavioral or cognitive biases that might hinder the process, help analysts expand upon their initial hypothesis and thesis regarding managers, and have a more indepth understanding about the manager helping to limit asymmetric risk within the portfolio.
All of PFMAM’s research is conducted internally by their Investment Research Group. Their Investment Research Group is focused on three broad areas of research using databases such as Investment Metrics, eVestment Alliance, Morningstar/Ibbotson Associates, Bloomberg, Pitchbook, and Hedge Fund Research, Inc.:
• General market data research for the Investment Committee; • Manager oversight for investment managers and the strategies we currently invest in; and • Manager searches to identify and maintain a bench of investment managers across asset classes. • Although PFMAM does reach out to various industry experts and academics for market insight educational pieces, they do not have any formal relationships with outside firms or consultants.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
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The graphic below shows PFMAM’s Investment Committee and its relationship to the Investment Research Group. e. What technical analysis (if any) do you use?
PFMAM does not use technical analysis for portfolio management mandates for clients. Investment selections are made using primarily fundamental analysis, which considers several aspects of the investments placed in the portfolios.
PFMAM believes that the strategic and tactical asset allocation decisions are the most important sources of investment returns. PFMAM does not believe that trying to time the market will add to returns over time, nor do they believe that security selection (net of all costs) can achieve the market return over time, especially in efficient markets. Strategic asset allocation involves defining which asset classes to include in the portfolio and the longterm allocation to each. Ideally, PFMAM wants investments that generate a reasonable return and are driven by different factors with low correlations. While strategic asset allocation is the primary driver of investment returns over time, PFMAM does not believe that they should allocate the same percentage to each asset class regardless of valuation. Hence, tactical asset allocation is the temporary deviation from the strategic asset allocation based on current valuation of the various asset classes. From time to time, investment opportunities present themselves to over- or under-weight specific asset classes. If PFMAM believes that equities are temporarily cheap and fixed income expensive, they would recommend shifting some assets from fixed income to equities while remaining within the strategic asset allocation ranges defined in the investment policy.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
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f. Briefly describe your firm’s investment management philosophy, including your approach to managing governmental portfolios.
PFMAM’s Investment Management Philosophy and Approach to Managing Governmental Portfolios PFMAM’s investment philosophy is very straightforward. They look to protect and grow their clients’ assets in a risk-controlled fashion. To do so, they hire institutional third-party managers within a diversified asset allocation framework that considers both active and passive management strategies. PFMAM believes in operating in a transparent structure that seeks to avoid conflicts of interest, and they employ the precepts of Modern Portfolio Theory (i.e., risk should be commensurate with return) and quantitative rigor to every portfolio we manage.
PFMAM manages assets which are invested in a broad range of public and private market securities, including but not limited to:
• Equities (domestic, international, and emerging across market caps and styles); • Fixed Income (core investment-grade, high yield, bank loans, emerging debt); and • Alternatives such as private equity, private debt, commodities, and real assets (real estate and infrastructure).
PFMAM’s solutions can be accessed via their open architecture structure that uses both exchange-traded funds (“ETFs”) and mutual funds or through the PFM Multi-Manager Series Trust. Investments they select may be in separate accounts, ETFs, and/or private investments (i.e., private real estate limited partnerships). For all of their alternative strategies, we access private fund vehicles directly.
Manager Selection
When considering any manager, it is important to understand why the manager has over or underperformed and, in particular, distinguish between talent and taking excess risk. PFMAM looks for managers that have exhibited a consistent methodology in selecting securities, not only in purchasing securities, but also in selling them. PFMAM’s preference is to find core managers that might have slight biases versus relying heavily on the relationship of growth versus value. PFMAM also favors investment managers that have a risk management process in place that helps prevent a manager from making unintended bets and that limits the possible downside for the portfolio. They maintain a thorough process for understanding the source of a manager’s alpha so as to determine its continued management of client assets. PFMAM favors independent investment firms because they believe that these independent firms are most focused on achieving investment outperformance and have a better alignment of interest with their clients. Within PFMAM’s manager selection and portfolio construction process, they are focusing heavily on both the type of process, sizing, and historical biases. For PFMAM’s active managers they seek to be balanced between fundamental and quant managers, but their historical bias has been skewed towards fundamental managers. Additionally, it is important to consider manager fees and how they are reflected in performance figures. Active managers tend to charge higher fees than passive managers, and therefore need to achieve even higher returns to produce comparable net-of-fee performance.
5. Identify the staff who would be assigned to each task, including sub-consultants and sub-contractors.
The following individuals will serve as the primary service team members to the City (led by Ryan Nicasio). This service team will also be supported by a larger group working behind the scenes at PARS, PFMAM, and U.S. Bank corporate offices and headquarters.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
PARS | Public Agency Retirement Services Page 23
• Ryan Nicasio| PARS Senior Vice President
o Will serve as the City’s main point of contact and account manager for the City. He will be the primary point of contact in facilitating services, including trust implementation and ongoing administration.
• Mitch Barker | PARS Senior Consultant
o Will serve as a liaison between the City and the PARS team. • Ashley Baires | PARS Client Services Coordinator
o Will serve as the City’s assigned Client Services Coordinator. She will work as a liaison between the plan administrator trustee/investment manager and the City and provide support regarding reporting, contributions, distributions, and other trust account activities. • Phillip Muschetto | PARS Senior Vice President, Plan Accounting o Will monitor all contributions and distributions and perform accounting for the City’s PARS Trust.
• Dennis Mullins, CFA | PFMAM Senior Institutional Client Portfolio Manager o Will serve as Senior Investment Consultant, overseeing a team that services the City’s Section 115 Trust.
PARS handles all day-to-day administration of the program in-house as it has done since we first began administering Section 115 Trusts. PARS does not contract out administrative tasks to other companies, with the following exceptions of legal and audit work:
• PARS’ legal counsel for its 115 trust is Pillsbury Winthrop Shaw Pittman LLP, one of the largest law firms in the nation. The firm provides ongoing legal and compliance support related to federal law and was involved both with the development of our trust agreements/documents, as well as with coordination of obtaining the IRS PLR.
• The PARS Trust auditor is CliftonLarsonAllen LLP (CLA). CLA is built on over 60 years of knowledge and expertise in business practices, economic trends, and the ever-changing tax scene.
Although U.S. Bank will provide trustee services for the City’s trust account and PFMAM will serve as investment manager, both firms operate independently and are not subcontractors of PARS. U.S. Bank has provided trustee services for PARS retirement plans since 2004 and PFMAM is a wholly owned subsidiary of U.S Bank. f. List any necessary equipment, training, or installation services required.
The PARS client services team will train staff on all necessary administrative facets of this 115 Trust Program and be readily available for any ongoing questions or needs. No additional equipment or installation services will be required.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
PARS | Public Agency Retirement Services Page 24
PART 5. TOTAL COST AND HOURLY RATES
The proposal should contain all pricing information related to establishing, administering, and management services of a Section 115 Trust for Pension as described in this request for proposal. The total all-inclusive maximum cost to be proposed is to contain all direct and indirect costs including all out-ofpocket expenses.
Fees are solely based on the City’s asset balance and include all services delineated in this proposal.
There are no additional or separate fees for: trust setup, implementation, administration, state and IRS compliance monitoring, contribution/disbursement processing, investment transactions, or trading fees. Trust document development or amendment and maintenance of documents, preparation of presentations/ad hoc materials, and meeting attendance are all included with the proposed asset-based fees. There are no surrender, withdrawal, or deferred sales charges, nor are there any fees associated with transfer of assets or termination of contract. There are no minimum fees. The City can set-up your account for no cost, therefore, very user friendly to get started.
Fees for the PARS Section 115 Pension Trust services to the City are broken down by: Trust administration (paid to PARS) and Investment advisory/management and trustee/custodial services (paid to U.S. Bank/PFMAM).
Trust Administration/Consulting Fees
Trust administration fees include all administration and consulting services.
Company Ongoing Fee
PARS
0.25% for assets under $10 million
0.20% for assets $10—15 million
0.15% for assets $15—50 million
0.10% for assets over $50 million
Discretionary Trustee/Investment Advisory and Management Fees With PFMAM serving as the program’s investment advisor, trustee and investment advisory/management fees are comprehensive. The fee schedule is based solely on the City’s trust assets.
Company Ongoing Fee
U.S. Bank/PFMAM
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
*Please note that all fees are waived on the portfolio’s money market fund. The 0.35% fee represents the highest weighted investment management fee that can be charged.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
PARS | Public Agency Retirement Services Page 25
Embedded Expense Ratios (as of December 31, 2023)
Please note that these fund level fees are already netted out of reported performance returns and are not additional fees charged on top of the asset-based fees listed above.
Strategy Active Portfolios Passive (Index) Portfolios
Capital Appreciation 0.43% ---
Balanced 0.42% 0.09%
Moderate 0.42% 0.08%
Mod. Conservative 0.40% 0.07%
Conservative 0.40% 0.05%
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
PARS | Public Agency Retirement Services Page 26
6. CONSIDERATIONS
PARS has identified the following areas in the sample Professional Services Agreement that we respectfully wish to negotiate. PARS recommends the use of our standard Agreement for Administrative Services, a sample of which can be provided for review upon the City’s request.
SECTION 4 - COMPENSATION AND METHOD OF PAYMENT
Fees for trust administration services are calculated based on the plan asset balance at the end of each month.
Fees are charged to the account monthly and are typically paid from plan assets. The City will receive a monthly statement from PARS detailing the beginning balance, contributions, earnings, expenses, distributions, transfers, and ending balance.
SECTION 7 - INSURANCE
PARS satisfies the City’s insurance requirements outlined in this section. To align with the provisions set forth in each policy, PARS’ insurance broker requests that the following adjustments be made:
B. Minimum Limits of Insurance. PARS’ Employer’s Liability limit is $1,000,000. The addition of language stating that any of the required limits can be satisfied by either a standalone policy or in combination with an excess/umbrella policy should also be included in this section.
C. Professional Liability Insurance. PARS’ Professional Liability Insurance is written on a claims-made basis.
G.Other Insurance Provisions. PARS’ policies provide for a thirty (30) day written notice of cancellation; however, a ten (10) day notice of cancellation for non-payment of premium applies. Notices are delivered by First Class U.S. mail. Subsection G.4. should be removed as it does not apply to PARS, and the term ‘agents’ deleted from sections G and H given that the term is broad and undefined.
I. The Acceptability of Insurers. PARS’ insurance carriers have an A.M. Best Company rating of “A–: VII” or better.
SECTION 8 - INDEMNIFICATION
PARS requests that this section be replaced with the following mutual indemnification language:
“Consultant and City hereby indemnify each other and hold the other harmless, including their respective officers, directors, and employees, from any claim, loss, demand, liability, or expense, including reasonable attorneys’ fees and costs, incurred by the other as a consequence of, to the extent, Consultant’s or City’s, as the case may be, negligent acts, errors or omissions with respect to the performance of their respective duties hereunder.”
SECTION 13 - SUSPENSION OF WORK
PARS requests that this section be omitted. Due to the nature of the services PARS provides, we would be obligated to continue our Services (accounting of assets, reporting, coordinating audits, processing disbursements, compliance monitoring, etc.) until all assets are transferred out of the Trust.
SECTION 21 - TERMINATION
To align with the termination provisions of the Trust Agreement and our standard Agreement for Administrative Services, PARS requests that written notice of the intent to terminate be not less than thirty (30) days. Also, given the nature of our services, immediate cessation of work would not be feasible. We would be obligated to continue our Services until all assets are transferred out of the Trust.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
PARS | Public Agency Retirement Services Page 27
SECTION 26 - DEFAULT
PARS requests that the Agreement allow for a cure period of 'within ten (10) business days' from the date of the default notice.
Additional Information:
PARS requests that a force majeure clause, Section 5 (Information Furnished to PARS), the information contained in Exhibits 1A (Services), 1B (Fees for Services), and 1C (Data Requirements) from our standard Agreement for Administrative Services, be incorporated into the final negotiated Agreement.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
PARS | Public Agency Retirement Services Page 28
PART 7. ADDITIONAL INFORMATION
Market Leader of
Pension Prefunding
Trusts
• Section 115 trust services for prefunding pension and OPEB is our core business. This is not the case for other providers.
• PARS developed the concept of pension prefunding trusts and is currently the only provider with significant clients and experience for pension prefunding trusts in California.
• The PARS program is a combination multiple employer solution that allows pension and/or OPEB within one trust while other providers require the City either to create its own or two separate trusts.
Experienced,
Knowledgeable
Section 115 Trust
Provider
• Unlike other providers, our main business is niche retirement trust administration for public agencies. We are the pioneer and have fine-tuned our Section 115 Trust program to ensure we offer the best program available. • PARS’ dedication and knowledge of clients’ needs is the reason why we were the first in the nation to develop a multiple-employer trust for combined pension and OPEB prefunding.
Local Control and
Less Red Tape
• The trust operates separate and apart from CalPERS which provides maximum autonomy and diversification of providers for local control. • PARS offers local control, meaning there is no central authority placing mandates on the trust. Other providers may require the City to join external Boards that make collective investment decisions for the City more difficult and decrease flexibility.
• PARS does not charge minimum annual fees, trading/transaction fees, disbursement fees, etc. unlike some other providers. All fees with PARS are asset-based.
• No start-up costs, no minimums, and no fees are charged until assets are put into the trust
• There are no hidden fees with PARS. We disclose all fees and are fully transparent. Other providers claim low costs but do not disclose the underlying expense ratios in their investment funds which drive up their costs. • We only require a 30-day termination notice, but competitors may take up to 150 days to transfer funds and may require their council’s approval, slowing down the process.
• PARS includes a mutual indemnification clause in agreements, providing an additional layer of legal protection to the City and is in the City’s best interests, while other providers require a one-sided agreement placing the customer at a severe disadvantage.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
PARS | Public Agency Retirement Services Page 29
• Our program allows for two plan year reimbursements (current year + prior year) at one time, unlike one year for other providers, which is helpful in an emergency or difficult budget year.
Diversified
Investment Focus
• PFMAM specializes in pension trust investing, rather than fixed income general fund investing, which is common with providers that mainly manage cash and fixed income, rather than long-term liabilities. • We are not limited to the same investment managers and approaches of CalPERS, and we provide further diversification and greater local autonomy outside of how the City is investing the entirety of its other pension assets. This Trust program is a way for the City to effectively “not put all its eggs in one basket” and spread out its risk.
Most Flexible
Investment
Approach
• PARS provides the most investment flexibility of all competitors. We offer five pre-established investment portfolios as well as a customized allocation and both active and passive strategies, enabling the City to choose an investment structure that most effectively meets its needs.
• Senior Portfolio Manager, Dennis Mullins will provide hands-on investment policy development, asset allocation recommendations, ongoing investment support, and direct cell phone access. He will be supported by a full team of investment professionals and analysts at PFMAM’s headquarters who review client portfolios on an ongoing basis.
• This flexibility and trust structure means that the City is not tied to using one investment firm/option, unlike other pension prefunding trust providers. • We have the option of five investment portfolios, with active and passive platforms, and custom accounts with actual, true 1-, 3-, 5-, and 10-year historical performance. Other providers use “what-if” scenario style portfolios that are not based on actual clients’ historical rate of returns. We are not proposing hypotheticals and composites based on portfolios that still need to be developed, which can make it difficult to evaluate performance history and even underlying investment expenses.
• Historically, clients have experienced greater net investment returns (gross performance minus fees) when both returns and fees are taken into consideration, the ultimate measure of value to the City and performance measurement tool.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration and Management Services of a Section 115 Trust for Pension
PARS | Public Agency Retirement Services Page 30
Most
Comprehensive
Administration
• No other provider offers the same level of comprehensive administrative services that reduce workload and costs for the City.
• PARS will provide all consulting, plan design, state and federal compliance monitoring, document preparation/management, trust administration, planlevel recordkeeping, employer statements, reporting, plan communications materials, audit and actuarial support, consulting and analysis, and ongoing client reviews and services. As program administrator, PARS will also serve as liaison between the City, U.S. Bank, and PFMAM.
User-Friendly Trust
Approach
• The City’s Plan and Trust Document have already been fully vetted and is IRS compliant with a Private Letter Ruling (PLR). Other providers applied to the IRS but failed to receive a PLR.
• The City’s only role would be to make contributions, request disbursements, and monitor reports on account and investment activity. We do the rest, which minimizes staff burden.
Personalized Service • PARS understands that a hands-on, individualized approach is the most effective method for administration and will take great pride in working closely with the City of St. Helena.
• The City’s assigned services team will always be directly available to staff, and we guarantee regular in-person client reviews.
Agenda Item #13.2.
Public Agency Retirement Services
APPENDIX:
private letter ruling
(PLR)
Agenda Item #13.2.
Agenda Item #13.2.
Agenda Item #13.2.
Agenda Item #13.2.
Agenda Item #13.2.
Agenda Item #13.2.
Public Agency Retirement Services
APPENDIX:
CLIENT LIST
Agenda Item #13.2.
Client list ▎ 1
115 Trust – OPEB/PENSION Client list
COUNTIES (37)
Alpine
Amador
Calaveras
Colusa
Contra Costa
Glenn
Humboldt
Imperial
Inyo
Kern
Kings
Lake
Lassen
Madera
Mariposa
Mendocino
Merced
Mono
Monterey
Napa
Nevada
Placer
Plumas
Riverside
San Benito
San Joaquin
Shasta
Siskiyou
Solano
Sonoma
Sutter
Tehama
Trinity
Tulare
Tuolumne
Yolo
Yuba
CITIES & TOWNS (164)
Updated April 2024
Alameda
Alhambra
Anaheim
Angels Camp
Atherton
Atwater
Azusa
Bakersfield
Beaumont
Bell Gardens
Benicia
Bishop
Brea
Brisbane
Burlingame
Calabasas
Camarillo
Canyon Lake
Capitola
Carlsbad
Carmel
Chino Hills
Chula Vista
Claremont
Colma
Commerce
Corcoran
Coronado
Costa Mesa
Crescent City
Cudahy
Cupertino
Cypress
Daly City
Dana Point
Del Rey Oaks
Dinuba
Duarte
Dublin
El Cajon
El Centro
El Cerrito
El Segundo
Elk Grove
Emeryville
Escondido
Fairfax
Fairfield
Fort Bragg
Fountain Valley
Fullerton
Galt
Garden Grove
Gilroy
Glendale
Glendora
Goleta
Grand Terrace
Grass Valley
Half Moon Bay
Hawthorne
Healdsburg
Hemet
Hercules
Hermosa Beach
Huntington Beach
Indian Wells
Imperial Beach
Indio
Ione
La Habra
Lakeport
La Mesa
La Quinta
Laguna Niguel
Lake Forest
Lakewood
Lemon Grove
Livermore
Lodi
Los Alamitos
Los Altos Hills
Mammoth Lakes
Manhattan Beach
Merced
Modesto
Monrovia
Monterey
Moreno Valley
Morgan Hill
Morro Bay
Murrieta
Napa
National City
Newport Beach
Norco
Novato
Oakley
Orinda
Oroville
Pacifica
Palmdale
Palo Alto
Pasadena
Patterson
Perris
Pico Rivera
Piedmont
Pinole
Pittsburg
Pleasant Hill
Pleasanton
Pomona
Port Hueneme
Rancho Cucamonga
Redding
Redwood City
Rialto
Richmond
Rio Vista
Ripon
Riverside
Rocklin
Rohnert Park
Rolling Hills
Rosemead
Ross
San Anselmo
San Jacinto
San Leandro
San Pablo
San Ramon
Sanger
Santa Ana
Santa Barbara
Santa Clara
Santa Clarita
Sausalito
Seaside
Selma
Solana Beach
South El Monte
Stanton
Sutter Creek
Taft
Temecula
Temple City
Thousand Oaks
Tiburon
Tustin
Twentynine Palms
Union City
Vallejo
Villa Park
Walnut
West Covina
West Sacramento
Westminster
Winters
Woodland
Woodside
Yountville
Yuba City
Yucca Valley
Agenda Item #13.2.
Client list ▎ 2
115 Trust – OPEB/PENSION Client list
Agoura Hills/Calabasas Community Center Authority
Alameda County Mosquito Abatement District
Alpine Fire Protection District
Beach Cities Health District
Bighorn-Desert View Water Agency
Bodega Bay Public Utilities District
Calaveras County Water District
California Intergovernmental Risk Authority
California Joint Powers Insurance Authority
California Joint Powers Risk Management Authority
Central Contra Costa Sanitary District
Central Contra Costa Transit Authority
Coastline Regional Occupational Program
Coastside Fire Protection District
Colusa Mosquito Abatement District
Contra Costa County EEs' Retirement Association
Contra Costa Mosquito and Vector Control District
Crestline Village Water District
Delta Diablo
Desert Recreation District
East Bay Regional Park District
East Orange County Water District
Eastern Sierra Community Services District
Eastern Sierra Transit Authority
El Dorado Hills County Water (& Fire) District
Fallbrook Public Utility District
Feather River Air Quality Management District
Fresno Irrigation District
Fresno Metropolitan Flood Control District
Glenn-Colusa Irrigation District
Goleta Cemetery District
Goleta West Sanitary District
Great Basin Unified Air Pollution Control District
Greater Vallejo Recreation District
Hayward Area Recreation & Park District
Hesperia Fire Protection District
Housing Authority of the County of Butte
Housing Authority of the County of Contra Costa
Housing Authority of the County of San Bernardino
Housing Authority of the County of Santa Cruz
Humboldt Bay Fire Joint Powers Authority
Humboldt Bay Municipal Water District
Humboldt No. 1 Fire Protection District
Menlo Park Fire Protection District
Mesa Water District
Metropolitan Transportation Commission
Midpeninsula Regional Open Space District
Mid-Peninsula Water District
Mojave Desert Air Quality Management District
Montecito Fire Protection District
Monterey Bay Unified Air Pollution Control District
Monterey County Mosquito Abatement District
Monterey One Water
Moraga-Orinda Fire Protection District
Mosquito & Vector Mgmt. Dist. of Santa Barbara Co.
Municipal Pooling Authority
Municipal Water District of Orange County
Napa County Mosquito Abatement District
Nevada County Consolidated Fire District
North Central Fire Protection District
North Coast Air Quality Management District
North County Fire Protection District
Novato Sanitary District
Orange County Fire Authority
Orange County LAFCO
Orange County Mosquito and Vector Control District
Orange County Sanitation District
Orange County Water District
Orchard Dale Water District
Pebble Beach Community Services District
Placentia Library District
Placer County Air Pollution Control District
Placer County Resource Conservation District
Rancho Cucamonga Fire Protection District
Rancho Murieta Community Services District
Redwood Empire Municipal Insurance Fund (REMIF)
Regional Housing Authority
Rowland Water District
Sacramento Area Flood Control Agency
San Andreas Sanitary District
San Elijo Joint Powers Authority
San Mateo Consolidated Fire Department
San Mateo Co. Mosquito & Vector Control District
Santa Barbara County Law Library
Santa Cruz Regional 9-1-1 JPA
Santa Fe Irrigation District
Sewer Authority Mid-Coastside
Shasta Valley Cemetery District
South Coast Water District
South Montebello Irrigation District
South Orange County Wastewater Authority
South Placer Fire Protection District
Southern Marin Fire Protection District
State Water Contractors
Superior Court of CA, County of Imperial
Superior Court of CA, County of Inyo
Superior Court of CA, County of Kern
Superior Court of CA, County of Marin
Superior Court of CA, County of Merced
Superior Court of CA, County of Orange
Superior Court of CA, County of San Mateo
Superior Court of CA, County of Shasta
Superior Court of CA, County of Siskiyou
Superior Court of CA, County of Sonoma
Sweetwater Springs Water District
Three Valleys Municipal Water District
Twentynine Palms Water District
Union Sanitary District
Ventura Regional Sanitation District
Walnut Valley Water District
West Bay Sanitary District
West County Wastewater District
Western Riverside Council of Governments
Yolo-Solano Air Quality Management District
Yorba Linda Water District
Zone 7 Water Agency
SPECIAL DISTRICTS (116)
Butte County Office of Education
Shasta County Office of Education
Sonoma County Office of Education
Intelecom
EDUCATION DISTRICTS (4)
Updated April 2024
Agenda Item #13.2.
Client list ▎ 3
115 Trust – OPEB/PENSION Client list
SCHOOL DISTRICTS (64)
Alisal Union School District
Alta Loma School District
Auburn Union School District
Bass Lake Joint Union Elementary SD
Bellflower Unified School District
Beverly Hills Unified School District
Brea Olinda Unified School District
Calistoga Joint Unified School District
Campbell Union High School District
Compton Unified School District
Corning Union Elementary School District
Coronado Unified School District
Cotati-Rohnert Park Unified School District
Dry Creek Joint Elementary SD
El Dorado Union High School District
El Monte Union High School District
Folsom Cordova Unified School District
Fontana Unified School District
Fowler Unified School District
Hermosa Beach City School District
Hesperia Unified School District
Hughes-Elizabeth Lakes Union ESD
John Swett Unified School District
Jurupa Unified School District
Lakeside Union School District (San Diego)
Le Grand Union High School District
Lemon Grove School District
Lindsay Unified School District
Madera Unified School District
Manteca Unified School District
Moreno Valley Unified School District
Napa Valley Unified School District
Natomas Unified School District
Newport-Mesa Unified School District
Ocean View School District (Ventura)
Ontario-Montclair School District
Orcutt Union School District
Palmdale School District
Palos Verdes Peninsula Unified School District
Paramount Unified School District
Placer Union High School District
Porterville Unified School District
Poway Unified School District
Red Bluff Joint Union High School District
Red Bluff Union Elementary School District
River Delta Unified School District
Riverdale Joint Unified School District
Roseville Joint Union High School District
Salinas City ESD
San Bruno Park School District
San Dieguito Union High School District
San Marino Unified School District
Santa Barbara Unified School District
Santa Rita Union School District
Savanna School District
South Bay Union School District
South Pasadena Unified School District
Taft Union High School District
Trona Joint Unified School District
Upland Unified School District
Visalia Unified School District
Westside Union School District
Whittier City School District
Wilsona School District
Allan Hancock Community College District
Citrus Community College District
Coast Community College District
Grossmont-Cuyamaca Community College Dist.
Hartnell Community College District
Imperial Community College District
Marin Community College District
Monterey Peninsula Community College Dist.
Palo Verde Community College District
Pasadena Area Community College District
Rancho Santiago Community College District
Rio Hondo Community College District
San Bernardino Community College District
San Luis Obispo County CCD (Cuesta)
Shasta-Trinity-Tehama Joint CCD
State Center Community College District
Victor Valley Community College District
West Valley-Mission Community College Dist.
Yosemite Community College District
Yuba Community College District
COMMUNITY COLLEGE DISTRICTS (20)
Updated April 2024
Agenda Item #13.2.
Public Agency Retirement Services
APPENDIX:
STAFF REPORTS
Agenda Item #13.2.
Agenda Date: 10/30/2018
Agenda Placement: 10E
NAPA COUNTY BOARD OF SUPERVISORS
Board Agenda Letter
TO: Board of Supervisors
FROM: Minh Tran - County Executive Officer
County Executive Office
REPORT BY: Mary Booher, Assistant County Executive Officer - 707-253-4153 SUBJECT: Pension and OPEB update and establishment of 115 Trust for Pension
RECOMMENDATION
County Executive Officer requests that the Board
1. Receive an annual report on the unfunded liability associated with Other Post-Employment Benefits (OPEB);
2. Receive an update on the unfunded liability associated with California Public Employees’ Retirement System (CalPERS) pensions;
3. Adopt a Resolution establishing a Pension Trust administered by Public Agency Retirement Services (PARS) and appointing the County Executive Officer as the Plan Administrator;
4. Authorize the cancellation of the General Fund Assignment for future pension contributions of $4,271,020 (4/5 vote required);
5. Approve a Budget Transfer No. CE0003 increasing appropriations in the General Expenditure Budget (10510) Retirement (51600), by $4,271,020, offset by available fund balance (4/5 vote required);
6. Direct staff to initiate process to move OPEB funds, currently with the CalPERS California Employers’ Retiree Benefit Trust (CERBT) plan to the PARS plan; and
7. Adopt Napa County Policy for 115 Trust administration.
EXECUTIVE SUMMARY
Napa County contracts with the California Public Employees’ Retirement System (CalPERS) to provide retirement benefits for permanent County employees. Each year, we receive actuarial valuation reports, which identify the employer contribution rates for the following year, as well as the unfunded accrued actuarial liability (UAAL). The UAAL has grown significantly over the past several years due to changes in benefits, reduced earnings due to the recession, and policy changes enacted by the CalPERS Board, such as reductions to the assumed discount rate, and shorter amortization schedules for these liabilities. The increase in the UAAL results in employer contribution A Tradition of Stewardship
A Commitment to Service
Agenda Item #13.2.
rates increasing much more rapidly than our growth in revenues. Based on the June 30, 2017 CalPERS valuation reports, which were published in August 2018, the UAAL for Napa County is $238 million. With CalPERS assets of $682 million, our funded ratio is currently 74.1%.
Napa County provides other post-employment benefits (OPEB) to employees, based on the Memoranda of Understanding (MOU’s) with the bargaining units. These have traditionally included medical, dental, vision, and term life insurance. Napa County paid for these benefits on a pay-as-you-go basis. As the cost for these benefits increased at a much higher rate than other costs, and corresponding revenue, the County began to address the future growth in these costs through the negotiation and implementation of tiered benefit programs. In addition, in 2007, the Board established a Trust fund, as authorized by IRS Code Section 115 (“115 Trust”), with CalPERS California Employers’ Retiree Benefits Trust (CERBT) to begin funding the OPEB UAAL. Attachment A provides an update on the OPEB liability and the OPEB 115 Trust.
Today, staff is requesting that the Board establish a Combination 115 Trust for Pension and OPEB with Public Agency Retirement Services (PARS), to begin addressing the Pension UAAL, as well as direct staff to move the CERBT OPEB 115 Trust to PARS, to take advantage of lower administration fees based on the total value of the assets. The initial investment for the Pension 115 Trust will be $4,271,020 that the Board has assigned as part of the Fiscal Year 2017-18 and 2018-19 budgets to address future pension liabilities. Staff is also requesting the Board adopt a policy providing oversight for the administration of 115 Trusts in Napa County.
PROCEDURAL REQUIREMENTS
1. Staff reports.
2. Public comments.
3. Motion, second, discussion and vote on the item.
FISCAL IMPACT
Is there a Fiscal Impact? Yes
Is it currently budgeted? Yes
Where is it budgeted? Non-Departmental.
Is it Mandatory or Discretionary? Discretionary
Discretionary Justification: Approval of this item begins a long-term investment to reduce the unfunded liability associated with pension, which will result in reduced rate of growth for future pension rates.
Is the general fund affected? Yes
Future fiscal impact: The Board will be given the opportunity, through the annual budget process, to make additional investments into this trust fund.
Consequences if not approved: Future pension contributions will continue to grow rapidly, which will possibly result in reduced services in the future.
Additional Information:
ENVIRONMENTAL IMPACT
Board Agenda Letter Tuesday, October 30, 2018
Agenda Item #13.2.
ENVIRONMENTAL DETERMINATION: The proposed action is not a project as defined by 14 California Code of Regulations 15378 (State CEQA Guidelines) and therefore CEQA is not applicable.
BACKGROUND AND DISCUSSION
As part of the Fiscal Year 2017-18 adopted budget, the Board established an assignment of $1 million of General Fund for future pension liabilities. As part of the Fiscal Year 2018-19 adopted budget, the Board increased this assignment by $3.271 million. As an assignment, those funds are invested with the County Treasury, in which the effective rate of return for August 2018 was 1.76%. By establishing a Pension Trust Fund, pursuant to IRS Code Section 115 (“115 Trust”), the County will be able to utilize an investment strategy more similar to that used by CalPERS, which are designed to provide annualized returns of 4-6%, depending on investment strategy. As a 115 Trust, these funds would only be available to fund future pension liabilities.
Staff reached out to all three entities that provide 115 Trust Services for Pension in California, and selected Public Agency Retirement Services (PARS) to partner with Napa County in establishing a 115 Trust, based on their experience in California and their competitive fee structure. PARS will provide trust administration and consultation services, including recordkeeping, accounting, actuarial coordination, monitor contributions, process disbursements, and monitoring compliance. As partners to PARS, U.S. Bank will be the trustee, which includes being the plan fiduciary and the custodian of the assets, and HighMark Capital will be the investment manager. 26 counties have adopted the PARS 115 Trust to fund either Pension or OPEB or both, making PARS the leading provider.
The administration costs of the Pension 115 Trust are funded by the plan assets, and are based on the value of the assets. Administrative Fees paid to PARS range from 0.25% for balances less than $10 million to 0.10% for balances above $50 million. Investment Fees paid to U.S. Bank and HighMark Capital range from range from
0.35% for balances less than $5 million to 0.10% for balances above $50 million.
HighMark offers five different investment portfolios that they actively manage, and four different investment portfolios that they passively manage. Attachment B shows the historical returns. Solano County has chosen to manage their investment portfolio internally, however staff believes that the options offered by PARS, vis-à-vis HighMark, meet Napa County’s needs in a cost effective manner.
COMBINATION 115 TRUST ESTABLISHMENT:
In addition to establishing a 115 Trust for Pension, staff recommends moving the assets from the CalPERS CERBT 115 Trust for OPEB into a combination 115 Trust with PARS, in which the OPEB assets are accounted for separately from Pension. As shown in Attachment B, PARS has historically had better return rates on similar investment strategies, and combining these funds will allow Napa County to take advantage of the lowest fee rates from PARS for the 115 Trust.
Attachment C is a resolution that establishes the Combination 115 Trust for Pension and OPEB with PARS and appoints the County Executive Officer as the Plan Administrator for the program. The Plan Administrator is responsible for executing the legal and administrative documents for the plan. Upon establishment, staff will deposit the current assignment of $4.271 million into the trust. If approved by the Board, staff will return with actions necessary to move the OPEB assets from CERBT to PARS.
Should the Board authorize staff to consolidate the 115 Trust for Pension and OPEB with PARS, staff recommends a different investment strategy for each sub-account. Due to the balance of approximately $70 million in OPEB assets, staff recommends the “Conservative-Actively Managed” portfolio. However, sSince we are just establishing Board Agenda Letter Tuesday, October 30, 2018
Agenda Item #13.2.
the trust for Pension assets, staff recommends the more aggressive approach offered with the “Balanced-Actively Managed” portfolio. Due to the balance of approximately $70 million in OPEB assets, staff will meet with HighMark investment advisors and return to the Board with an investment strategy recommendation at the same time the Board authorizes the actions necessary to move the OPEB assets from CERBT.
As an alternative, should the Board not authorize staff to consolidate the 115 Trusts for Pension and OPEB with PARS, staff still recommends investing the Pension assets in the “Balanced-Actively Managed” portfolio. Staff recommends shifting the investment strategy with CERBT from Strategy 1 to Strategy 2, a more conservative strategy, in order to preserve the assets in this trust. 115 TRUST POLICY & OVERSIGHT:
In order to ensure ongoing oversight of the 115 Trust for Pension and OPEB, staff recommends the Board adopt the attached policy. This policy is important because unlike the investment policy that governs the County Treasury, these trust funds are designated to address future liabilities, and therefore have unique risks and opportunities.
Staff also evaluated the possibility of utilizing the Deferred Compensation Committee to oversee these Trust funds, however, the Deferred Compensation funds are employee funds, and these Trust funds are County assets reported as part of the Comprehensive Annual Financial Report.
The proposed policy (Attachment D) provides the Board with the authority for investment strategies, based on recommendations from an Oversight Committee and the County Executive Officer. The CEO’s office will prepare an annual report to the Board, and the annual report will contain recommendations regarding the investment strategy.
The Oversight Committee will review the report prior to submission to the Board.
Later in the 2018-19 Fiscal Year, staff will bring a funding policy to the Board to recommend a long-term strategy to fund the 115 Trust for Pension and OPEB in a manner that maximizes equitable contributions from all funding sources, not just the General Fund. The Oversight Committee will be involved in the development of this policy.
SUPPORTING DOCUMENTS
A . OPEB Trust annual report
B . 115 Trust Resolution with exhibit
C . Historical Performance Comparison
D . 115 Trust policy
CEO Recommendation: Approve
Reviewed By: Molly Rattigan
Board Agenda Letter Tuesday, October 30, 2018
Agenda Item #13.2.
Town of Yountville
Staff Report
6550 Yount Street
Yountville, CA 94599
Yountville Town Council Staff Report
DATE: December 5, 2017
TO: Mayor and Town Council
FROM: Maria Ojeda, Finance Director
TITLE
Consider Adoption Resolution Number 17-3446 Approving a Public Agency Post-Employment Benefits Section 115 Trust Account and contract with Public Agency Retirement Services (PARS) to pre-fund pension obligations.
DISCUSSION/BACKGROUND
In 2012, the Government Accounting Standards Board (GASB) issued Statement No. 68, Accounting and Financial Reporting for Pensions. GASB 68 requires that all governmental employers that sponsor Defined Benefit plans such as that of the Town’s Public Employees’ Retirement System (CalPERS) must recognize a net pension liability, also known as an unfunded actuarial accrued liability (UAAL) on their balance sheet. This is the difference between the Town’s total pension liability (actuarial accrued liability) and actual plan assets.
GASB 68 became effective after June 15, 2014. The Town of Yountville’s total UAAL as of the June 30, 2016 PERS Actuarial Report is $3,838,602.
A Private Letter Ruling (PLR) from the IRS established that public agencies or municipalities could create a separate trust to pre-fund its CalPERS unfunded liability. This would provide the Town with an alternative to sending funds to CalPERS that will provide for greater local control over assets, portfolio management by a registered investment advisor selected and monitored by the Town, with future excess contributions transferred to CalPERS (or the Town to reimburse for up to two years of pension expenses) at the discretion of the Town.
Until recently, the Town’s only option for reducing the UAAL was to commit additional funds to CalPERS.
These additional funds would be subject to the same market volatility risk as the CalPERS investment rate of return. A recent ruling received from the IRS established that public agencies or municipalities could create a separate trust to "pre-fund" its CalPERS unfunded liability. This would provide the Town with an alternative to sending funds to CalPERS and will provide greater control over assets and portfolio management.
As part of the budget process for fiscal year 2017-18, the Town Council approved an allocation to an Unfunded Actuarial Accrued Liability Fund (03) so that the Town could initiate a Pension Rate Stabilization Program (PRSP) Trust to pre-fund pension obligations and allocated $300,000 of the 2017-18 General Fund budget to invest in this trust. The Town Council also approved setting aside $366,453 during Fiscal Year End 2016-17, making total funds available to invest $666,453. While the initial contribution is modest, over time, and with additional contributions, this trust will assist the Town in mitigating the CalPERS contribution rate File #: 17-1370, Version: 3
Town of Yountville Page 1 of 3 Printed on 12/2/2017
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Agenda Item #13.2.
File #: 17-1370, Version: 3
volatility.
By establishing a PRSP it will allow the Town to set aside funds towards future CalPERS costs. The benefits provided for establishing a formal IRS Section 115 approved Trust include:
1) Local control over assets -the trust can be accessed at any time so long as it is used to pay the employer's pension obligation.
2) Pension Rate Stabilization -assets can be transferred to a CalPERS plan at the Town's discretion, which would reduce or eliminate large fluctuations in employer contributions to CalPERS; 3) Investment Flexibility -investment requirements that apply to the Town's General fund under Government Code 53601 are not applicable to assets held in an irrevocable Section 115 Trust. The Town maintains oversight of the investment and the portfolio's risk tolerance level and the investments can be diversified and invested in a prudent fashion (Code 53216). This provides the potential for a greater return than what assets in the General Fund can earn. 4) Lower Pension Liability -contributions placed in the Trust address the Town's unfunded pension liability. Assets placed into the Trust will eventually reduce the Town's pension liability. Due to a ruling by GASB for financial reporting purposes as required by GASB 68 the Net Pension Liability will not be offset on our balance sheets.
To date, the most widely adopted PRSP for government agencies has been the plan sponsored by Public Agency Retirement Services (PARS). PARS provides the security of a Private Letter Ruling from the IRS for Section 115 Trusts that assures participants the tax-exempt status of their investments. PARS also allows the flexibility of the Town's participation in selecting the investment strategies for its funds, giving the Town control on target yield and level of risk on its investments.
In addition, the Town has an existing trust with PARS to fund its retiree health benefits, otherwise known as Other Post-Employment Benefits (OPEB). The adoption of a PRSP to be administered by PARS will require replacing the City's existing OPEB Trust with a new trust, one that will have two accounts. One account will be for the existing OPEB assets, and the other account will be for pre-funding pension liabilities. The same Administrative and Investment Management fee schedule would apply going from the old Trust to the new Trust, with the added benefit of aggregating plan assets in both the OPEB and Pension Account to allow the Town to access a lower fee tier for any new contributions made to the Pension Account. PARS has partnered with U.S. Bank to serve as trustee for this program.
Contracting with PARS to establish an irrevocable trust account to pre-fund retirement plan obligations will assist the Town in addressing future pension contribution increases. Funding the Trust will restrict the use of funds that are transferred to the irrevocable trust account.
The Town will pay fees to PARS for management of the Trust Fund. With the combination of OPEB and prefunding of pension obligations into one trust, by the end of Fiscal Year 2017-18 total assets will fall in the range of $3.8 million (includes current OPEB fund balance, Fiscal Year 2017-2018 OPEB contributions and $666,943 for the PERS UAAL). The fees will be paid from trust assets and staff anticipates investment earnings will Town of Yountville Page 2 of 3 Printed on 12/2/2017
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Agenda Item #13.2.
File #: 17-1370, Version: 3
cover the fees. The plan fees have ranges but should not exceed .59%.
ENVIRONMENTAL REVIEW
This item is not subject to CEQA.
FISCAL IMPACT
Is there a Fiscal Impact? Yes
Is it Currently Budgeted? Yes
Where is it Budgeted? General Fund, PERS UAL, Fund 03.
Is it Mandatory or Discretionary? Discretionary
Is there a Staff Resource Impact? Nominal
STRATEGIC PLAN GOAL
Is item Identified in Strategic Plan? Yes
If yes, Identify Strategic Goal and Objective. Responsible Fiscal Policy: The Town maintains its fiscal health through policies designed to maximize economic opportunities, manage expenses, and ensure prudent reserves.
Briefly Explain Relationship to Strategic Plan Goal and Objective. Establishing a PERS Rate Stabilization Fund will aid the Town in saving and paying for future pension obligations.
ALTERNATIVES
The Town Council may elect to forgo the establishment of a PARS Trust Fund all together or direct staff to complete research on other options.
RECOMMENDATION ..Recommendation
Receive staff report and direct questions to staff.
Receive public comment.
Conduct Council discussion on proposed Resolution.
Adopt Resolution Number 17-3446 Approving a Public Agency Post-Employment Benefits Section 115 Trust Account and contract with Public Agency Retirement Services (PARS) to pre-fund pension obligations.
Town of Yountville Page 3 of 3 Printed on 12/2/2017
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Agenda Item #13.2.
HBART OF SOLANO COUNTY
CALIPOR
DATE:
TO:
FROM:
SUBJECT:
Agenda Item No.J/i._
Agenda Report
January 15, 2019
The Mayor and City Council
David A. White, City ManagerV
Emily Combs, Director of Finance~
Resolution of the City Council of the City of Fairfield Approving the Agreement and Establishment of an IRS Section 115 Pension Trust with Public Agency Retirement Services (PARS) for the Purpose of Pre-Funding a Portion of the City's Contributions to the California Public Employees' Retirement System (CalPERS), Delegating Authority to Request Disbursements, and Authorizing the City Manager to Execute all Documents to Fund and Maintain
Participation in the Trust
RECOMMENDED ACTION
Adopt resolution.
STATEMENT OF ISSUE
The City Council is being asked to approve establishing a third-party irrevocable trust to pre-fund a portion of the City's long-term financial pension obligation. Approval of a Trust implements one of the strategies included in the Council Adopted Pension Funding Policy and is a recognized best practice that will help the City achieve greater financial sustainability. Recent assumption changes and modified amortization methods adopted by CalPERS have led to increases in employer contribution for all agencies participating in CalPERS. As a result, "Addressing Rising Pension Costs" was identified as a priority initiative as part of the City Council 2018 Workplan.
DISCUSSION
On September 18th , 2018 the City Council approved a Pension Funding Policy for the purpose of deploying a variety of strategies to achieve the following objectives: reduce projected pension contributions to maintain services and, increase the funding ratio for both the City's Safety and Miscellaneous CalPERS plans. One of those strategies was to establish a Section 115 Pension Trust to realize greater investment returns than what is currently available through the City's cash pool investments. The City would maintain Agenda Item #13.2.
PAGE2
DATE:
SUBJECT:
Agenda Item No. /~
January 15, 2019
Resolution of the City Council of the City of Fairfield Approving the Agreement and Establishment of an IRS Section 115 Pension Trust with Public Agency Retirement Services (PARS) for the Purpose of Pre-Funding a Portion of the City's Contributions to the California Public Employees' Retirement System (CalPERS), Delegating Authority to Request Disbursements, and Authorizing the City Manager to Execute all Documents to Fund and Maintain
Participation in the Trust
a minimum of $5 million in the Trust, unless needed to address deficits caused by increasing pension costs. As a result, in the long-term, establishment of a Trust should result in lower total pension costs to the City.
In September 2017, the City issued a Request for Qualifications (RFQ) for pension trust fund management services. Two firms responded to the RFQ. After evaluating all proposals alongside the needs of the City, staff conducted interviews and evaluated the programs of two vendors: PFM Asset Management LLC and Public Agency Retirement Services (PARS). Both programs are compliant with Internal Revenue Code Section 115.
PARS, which was established in 1984 has been designing and administering retirement plan and trust solutions exclusively for public agencies for the past 34 years. They currently administer over 1,400 plans for more than 850 public agencies, including 675 in California. PARS offers five investment strategies and asset management fees are 25 basis points (0.25%). Contributions to the trust fund are strictly voluntary by the City and can be accessed at any time. Fees are only charged when assets are added to the trust.
In contrast, PFM administers over 120 plans and asset management fees are 45 basis points (0.45%).
While both vendors provide excellent pension trust options for the City, staff recommends that Council engage PARS to provide these services. Primary drivers for this recommendation are lower asset management fees, established track record, and the size of the client base and assets under management with PARS.
FINANCIAL IMPACT
The City currently has $5 million set-aside in the Pension Stabilization Fund (Fund 014) and would transfer this funding to the newly established trust. Fees resulting from managing the trust are embedded within the investment returns. There are no other costs associated with this action.
Agenda Item #13.2.
PAGE3
DATE:
Agenda Item No. ~
January 15, 2019
SUBJECT: Resolution of the City Council of the City of Fairfield Approving the Agreement and Establishment of an IRS Section 115 Pension Trust with Public Agency Retirement Services (PARS) for the Purpose of Pre-Funding a Portion of the City's Contributions to the California Public Employees' Retirement System (CalPERS), Delegating Authority to Request Disbursements, and Authorizing the City Manager to Execute all Documents to Fund and Maintain
Participation in the Trust
CITY COUNCIL WORKPLAN
City Council Goal this item supports:
Community Safety
~ Financial and Operational Sustainability
Quality of Life
□ Not Applicable
Priority Project:
~ #28.9 Addressing Rising Pension Costs
Community Infrastructure
□ Economic Development
Travis Air Force Base
PUBLIC CONTACT/ADVISORY BODY RECOMMENDATION
N/A
ALTERNATIVE ACTION
City Council could choose to not approve the establishment of a pension trust or direct staff to investigate other trust providers in more detail. This is not recommended as staff has performed a RFQ process and establishing a pension trust is a recognized best practice that will help the City achieve greater financial sustainability.
DOCUMENTS ATTACHED
Attachment 1: Proposed Resolution
STAFF CONTACT
Emily Combs, Director of Finance
707-428-7629
[email protected]
Coordinated with: City Attorney
Agenda Item #13.2.
CITY OF FAIRFIELD
RESOLUTION NO. 2019- ,, ?/
ATTACHMENT 1
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF FAIRFIELD APPROVING THE AGREEMENT AND ESTABLISHMENT OF AN IRS SECTION 115 PENSION
TRUST WITH PUBLIC AGENCY RETIREMENT SERVICES (PARS) FOR THE
PURPOSE OF PRE-FUNDING A PORTION OF THE CITY'S CONTRIBUTIONS TO
THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM (CALPERS),
DELEGATING AUTHORITY TO REQUEST DISBURSEMENTS, AND AUTHORIZING
THE CITY MANAGER TO EXECUTE ALL DOCUMENTS TO FUND AND MAINTAIN
PARTICIPATION IN THE TRUST
WHEREAS, PARS has made available the PARS Public Agencies Post-Employment Benefits (Pension) Trust (the "Program") for the purpose of pre-funding a portion of the City's contributions to CalPERS; and
WHEREAS, the City is eligible to participate in the Program, a tax-exempt trust performing an essential governmental function with the meaning of Section 115 of the Internal Revenue Code, as amended, and the regulations issued there under, and is taxexempt trust under the relevant statutory provisions of the State of California; and WHEREAS, the City's adoption and participation in the Program has no effect on any current or former employee's entitlement to post-employment pension benefits; and WHEREAS, the terms and conditions of post-employment benefit entitlement, if any, are governed by contracts separate from and independent of the Program; and WHEREAS, the City's funding of the Program does not, and is not intended to, create any new vested right to any benefit nor strengthen any existing vested right; and WHEREAS, the City reserves the right to make contributions, if any, to the Program.
NOW, THEREFORE, THE COUNCIL OF THE CITY OF FAIRFIELD HEREBY RESOLVES:
Section 1. The City Council hereby adopts the PARS Public Agencies Post-Employment Benefits (Pension) Trust.
Section 2. The City Manager, or designee, is hereby appointed the City's Plan Administrator for the Program.
Section 3. The City's Plan Administrator is hereby authorized to execute the PARS legal and administrative documents on behalf of the City and to take whatever additional Agenda Item #13.2.
RES. NO. 2019 - If
PAG 2
actions are necessary to maintain the City's participation in the Program and to maintain compliance of any relevant regulation issued or as may be issued; therefore, authorizing him to take whatever additional actions are required to administer the City's Program.
PASSED AND ADOPTED this 15th day of January, 2019, by the following vote:
AYES: COUNCILMEMBERS: ______________ _
NOES: COUNCILMEMBERS: -----------------
ABSENT: COUNCILMEMBERS: -----------------
ABSTAIN: COUNCILMEMBERS: -----------------
MAYOR
ATTEST:
CITY CLERK
Agenda Item #13.2.
7/31/2015 Coversheet
http://healdsburg.novusagenda.com/agendapublic/CoverSheet.aspx?ItemID=462&MeetingID=29 1/3 Meeting Date: August 3, 2015
Agenda Item No: 8.A.
Prepared By: Heather Ippoliti, Assistant City Manager
REQUEST FOR CITY COUNCIL ACTION
SUBJECT:
Authorize participation in the Public Agencies Post-Employment Benefits Trust Program to be administered by Public Agency Retirement Services (PARS) with U.S. Bank as trustee, appointing the City Manager as the Plan Administrator, authorizing the City Manager to negotiate and execute the documents to implement the program, and creating a Council sub-committee to develop the related investment policy.
STRATEGIC INITIATIVE:
Fiscal Responsibility
RECOMMENDED ACTION(S):
Adopt Resolution authorizing participation in the Public Agencies Post-Employment Benefits Trust Program to be administered by Public Agency Retirement Services (PARS) with U.S. Bank as trustee, appointing the City Manager as the Plan Administrator and authorizing him to negotiate and execute the documents to implement the program, and creating a Council sub-committee to develop the related investment policy.
BACKGROUND:
In 2012, the Government Accounting Standards Board (GASB) issued Statement No. 68, Accounting and Financial Reporting for Pensions. GASB 68 requires that governmental employers that sponsor Defined Benefit plans (i.e., California Public Employees Retirement System (PERS)) must recognize a net pension liability, also known as an unfunded actuarial accrued liability (UAAL) on their balance sheet. This is the difference between the City’s total pension liability (actuarial accrued liability) and actual plan assets. GASB 68 will become effective for fiscal years starting after June 15, 2014.
CalPERS has also significantly changed the methodology for calculating the City’s Annual Required Contributions (ARC) in regards to amortizing the UAAL.
Until recently, the City’s only option for reducing the UAAL was to commit additional funds to CalPERS.
Unfortunately, these additional funds would be subject to the same market volatility risk as the CalPERS investment policy target of 7.5%, and are not accessible to the City for other CalPERS pension expenses.
DISCUSSION/ANALYSIS:
A recent private letter ruling received from the IRS established that public agencies or municipalities could create a separate trust to "pre-fund" its PERS unfunded liability. This would provide the City with an alternative to sending funds to PERS and will provide greater City local control over assets and portfolio management.
The City engaged the services of John Bartel, President of the actuarial consulting firm, Bartel and Associates, LLC to evaluate the PERS actuarial issues facing the City. Mr. Bartel presented his firm’s findings to the City Council on April 21 and his recommendations on June 1, 2015 (report attached as Exhibit A).
Expected benefits offered by a separate retirement funding trust include:
Agenda Item #13.2.
7/31/2015 Coversheet
http://healdsburg.novusagenda.com/agendapublic/CoverSheet.aspx?ItemID=462&MeetingID=29 2/3 · Pension volatility mitigation-contributions from the trust can be transferred to PERS at the City’s discretion to offset fluctuations in the required annual contributions impacted by PERS investment returns.
As shown on page 2 of Exhibit A, PERS investment returns have fluctuated dramatically over the last 20 years. Last week PERS stakeholders were notified via email that the preliminary one year investment performance for FY 14-15 showed a return of only 2.4 percent. Although PERS has achieved returns over the past three and five years of 10.9 and 10.7 percent, respectively, cities throughout California were negatively impacted during the period when their 10 year returns averaged only 3.4 percent. To mitigate this potential going forward, the proposed trust and funding plan have been structured to level contribution rates to the following:
-Miscellaneous-28% through FY 23-24
-Safety-44%
· Trust assets can be accessed anytime to fund the City’s pension obligations and defray reasonable expenses associated therewith.
· Investment flexibility with Section 115 Trust compared to restrictions on general fund investments (Govt.
Code 53216.1)
· Investment security with Section 115 Trust compared to CalPERS investment management, risk appetite and portfolio allocation
· Investments can be tailored to the City’s unique demographics · Oversight and local control of fund management selection and monitoring of performance An investment policy for trust assets also needs to be developed. Staff recommends that a Council subcommittee be formed to work with PARS to create the policy, which will then be brought forward to the full Council for consideration and adoption at a future meeting.
ENVIRONMENTAL ANALYSIS:
Pursuant to Title 14, the California Code of Regulations, Section 15302(C) of the California Environmental Quality Act (CEQA) guidelines, approval of this resolution is an administrative activity of the City that will not result in direct or indirect physical changes to the environment.
FISCAL IMPACT:
Cash Impact:
Establishing the Pension Trust Fund has no direct cash impact. Funding the Trust Fund will have a cash impact as funds must be withdrawn from existing accounts and transferred to the irrevocable trust account. As part of the FY 15-16 Budget Adoption process, Council authorized the following contributions to the trust:
General Fund $1,500,000. Miscellaneous Employees
General Fund 1,000,000. Safety Employees
Streets Fund 93,017. Miscellaneous Employees
Water Fund 279,040. Miscellaneous Employees
Wastewater Fund 336,044. Miscellaneous Employees
Drainage Fund 73,045. Miscellaneous Employees
Electric Fund 479,929. Miscellaneous Employees
Community Services Fund 238,925. Miscellaneous Employees Total $4,000,000
Financial Statement Impact:
Agenda Item #13.2.
7/31/2015 Coversheet
http://healdsburg.novusagenda.com/agendapublic/CoverSheet.aspx?ItemID=462&MeetingID=29 3/3 The actual financial statement impact of the amount of GASB 68 UAAL is not known at the present time, as CalPERS is still working on current valuations
ALTERNATIVES:
Council may choose to not adopt the resolution and to not authorize participation in the program.
ATTACHMENTS:
Description
Resolution
Exhibit A - Bartle Associates Report 6_1_15
D
D
Agenda Item #13.2.
TOWN OF TIBURON
1505 Tiburon Boulevard
Tiburon, CA 94920
Town Council Meeting
May 4,2016
Agenda Item: Cc 3
STAFF REPORT
To:
From:
Mayor and Members of the Town Council
Department of Administrative Services
Subject: Recommendation to Authorize Participation in the Public Agency Re ement Services (PARS) Post -Employment Benefits Trust Program for Pr ndyig OPEB and Pension Liabilities
Reviewed By: [
BACKGROUND
The Town of Tiburon provides post -employment benefits to retirees who meet plan eligibility requirements. Under the Town' s contract with Ca1PERS, employees who retire from the Town at age 50 or later with at least 5 years of service are eligible for a Ca1PERS pension.
All eligible retirees, irrespective of their date of hire, are entitled to the minimum CaIPERS medical benefits, which is $ 125 in 2016. This amount increases annually and the benefit continues for the life of the retiree and for the life of a surviving spouse.
In addition to the above, retirees with 15 or more years of Town service are eligible to receive a monthly medical allowance based on the premium charged by Ca1PERS for the Kaiser single person coverage. This benefit does not apply to Management/ Mid-management employees hired after July 1, 2009, Police employees hired after July 1, 2010, or SEN employees hired after July 1, 2011 ( the pool for this benefit has been closed). The benefit amount that is earned at retirement is based on the schedule below, and does not increase as medical premiums increase and does not pass on to an employee' s surviving spouse. 15- 19 years of service:
20- 24 years of service
25+ of service
50% of Kaiser Single Rate
75% of Kaiser Single Rate
100% ofKaiser Single Rate
The Town currently has 14 employees receiving this benefit at an annual cost of $88, 581. 12, and 12 employees left who are eligible for this benefit upon retirement.
ANALYSIS
In 2004, the Government Accounting Standards Board ( GASB), the organization that sets generally accepted accounting principles (GAAP) for public sector entities, issued a statement GASB 45) that requires public employers to produce actuarial valuations for their OPEB, and to report these liabilities in their financial statements. Under GASB regulations, how to handle OPEB funding is at the agency' s discretion.
Agenda Item #13.2.
1 1) V 11 l..il ll l lCl l :viCC [.11
May 4, 20)
Up to this point, the Town has paid the amount required for retiree medical benefits in a given year on the pay-as- you-go basis. In addition, the Town has set aside funds in the OPEB GASB 45 General Fund Reserve. The funds held in this reserve do not earn interest, and are not eligible to be considered in reducing the Town' s OPEB unfunded liability because they are not held in an irrevocable trust. There is currently $ 1, 246, 159 in the OPEB GASB 45 reserve, and based on the most recent analysis, the Town' s unfunded liability for OPEB benefits will be approximately
3. 63 million based on a 4% discount rate. The 4% discount rate is the scenario used for agencies that only contribute OPEB costs in the amount of the actual payments on behalf of retires (pay-as- you- go), which the Town currently employs.
It is a financial management best practice, and consistent with the Town' s financial goals to reduce long term liabilities and GFOA considers it "best practice" to prefund OPEB benefits 2012). Staff believes that entering into a trust agreement to prefund OPEB liabilities will lower long term liabilities and produce savings in the long run. Prefunding OPEB costs in an irrevocable trust will also allow the Town to use a higher discount rate when performing its next actuarial valuation in 2017. It is estimated that a 1% increase in the discount rate could lower the Town' s OPEB unfunded liability by 10- 12%, or $360,000 to $435, 000, based on a $ 3. 63 million liability. A 6. 0% discount rate would still be considered moderately conservative when performing the next actuarial, and could reduce the Town' s current unfunded liability from $3. 63 million to approximately $2. 75 - $ 2.9 million.
While not a requirement of GASB 45, prefunding the Town' s OPEB obligation and placing it in an irrevocable trust provides certain benefits:
Once placed into a trust, the funds cannot be diverted to other purposes, nor is it subject to claims by creditors or State takeaways.
Trust assets can be managed for investment purposes to achieve a higher rate ofreturn, thus lowering the Town' s future liability. There is investment flexibility with Section 115 Trust compared to restrictions on general fund investments.
It is fiscally prudent to prefund retiree obligations while accrued during active service, preventing the increase of the Town' s unfunded obligation and pay- as- you-go costs.
Prefunding is less expensive for the Town over the long run since more of the unfunded liability will be paid for by investment dollars.
There are surprisingly few choices when it comes to companies that provide trust services for OPEB pre -funding. Staff reached out to the California Employers' Retirement Benefit Trust CERBT) and Public Agency Retirement Services (PARS) for proposals to provide trust services.
After reviewing the information provided, the main difference between the two companies comes down to fees charged, number of investment strategies provided, requirement on timing of OPEB Actuarial, and additional services provided.
CERBT is overseen and administered by the CaIPERS Board of Administration and currently charges an annual fee of 10 basis points on the assets under its management. This fee can be increased at any time. CERBT has three asset allocation strategies with the most conservative allocation averaging 24% in equities and the most aggressive with 57% in equities. CERBT requires an actuarial valuation be performed every two years, at an approximate cost of $5, 000 per valuation.
TOWN 01' TIBI -. RON : ; . al. 4
Agenda Item #13.2.
OVVII
May 4, 2016
PARS is a private for-profit company that contracts with US Bank for trustee services and HighMark Capital Management for Investment Management services. PARS charges 25 basis points for their trust administration/consulting fees with additional fees ranging between 24 — 32 basis points for contracted trust/investment management fees, for a total maximum fee of 57 basis points. The fee that would be charged is fixed for the next two years. PARS has actually reduced fees over the past six years due to economies of scale of their multi-employer trust. PARS provides more flexibility with 5 asset allocation strategies (active or passive) and the ability to customize the portfolio. The most conservative portfolio has a minimum of 5% invested in equities, with the most aggressive at 75% equities. PARS allows for tri -annual actuarial valuation reports. PARS also provides an option, at no additional cost, to make OPEB payments directly to retirees, therefore relieving the administrative duty from Town staff. This option is not available with CERBT. PARS also provides an option for establishing an account within the same trust for prefunding unfunded pension liabilities. There are currently no other options for prefunding our CaIPERS pension unfunded liability except lump -sum payments to Ca1PERS.
This pension prefunding option with PARS gives us the ability to set aside reserves in the same trust (sub accounted for separately from OPEB) and lower Net Pension Liabilities (NPL) for GASB 68 reporting.
There are no costs to establish a trust fund with either administrator. Fees are only charged once funds are place with the administrator to manage.
The pros of contracting with CERBT are lower management fees ( ten basis points versus 49- 57 basis points). However, CEBRT has under -performed PARS in their three investment options over the past three years, net of all fees. Of course, this past performance does not guarantee future results. Two of CERBTS investment options do not have a five year history at this point to compare results.
The pros in contracting with PARS would be diversification of investments as Ca1PERS would not also be managing these funds (PERS currently manages approximately $27 million in Town pension assets). Only this PARS Trust has a Private Letter Ruling (PLR) from the IRS which allows for prefunding of OPEB or Pension or Both liabilities. PARS will directly make payment to retirees who are eligible for monthly medical allowance payments (currently 14 employees).
For an agency our size, PARS only requires an actuarial valuation be performed every three years as opposed to CERBT every two years. PARS does provide more investment options than CERBT and does allow for customization of investment options. PARS has a full service approach including a local dedicated Portfolio Manager who will make a recommendation on our investment strategy, take on the fiduciary responsibility to manage our assets, assist with our investment policy, conduct annual reviews and has cell phone access for questions.
This agenda item is recommending, though the Council Budget Committee, that the Town Council authorize participation in the Public Agency Retirement Services (PARS) Post - Employment Benefits Trust. Though staff was looking only at establishing an OPEB Irrevocable Trust only, there is no cost to open either Trust Fund and the Town could consider pre -funding pension liabilities through this trust as opposed to directing additional payments to Ca1PERS in the future. Once this combination trust is established, PARS will work with the Town, through the Budget Committee, to determine the best strategic asset allocation policy for the investment of the OPEB GASB 45 Reserve funds.
TO\..'N OF TJB11RL' N Page 3 O1: 4
Agenda Item #13.2.
n I CTI
lav= 2i, 116
FINANCIAL IMPACT
Establishing the Pension Trust Fund has no direct cash impact. Funding the Trust Fund will have a cash impact as funds will be withdrawn from the OPEB GASB 45 General Fund Reserve and transferred to the irrevocable trust.
ENVIRONMENTAL DETERMINATION
This item does not meet the definition of a project under the California Environmental Quality Act (CEQA).
RECOMMENDATION
Staff recommends that the Town Council:
Move to adopt the following resolution:
1. Resolution authorizing_ participation the in PARS Post -Employment Benefits Trust Program, to be administered by Public Agency Retirement Services ( PARS) and U. S.
Bank, as Trustee, appointment the Town Manager as the Town' s Plan Administrator, and authorizing the Town Manager to execute the documents to implement the Program Staff will meet with the Budget Committee and PARS representatives to determine the best strategy for our OPEB GASB 45 Reserves based on needs and objectives, and bring the recommendation back to the full Council for approval. Ifwe invest these funds prior to June 30, 2016, we can receive credit for the investment against our Net OPEB Obligation in the FY 2015- 16 annual audit.
Exhibits:
1. Resolution authorizing participation the in PARS Post -Employment Benefits Trust Program, to be administered by Public Agency Retirement Services ( PARS) and U.S.
Bank, as Trustee, appointment the Town Manager as the Town' s Plan Administrator, and authorizing the Town Manager to execute the documents to implement the Program
2. Administrative Services Agreement
Prepared By: Heidi Bigall, Director of Administrative Services TOWN OF "[ iii`j.' N Pa; c4of4
Agenda Item #13.2.
Public Agency Retirement Services
APPENDIX:
net returns comparison
Agenda Item #13.2.
Investment returns ▎ 1
PARS
Moderate
(50% Fixed Income/Cash) 7.17%
minus weighted PARS
administration fee (-) 0.25%
minus weighted
investment management fee
(-) 0.35%
5-Year Net Return 6.57%
CALPERS CEPPT
Strategy 1
(49% Fixed Income/Cash) N/A
minus fees N/A
5-Year Net Return N/A
PARS
Moderate
(50% Fixed Income/Cash) 2.08%
minus weighted PARS
administration fee (-) 0.25%
minus weighted
investment management fee
(-) 0.35%
3-Year Net Return 1.48%
CALPERS CEPPT
Strategy 1
(49% Fixed Income/Cash) 0.90%
minus fees (-) 0.23%
3-Year Net Return 0.67%
PARS
Moderate
(50% Fixed Income/Cash) 13.98%
minus weighted PARS
administration fee (-) 0.25%
minus weighted
investment management fee
(-) 0.35%
1-Year Net Return 13.38%
Net Performance Fee Analysis
CALPERS CEPPT
Strategy 1
(49% Fixed Income/Cash) 12.11%
minus fees (-) 0.26%
1-Year Net Return 11.85%
Over 1 Year Over 3 Years Over 5 Years
As of December 31, 2023
Subject to change due to rebalancing; Past performance does not guarantee future results.
The advisor to the PARS portfolios is U.S. Bank, and PFM Asset Management serves as sub-advisor to U.S. Bank to manage these portfolios. Prior to January 1st, 2024, HighMark Capital Management, Inc. (“HighMark”) acted as sub-advisor to the PARS portfolios. HighMark, including clients and investment personnel, was consolidated into its affiliate, PFM Asset Management LLC (PFMAM) on January 1st, 2024.
Please see important additional disclosures to the PARS portfolios included in the individual strategy fact sheets at the end of this presentation.
Agenda Item #13.2.
Investment returns ▎ 2
PARS
Moderately Conservative
(70% Fixed Income/Cash) 4.95%
minus weighted PARS
administration fee (-) 0.25%
minus weighted
investment management fee
(-) 0.35%
5-Year Net Return 4.35%
CALPERS CEPPT
Strategy 2
(70% Fixed Income/Cash) N/A
minus fees N/A
5-Year Net Return N/A
PARS
Moderately Conservative
(70% Fixed Income/Cash) 0.35%
minus weighted PARS
administration fee (-) 0.25%
minus weighted
investment management fee
(-) 0.35%
3-Year Net Return -0.25%
CALPERS CEPPT
Strategy 2
(70% Fixed Income/Cash) -0.92%
minus fees (-) -0.22%
3-Year Net Return -1.14%
PARS
Moderately Conservative
(70% Fixed Income/Cash) 11.05%
minus weighted PARS
administration fee (-) 0.25%
minus weighted
investment management fee
(-) 0.35%
1-Year Net Return 10.45%
Net Performance Fee Analysis
CALPERS CEPPT
Strategy 2
(70% Fixed Income/Cash) 9.23%
minus fees (-) 0.25%
1-Year Net Return 8.98%
Over 1 Year Over 3 Years Over 5 Years
As of December 31, 2023
Subject to change due to rebalancing; Past performance does not guarantee future results.
The advisor to the PARS portfolios is U.S. Bank, and PFM Asset Management serves as sub-advisor to U.S. Bank to manage these portfolios. Prior to January 1st, 2024, HighMark Capital Management, Inc. (“HighMark”) acted as sub-advisor to the PARS portfolios. HighMark, including clients and investment personnel, was consolidated into its affiliate, PFM Asset Management LLC (PFMAM) on January 1st, 2024.
Please see important additional disclosures to the PARS portfolios included in the individual strategy fact sheets at the end of this presentation.
Agenda Item #13.2.
Public Agency Retirement Services
APPENDIX:
INVESTMENT PORTFOLIOS
Agenda Item #13.2.
For Institutional Investor or Investment Professional Use Only | See Important Disclosures HighMark Plus (Active)
Composite Inception Date 07/2004
No of Holdings in Portfolio 19
HighMark Plus Composite (Active)
Gross Net
Current Quarter* 7.47% 7.38%
Blended Benchmark*,** 6.27%
Year To Date* 8.81% 8.42%
Blended Benchmark*,** 7.85%
1 Year 8.81% 8.42%
Blended Benchmark** 7.85%
3 Year -0.96% -1.31%
Blended Benchmark** -0.47%
5 Year 3.30% 2.93%
Blended Benchmark** 3.20%
10 Year 3.00% 2.63%
Blended Benchmark** 2.95%
PARS DIVERSIFIED PORTFOLIOS
CONSERVATIVE
INVESTMENT OBJECTIVE
ANNUAL RETURNS
ASSET ALLOCATION — CONSERVATIVE PORTFOLIO
Comprehensive Investment Solution
HighMark® Capital Management, Inc.’s (HighMark)
diversified investment portfolios are designed to
balance return expectations with risk tolerance.
Key features include: sophisticated asset allocation
and optimization techniques, four layers of
diversification (asset class, style, manager, and
security), access to rigorously screened, top tier
money managers, flexible investment options, and
experienced investment management.
Rigorous Manager Due Diligence
Our manager review committee utilizes a rigorous
screening process that searches for investment
managers and styles that have not only produced
above-average returns within acceptable risk
parameters, but have the resources and commitment
to continue to deliver these results. We have set high
standards for our investment managers and funds.
This is a highly specialized, time consuming
approach dedicated to one goal: competitive and
consistent performance.
Flexible Investment Options
In order to meet the unique needs of our clients,
we offer access to flexible implementation strategies:
HighMark Plus utilizes actively managed mutual
funds while Index Plus utilizes index-based
securities, including exchange-traded funds. Both
investment options leverage HighMark’s active asset
allocation approach.
Risk Management
The portfolio is constructed to control risk through
four layers of diversification – asset classes (cash,
fixed income, equity), investment styles (large cap,
small cap, international, value, growth), managers
and securities. Disciplined mutual fund selection and
monitoring process helps to drive return potential
while reducing portfolio risk.
WHY THE PARS DIVERSIFIED
CONSERVATIVE PORTFOLIO?
Q4 2023
* Returns less than one year are not annualized. **Breakdown for Blended Benchmark: From 10/1/2012 - Present: 7.5% S&P500,
1.5% Russell Mid Cap, 2.5% Russell 2000, 1% MSCI EM (net), 2% MSCI EAFE (net), 52.25% Bloomberg US Agg, 25.75% ICE BofA 1-3 Yr US Corp/Gov’t, 2% ICE BofA US High Yield Master II, 0.5% Wilshire REIT, and 5% FTSE 1 Mth US T-Bill. From 4/1/2007 – 9/30/2012, the blended benchmark was 12% S&P 500; 1% Russell 2000, 2% MSCI EAFE (net), 40% ICE BofA 1-3 Year Corp./Govt, 40% Bloomberg US Agg, 5% FTSE 1 Mth US T-Bill. Prior to April 2007: the blended benchmark was 15% S&P 500, 40% ICE BofA 1-3Yr Corp/Gov, 40% Bloomberg US Agg, and 5% FTSE 1 Mth US T-Bill.
To provide a consistent level of
inflation-protected income over
the long-term. The major portion
of the assets will be fixed income
related. Equity securities are
utilized to provide inflation
protection.
Conservative
Moderately Conservative
Moderate
Balanced
Capital Appreciation
Efficient Frontier
Risk (Standard Deviation)
Reward (Rate of Return)
Strategic Range Policy Tactical
Equity 5 – 20% 15% 15%
Fixed Income 60 – 95% 80% 81%
Cash 0 – 20% 5% 4%
ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees, but Net of Embedded Fund Fees)
Index Plus Composite (Passive)
Gross Net
Current Quarter* 7.24% 7.14%
Blended Benchmark*,** 6.27%
Year To Date* 7.63% 7.25%
Blended Benchmark*,** 7.85%
1 Year 7.63% 7.25%
Blended Benchmark** 7.85%
3 Year -1.17% -1.53%
Blended Benchmark** -0.47%
5 Year 2.95% 2.58%
Blended Benchmark** 3.20%
10 Year 2.72% 2.35%
Blended Benchmark** 2.95%
PORTFOLIO FACTS
Index Plus (Passive)
Composite Inception Date 07/2004
No of Holdings in Portfolio 12
(Gross of Investment Management Fees, but Net of Embedded Fund Fees)
HighMark Plus Composite (Active)
2008 -9.04%
2009 15.59%
2010 8.68%
2011 2.19%
2012 8.45%
2013 3.69%
2014 3.88%
2015 0.29%
2016 4.18%
2017 6.73%
2018 -1.35%
2019 11.05%
2020 9.03%
2021 2.20%
2022 -12.63%
2023 8.81%
Index Plus Composite (Passive)
2008 -6.70%
2009 10.49%
2010 7.67%
2011 3.70%
2012 6.22%
2013 3.40%
2014 4.32%
2015 0.06%
2016 3.75%
2017 5.52%
2018 -1.09%
2019 10.37%
2020 8.56%
2021 1.97%
2022 -12.06%
2023 7.63%
Agenda Item #13.2.
HIGHMARK CAPITAL MANAGEMENT
350 California Street
Suite 1600
San Francisco, CA 94104
800-582-4734
ABOUT THE ADVISER
HighMark® Capital Management, Inc. (HighMark) has
over 100 years (including predecessor organizations) of institutional money management experience with $9.2
billion in assets under management*. HighMark has a
long term disciplined approach to money management
and currently manages assets for a wide array of
clients.
ABOUT THE PORTFOLIO MANAGEMENT TEAM
Andrew Brown, CFA®
Senior Portfolio Manager
Investment Experience: since 1994
HighMark Tenure: since 1997
Education: MBA, University of Southern California;
BA, University of Southern California
Salvatore “Tory” Milazzo III, CFA®
Senior Portfolio Manager
Investment Experience: since 2004
HighMark Tenure: since 2014
Education: BA, Colgate University
J. Keith Stribling, CFA ®
Senior Portfolio Manager
Investment Experience: since 1985
HighMark Tenure: since 1995
Education: BA, Stetson University
Christiane Tsuda
Senior Portfolio Manager
Investment Experience: since 1987
HighMark Tenure: since 2010
Education: BA, International Christian University, Tokyo Anne Wimmer, CFA®
Senior Portfolio Manager
Investment Experience: since 1987
HighMark Tenure: since 2007
Education: BA, University of California, Santa Barbara
Asset Allocation Committee
Number of Members: 10
Average Years of Experience: 29
Average Tenure (Years): 18
Manager Review Group
Number of Members: 3
Average Years of Experience: 29
Average Tenure (Years): 13
*Assets under management (“AUM”) include assets for which HighMark provides continuous and regular supervisory and management services. As of 6/1/2023 HighMark previously listed Assets under Advisement (“AUA”) are no longer advised by HighMark.
For Institutional Investor or Investment Professional Use Only | See Important Disclosures The performance records shown represent size-weighted composites of tax exempt accounts that meet the following criteria:
Accounts are managed by HighMark with full investment authority according to the PARS Conservative active and passive objectives.
The adviser to the PARS portfolios is U.S. Bank, and HighMark serves as sub-adviser to U.S. Bank to manage these portfolios. U.S. Bank may charge clients as much as 0.60% annual management fee based on a sliding scale. U.S. Bank pays HighMark 60% of the annual management fee for assets sub-advised by HighMark under its sub-advisory agreement with U.S. Bank. The 0.36% paid to HighMark, as well as other expenses that may be incurred in the management of the portfolio, will reduce the portfolio’s returns. Assuming an investment for five years, a 5% annual total return, and an annual sub-advisory fee rate of 0.36% deducted from the assets at market at the end of each year, a $10 million initial value would grow to $12.53 million after fees (Net-of-Fees) and $12.76 million before fees (Gross-of-Fees). Gross returns are presented before management and custodial fees but after all trading expenses and reflect the reinvestment of dividends and other income. A client's return will be reduced by the advisory fees and other expenses it may incur as a client. Additional information regarding the firm’s policies and procedures for calculating and reporting performance results is available upon request. Performance results are calculated and presented in U.S. dollars and do not reflect the deduction of investment advisory fees, custody fees, or taxes but do reflect the deduction of trading expenses. Returns are calculated based on tradedate accounting.
Blended benchmarks represent HighMark’s strategic allocations between equity, fixed income, and cash and are rebalanced monthly. Benchmark returns do not reflect the deduction of advisory fees or other expenses of investing but assumes the reinvestment of dividends and other earnings. An investor cannot invest directly in an index. The unmanaged S&P 500 Index is representative of the performance of large companies in the U.S. stock market. The MSCI EAFE Index is a free floatadjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The Russell Midcap Index measures the performance of the mid- cap segment of the U.S. equity universe. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The ICE BofA U.S. High Yield Master II Index tracks the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market. Wilshire REIT Index measures U.S. publicly traded Real Estate Investment Trusts. The unmanaged Bloomberg U.S. Aggregate Bond Index is generally representative of the U.S. taxable bond market as a whole. The ICE BofA 1-3 Year U.S. Corporate & Government Index tracks the bond performance of the ICE BofA U.S. Corporate & Government Index, with a remaining term to final maturity less than 3 years.
The unmanaged FTSE 1-Month U.S. Treasury Bill Index tracks the yield of the 1-month U.S. Treasury Bill.
HighMark Capital Management, Inc. (HighMark) is an investment adviser registered with the U.S. Securities and Exchange Commission and a subsidiary of U.S. Bank National Association ("U.S. Bank"). U.S. Bank is a separate entity and subsidiary of U.S. Bancorp. U.S. Bank is not responsible for and does not guarantee the products, services or performance of HighMark.
HighMark manages institutional separate account portfolios for a wide variety of for-profit and nonprofit organizations, public agencies, and public and private retirement plans. Individual account management and construction will vary depending on each client's investment needs and objectives. U.S. Bank provides certain services to HighMark and is compensated for these services. Investments employing HighMark strategies are NOT insured by the FDIC or by any other Federal Government Agency, are NOT Bank deposits, are NOT guaranteed by the Bank or any Bank affiliate, and MAY lose value, including possible loss of principal.
350 California Street
Suite 1600
San Francisco, CA 94104
800.582.4734
www.highmarkcapital.com
HOLDINGS
STYLE
Small Cap
2.2%
Interm-Term Bond
74.3%
Mortgage Backed
Securities
7.1%
Large Cap Core
4.4%
Large Cap Growth
1.5%
Mid Cap
1.6%
Intl Stocks
2.8%
Cash
3.9%
Large Cap Value
1.8% Real Estate
0.4%
Holdings are subject to change at the
discretion of the investment manager.
HighMark Plus (Active) Index Plus (Passive)
Columbia Contrarian Core I3 iShares Core S&P 500 ETF
Vanguard Growth & Income Adm iShares S&P 500 Value ETF
Dodge & Cox Stock Fund iShares S&P 500 Growth ETF
iShares S&P 500 Value ETF iShares Russell Mid-Cap ETF
Harbor Capital Appreciation - Retirement Vanguard Real Estate ETF iShares S&P 500 Growth ETF iShares Russell 2000 Value ETF iShares Russell Mid-Cap ETF iShares Russell 2000 Growth ETF Vanguard Real Estate ETF iShares Core MSCI EAFE ETF
Undiscovered Managers Behavioral Value-R6 Vanguard FTSE Emerging Markets ETF Emerald Growth Fund-I iShares MBS ETF
DFA Large Cap International Portfolio iShares Core U.S. Aggregate Dodge & Cox International Stock First American Government Obligations Z MFS International Growth - R6
Hartford Schroders Emerging Markets Eq
iShares MBS ETF
Dodge & Cox Income-I
PGIM Total Return Bond - R6
DoubleLine Core Fixed Income - I
First American Government Obligations Z
Agenda Item #13.2.
For Institutional Investor or Investment Professional Use Only | See Important Disclosures HighMark Plus (Active)
Composite Inception Date 08/2004
No of Holdings in Portfolio 19
PARS DIVERSIFIED PORTFOLIOS
MODERATELY CONSERVATIVE
INVESTMENT OBJECTIVE
ANNUAL RETURNS
ASSET ALLOCATION — MODERATELY CONSERVATIVE PORTFOLIO
Comprehensive Investment Solution
HighMark® Capital Management, Inc.’s (HighMark)
diversified investment portfolios are designed to
balance return expectations with risk tolerance.
Key features include: sophisticated asset allocation
and optimization techniques, four layers of
diversification (asset class, style, manager, and
security), access to rigorously screened, top tier
money managers, flexible investment options, and
experienced investment management.
Rigorous Manager Due Diligence
Our manager review committee utilizes a rigorous
screening process that searches for investment
managers and styles that have not only produced
above-average returns within acceptable risk
parameters, but have the resources and commitment
to continue to deliver these results. We have set high
standards for our investment managers and funds.
This is a highly specialized, time consuming
approach dedicated to one goal: competitive and
consistent performance.
Flexible Investment Options
In order to meet the unique needs of our clients,
we offer access to flexible implementation strategies:
HighMark Plus utilizes actively managed mutual
funds while Index Plus utilizes index-based
securities, including exchange-traded funds. Both
investment options leverage HighMark’s active asset
allocation approach.
Risk Management
The portfolio is constructed to control risk through
four layers of diversification – asset classes (cash,
fixed income, equity), investment styles (large cap,
small cap, international, value, growth), managers
and securities. Disciplined mutual fund selection and
monitoring process helps to drive return potential
while reducing portfolio risk.
WHY THE PARS DIVERSIFIED
MODERATELY CONSERVATIVE PORTFOLIO?
Q4 2023
* Returns less than one year are not annualized. **Breakdown for Blended Benchmark: From 10/1/2012 - Present: 15.5% S&P500, 3% Russell Mid Cap, 4.5% Russell 2000, 2% MSCI EM (net), 4% MSCI EAFE (net), 49.25% Bloomberg US Agg, 14% ICE BofA 1- 3 Yr US Corp/Gov’t, 1.75% ICE BofA US High Yield Master II, 1% Wilshire REIT, and 5% FTSE 1 Mth US T-Bill. From 4/1/2007 - 9/30/2012: the blended benchmark was 25% S&P 500; 1.5% Russell 2000, 3.5% MSCI EAFE (net), 25% ICE BofA 1-3 Year Corp./Govt, 40% Bloomberg US Agg, 5% FTSE 1 Mth US T-Bill. Prior to April 2007, the blended benchmark was 30% S&P 500, 25% ICE BofA 1-3Yr Corp/Gov, 40% Bloomberg US Agg, and 5% FTSE 1 Mth US T-Bill.
To provide current income, with
capital appreciation as a
secondary objective. The major
portion of the assets is committed
to income-producing securities.
Market fluctuations should be
expected.
Strategic Range Policy Tactical
Equity 20 - 40% 30% 29%
Fixed Income 50 - 80% 65% 67%
Cash 0 - 20% 5% 4%
ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees, but Net of Embedded Fund Fees)
HighMark Plus Composite (Active)
Gross Net
Current Quarter* 8.24% 8.14%
Blended Benchmark*,** 7.52%
Year To Date* 11.05% 10.66%
Blended Benchmark*,** 10.30%
1 Year 11.05% 10.66%
Blended Benchmark** 10.30%
3 Year 0.35% -0.01%
Blended Benchmark** 0.66%
5 Year 4.95% 4.57%
Blended Benchmark** 4.94%
10 Year 4.09% 3.72%
Blended Benchmark** 4.21%
Index Plus Composite (Passive)
Gross Net
Current Quarter* 8.02% 7.93%
Blended Benchmark*,** 7.52%
Year To Date* 9.89% 9.50%
Blended Benchmark*,** 10.30%
1 Year 9.89% 9.50%
Blended Benchmark** 10.30%
3 Year 0.23% -0.13%
Blended Benchmark** 0.66%
5 Year 4.64% 4.27%
Blended Benchmark** 4.94%
10 Year 3.92% 3.55%
Blended Benchmark** 4.21%
PORTFOLIO FACTS
Index Plus (Passive)
Composite Inception Date 05/2005
No of Holdings in Portfolio 12
Efficient Frontier
Risk (Standard Deviation)
Reward (Rate of Return)
Conservative
Moderately Conservative
Moderate
Capital Appreciation
Balanced
(Gross of Investment Management Fees, but Net of Embedded Fund Fees)
HighMark Plus Composite (Active)
2008 -15.37%
2009 18.71%
2010 10.46%
2011 1.75%
2012 10.88%
2013 7.30%
2014 4.41%
2015 0.32%
2016 4.94%
2017 9.56%
2018 -2.60%
2019 13.73%
2020 10.76%
2021 5.15%
2022 -13.46%
2023 11.05%
Index Plus Composite (Passive)
2008 -12.40%
2009 11.92%
2010 9.72%
2011 3.24%
2012 8.24%
2013 6.78%
2014 5.40%
2015 -0.18%
2016 5.42%
2017 8.08%
2018 -2.33%
2019 13.53%
2020 9.74%
2021 5.33%
2022 -13.00%
2023 9.89%
Agenda Item #13.2.
HIGHMARK CAPITAL MANAGEMENT
350 California Street
Suite 1600
San Francisco, CA 94104
800-582-4734
ABOUT THE ADVISER
HighMark® Capital Management, Inc. (HighMark) has
over 100 years (including predecessor organizations) of institutional money management experience with $9.2
billion in assets under management*. HighMark has a
long term disciplined approach to money management
and currently manages assets for a wide array of
clients.
ABOUT THE PORTFOLIO MANAGEMENT TEAM
Andrew Brown, CFA®
Senior Portfolio Manager
Investment Experience: since 1994
HighMark Tenure: since 1997
Education: MBA, University of Southern California;
BA, University of Southern California
Salvatore “Tory” Milazzo III, CFA®
Senior Portfolio Manager
Investment Experience: since 2004
HighMark Tenure: since 2014
Education: BA, Colgate University
J. Keith Stribling, CFA®
Senior Portfolio Manager
Investment Experience: since 1985
HighMark Tenure: since 1995
Education: BA, Stetson University
Christiane Tsuda
Senior Portfolio Manager
Investment Experience: since 1987
HighMark Tenure: since 2010
Education: BA, International Christian University, Tokyo Anne Wimmer, CFA®
Senior Portfolio Manager
Investment Experience: since 1987
HighMark Tenure: since 2007
Education: BA, University of California, Santa Barbara
Asset Allocation Committee
Number of Members: 10
Average Years of Experience: 29
Average Tenure (Years): 18
Manager Review Group
Number of Members: 3
Average Years of Experience: 29
Average Tenure (Years): 13
*Assets under management (“AUM”) include assets for which HighMark provides continuous and regular supervisory and management services. As of 6/1/2023 HighMark previously listed Assets under Advisement (“AUA”) are no longer advised by HighMark.
For Institutional Investor or Investment Professional Use Only | See Important Disclosures The performance records shown represent a size-weighted composite of tax exempt accounts that meet the following criteria: Accounts are managed by HighMark with full investment authority according to the PARS Moderately Conservative active and passive objectives.
The adviser to the PARS portfolios is U.S. Bank, and HighMark serves as sub-adviser to U.S. Bank to manage these portfolios. U.S. Bank may charge clients as much as 0.60% annual management fee based on a sliding scale. U.S. Bank pays HighMark 60% of the annual management fee for assets sub-advised by HighMark under its sub-advisory agreement with U.S. Bank. The 0.36% paid to HighMark, as well as other expenses that may be incurred in the management of the portfolio, will reduce the portfolio’s returns. Assuming an investment for five years, a 5% annual total return, and an annual sub-advisory fee rate of 0.36% deducted from the assets at market at the end of each year, a $10 million initial value would grow to $12.53 million after fees (Net-of-Fees) and $12.76 million before fees (Gross-of-Fees).
Gross returns are presented before management and custodial fees but after all trading expenses and reflect the reinvestment of dividends and other income. A client's return will be reduced by the advisory fees and other expenses it may incur as a client. Additional information regarding the firm’s policies and procedures for calculating and reporting performance results is available upon request. Performance results are calculated and presented in U.S. dollars and do not reflect the deduction of investment advisory fees, custody fees, or taxes but do reflect the deduction of trading expenses. Returns are calculated based on trade-date accounting.
Blended benchmarks represent HighMark’s strategic allocations between equity, fixed income, and cash and are rebalanced monthly. Benchmark returns do not reflect the deduction of advisory fees or other expenses of investing but assumes the reinvestment of dividends and other earnings. An investor cannot invest directly in an index. The unmanaged S&P 500 Index is representative of the performance of large companies in the U.S. stock market. The MSCI EAFE Index is a free float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The ICE BofA U.S. High Yield Master II Index tracks the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market. Wilshire REIT index measures U.S. publicly traded Real Estate Investment Trusts. The unmanaged Bloomberg U.S. Aggregate Bond Index is generally representative of the U.S. taxable bond market as a whole. The ICE BofA 1-3 Year U.S. Corporate & Government Index tracks the bond performance of the ICE BofA U.S. Corporate & Government Index, with a remaining term to final maturity less than 3 years. The unmanaged FTSE 1-Month U.S.
Treasury Bill Index tracks the yield of the 1-month U.S. Treasury Bill.
HighMark Capital Management, Inc. (HighMark) is an investment adviser registered with the U.S. Securities and Exchange Commission and a subsidiary of U.S. Bank National Association ("U.S. Bank"). U.S. Bank is a separate entity and subsidiary of U.S. Bancorp. U.S. Bank is not responsible for and does not guarantee the products, services or performance of HighMark. HighMark manages institutional separate account portfolios for a wide variety of for-profit and nonprofit organizations, public agencies, and public and private retirement plans. Individual account management and construction will vary depending on each client's investment needs and objectives. U.S. Bank provides certain services to HighMark and is compensated for these services. Investments employing HighMark strategies are NOT insured by the FDIC or by any other Federal Government Agency, are NOT Bank deposits, are NOT guaranteed by the Bank or any Bank affiliate, and MAY lose value, including possible loss of principal. 350 California Street
Suite 1600
San Francisco, CA 94104
800.582.4734
www.highmarkcapital.com
HOLDINGS
STYLE
Small Cap 4.0%
Interm-Term Bond
61.0%
Mortgage Backed
Securities 5.9%
Large Cap Core
8.5%
Large Cap Growth
3.2%
Mid Cap 3.3%
Intl Stocks 5.9%
Cash 3.7%
Large Cap Value
3.6%
Real Estate 0.9%
Holdings are subject to change at the
discretion of the investment manager.
HighMark Plus (Active) Index Plus (Passive)
Columbia Contrarian Core I3 iShares Core S&P 500 ETF
Vanguard Growth & Income Adm iShares S&P 500 Value ETF
Dodge & Cox Stock Fund iShares S&P 500 Growth ETF
iShares S&P 500 Value ETF iShares Russell Mid-Cap ETF
Harbor Capital Appreciation - Retirement Vanguard Real Estate ETF iShares S&P 500 Growth ETF iShares Russell 2000 Value ETF iShares Russell Mid-Cap ETF iShares Russell 2000 Growth ETF Vanguard Real Estate ETF iShares Core MSCI EAFE ETF
Undiscovered Managers Behavioral Value-R6 Vanguard FTSE Emerging Markets ETF Emerald Growth Fund-I iShares MBS ETF
DFA Large Cap International Portfolio iShares Core U.S. Aggregate Dodge & Cox International Stock First American Government Obligations Z MFS International Growth - R6
Hartford Schroders Emerging Markets Eq
iShares MBS ETF
Dodge & Cox Income-I
PGIM Total Return Bond - R6
DoubleLine Core Fixed Income - I
First American Government Obligations Z
Agenda Item #13.2.
For Institutional Investor or Investment Professional Use Only | See Important Disclosures
PARS DIVERSIFIED PORTFOLIOS
MODERATE
INVESTMENT OBJECTIVE
ANNUAL RETURNS
ASSET ALLOCATION — MODERATE PORTFOLIO
Comprehensive Investment Solution
HighMark® Capital Management, Inc.’s (HighMark)
diversified investment portfolios are designed to
balance return expectations with risk tolerance.
Key features include: sophisticated asset allocation
and optimization techniques, four layers of
diversification (asset class, style, manager, and
security), access to rigorously screened, top tier
money managers, flexible investment options, and
experienced investment management.
Rigorous Manager Due Diligence
Our manager review committee utilizes a rigorous
screening process that searches for investment
managers and styles that have not only produced
above-average returns within acceptable risk
parameters, but have the resources and commitment
to continue to deliver these results. We have set high
standards for our investment managers and funds.
This is a highly specialized, time consuming
approach dedicated to one goal: competitive and
consistent performance.
Flexible Investment Options
In order to meet the unique needs of our clients,
we offer access to flexible implementation strategies:
HighMark Plus utilizes actively managed mutual
funds while Index Plus utilizes index-based
securities, including exchange-traded funds. Both
investment options leverage HighMark’s active asset
allocation approach.
Risk Management
The portfolio is constructed to control risk through
four layers of diversification – asset classes (cash,
fixed income, equity), investment styles (large cap,
small cap, international, value, growth), managers
and securities. Disciplined mutual fund selection and
monitoring process helps to drive return potential
while reducing portfolio risk.
WHY THE PARS DIVERSIFIED
MODERATE PORTFOLIO?
Q4 2023
* Returns less than one year are not annualized. **Breakdown for Blended Benchmark: From 10/1/2012 – Present: 26.5% S&P500, 5% Russell Mid Cap, 7.5% Russell 2000, 3.25% MSCI EM (net), 6% MSCI EAFE (net), 33.50% Bloomberg US Agg, 10% ICE BofA 1-3 Yr US Corp/Gov’t, 1.50% ICE BofA US High Yield Master II, 1.75% Wilshire REIT, and 5% FTSE 1 Mth US T-Bill. From 4/1/2007 – 9/30/2012: the blended benchmark was 43% S&P 500; 2% Russell 2000, 5% MSCI EAFE (net), 15% ICE BofA 1-3 Year Corp./Govt, 30% Bloomberg US Agg, 5% FTSE 1 Mth US T-Bill. Prior to April 2007: the blended benchmark was 50% S&P 500, 15% ICE BofA 1- 3Yr Corp/Gov, 30% Bloomberg US Agg, and 5% FTSE 1 Mth US T-Bill.
To provide current income and
moderate capital appreciation.
It is expected that dividend and
interest income will comprise a
significant portion of total return,
although growth through capital
appreciation is equally important.
Strategic Range Policy Tactical
Equity 40 - 60% 50% 49%
Fixed Income 40 - 60% 45% 48%
Cash 0 - 20% 5% 3%
ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees, but Net of Embedded Fund Fees)
Index Plus Composite (Passive)
Gross Net
Current Quarter* 9.01% 8.91%
Blended Benchmark*,** 8.72%
Year To Date* 12.74% 12.33%
Blended Benchmark*,** 13.56%
1 Year 12.74% 12.33%
Blended Benchmark** 13.56%
3 Year 2.14% 1.77%
Blended Benchmark** 2.58%
5 Year 6.85% 6.47%
Blended Benchmark** 7.31%
10 Year 5.34% 4.96%
Blended Benchmark** 5.82%
PORTFOLIO FACTS
HighMark Plus (Active)
Composite Inception Date 10/2004
No of Holdings in Portfolio 19
Index Plus (Passive)
Composite Inception Date 05/2006
No of Holdings in Portfolio 12
Efficient Frontier
Risk (Standard Deviation)
Reward (Rate of Return)
Conservative
Moderately Conservative
Moderate
Capital Appreciation
Balanced
(Gross of Investment Management Fees, but Net of Embedded Fund Fees)
HighMark Plus Composite (Active)
2008 -22.88%
2009 21.47%
2010 12.42%
2011 0.55%
2012 12.25%
2013 13.06%
2014 4.84%
2015 0.14%
2016 6.45%
2017 13.19%
2018 -4.03%
2019 17.71%
2020 12.92%
2021 9.31%
2022 -14.63%
2023 13.98%
Index Plus Composite (Passive)
2008 -18.14%
2009 16.05%
2010 11.77%
2011 2.29%
2012 10.91%
2013 12.79%
2014 5.72%
2015 -0.52%
2016 7.23%
2017 11.59%
2018 -4.03%
2019 17.52%
2020 11.23%
2021 10.18%
2022 -14.21%
2023 12.74%
HighMark Plus Composite (Active)
Gross Net
Current Quarter* 9.28% 9.18%
Blended Benchmark*,** 8.72%
Year To Date* 13.98% 13.57%
Blended Benchmark*,** 13.56%
1 Year 13.98% 13.57%
Blended Benchmark** 13.56%
3 Year 2.08% 1.71%
Blended Benchmark** 2.58%
5 Year 7.17% 6.79%
Blended Benchmark** 7.31%
10 Year 5.55% 5.17%
Blended Benchmark** 5.82%
Agenda Item #13.2.
HIGHMARK CAPITAL MANAGEMENT
350 California Street
Suite 1600
San Francisco, CA 94104
800-582-4734
ABOUT THE ADVISER
HighMark® Capital Management, Inc. (HighMark) has
over 100 years (including predecessor organizations) of institutional money management experience with $9.2
billion in assets under management*. HighMark has a
long term disciplined approach to money management
and currently manages assets for a wide array of
clients.
ABOUT THE PORTFOLIO MANAGEMENT TEAM
Andrew Brown, CFA®
Senior Portfolio Manager
Investment Experience: since 1994
HighMark Tenure: since 1997
Education: MBA, University of Southern California;
BA, University of Southern California
Salvatore “Tory” Milazzo III, CFA®
Senior Portfolio Manager
Investment Experience: since 2004
HighMark Tenure: since 2014
Education: BA, Colgate University
J. Keith Stribling, CFA®
Senior Portfolio Manager
Investment Experience: since 1985
HighMark Tenure: since 1995
Education: BA, Stetson University
Christiane Tsuda
Senior Portfolio Manager
Investment Experience: since 1987
HighMark Tenure: since 2010
Education: BA, International Christian University, Tokyo Anne Wimmer, CFA®
Senior Portfolio Manager
Investment Experience: since 1987
HighMark Tenure: since 2007
Education: BA, University of California, Santa Barbara
Asset Allocation Committee
Number of Members: 10
Average Years of Experience: 29
Average Tenure (Years): 18
Manager Review Group
Number of Members: 3
Average Years of Experience: 29
Average Tenure (Years): 13
*Assets under management (“AUM”) include assets for which HighMark provides continuous and regular supervisory and management services. As of 6/1/2023 HighMark previously listed Assets under Advisement (“AUA”) are no longer advised by HighMark.
For Institutional Investor or Investment Professional Use Only | See Important Disclosures The performance records shown represent size-weighted composites of tax exempt accounts that meet the following criteria: Accounts are managed by HighMark with full investment authority according to the PARS Moderate active and passive objectives.
The adviser to the PARS portfolios is U.S. Bank, and HighMark serves as sub-adviser to U.S. Bank to manage these portfolios. U.S. Bank may charge clients as much as 0.60% annual management fee based on a sliding scale. U.S. Bank pays HighMark 60% of the annual management fee for assets sub-advised by HighMark under its sub-advisory agreement with U.S. Bank. The 0.36% paid to HighMark, as well as other expenses that may be incurred in the management of the portfolio, will reduce the portfolio’s returns. Assuming an investment for five years, a 5% annual total return, and an annual sub-advisory fee rate of 0.36% deducted from the assets at market at the end of each year, a $10 million initial value would grow to $12.53 million after fees (Net-of-Fees) and $12.76 million before fees (Gross-of-Fees). Gross returns are presented before management and custodial fees but after all trading expenses and reflect the reinvestment of dividends and other income. A client's return will be reduced by the advisory fees and other expenses it may incur as a client. Additional information regarding the firm’s policies and procedures for calculating and reporting performance results is available upon request. Performance results are calculated and presented in U.S. dollars and do not reflect the deduction of investment advisory fees, custody fees, or taxes but do reflect the deduction of trading expenses. Returns are calculated based on trade-date accounting.
Blended benchmarks represent HighMark’s strategic allocations between equity, fixed income, and cash and are rebalanced monthly. Benchmark returns do not reflect the deduction of advisory fees or other expenses of investing but assumes the reinvestment of dividends and other earnings. An investor cannot invest directly in an index. The unmanaged S&P 500 Index is representative of the performance of large companies in the U.S. stock market. The MSCI EAFE Index is a free float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The ICE BofA U.S. High Yield Master II Index tracks the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market. Wilshire REIT index measures U.S. publicly traded Real Estate Investment Trusts. The unmanaged Bloomberg U.S. Aggregate Bond Index is generally representative of the U.S. taxable bond market as a whole. The ICE BofA 1-3 Year U.S. Corporate & Government Index tracks the bond performance of the ICE BofA U.S. Corporate & Government Index, with a remaining term to final maturity less than 3 years. The unmanaged FTSE 1-Month U.S. Treasury Bill Index tracks the yield of the 1- month U.S. Treasury Bill.
HighMark Capital Management, Inc. (HighMark) is an investment adviser registered with the U.S. Securities and Exchange Commission and a subsidiary of U.S. Bank National Association ("U.S. Bank"). U.S. Bank is a separate entity and subsidiary of U.S. Bancorp. U.S. Bank is not responsible for and does not guarantee the products, services or performance of HighMark. HighMark manages institutional separate account portfolios for a wide variety of for-profit and nonprofit organizations, public agencies, and public and private retirement plans. Individual account management and construction will vary depending on each client's investment needs and objectives. U.S. Bank provides certain services to HighMark and is compensated for these services. Investments employing HighMark strategies are NOT insured by the FDIC or by any other Federal Government Agency, are NOT Bank deposits, are NOT guaranteed by the Bank or any Bank affiliate, and MAY lose value, including possible loss of principal. 350 California Street
Suite 1600
San Francisco, CA 94104
800.582.4734
www.highmarkcapital.com
HOLDINGS
STYLE
Small Cap
6.6%
Interm-Term Bond
43.4%
Mortgage Backed Securities
4.2%
Large Cap Core
14.6%
Large Cap Growth
5.4%
Mid Cap
5.4%
Intl Stocks
9.4%
Cash
3.2%
Large Cap Value
6.2%
Real Estate
1.6%
Holdings are subject to change at the
discretion of the investment manager.
HighMark Plus (Active) Index Plus (Passive)
Columbia Contrarian Core I3 iShares Core S&P 500 ETF
Vanguard Growth & Income Adm iShares S&P 500 Value ETF
Dodge & Cox Stock Fund iShares S&P 500 Growth ETF
iShares S&P 500 Value ETF iShares Russell Mid-Cap ETF
Harbor Capital Appreciation - Retirement Vanguard Real Estate ETF iShares S&P 500 Growth ETF iShares Russell 2000 Value ETF iShares Russell Mid-Cap ETF iShares Russell 2000 Growth ETF Vanguard Real Estate ETF iShares Core MSCI EAFE ETF
Undiscovered Managers Behavioral Value-R6 Vanguard FTSE Emerging Markets ETF Emerald Growth Fund-I iShares MBS ETF
DFA Large Cap International Portfolio iShares Core U.S. Aggregate Dodge & Cox International Stock First American Government Obligations Z MFS International Growth - R6
Hartford Schroders Emerging Markets Eq
iShares MBS ETF
Dodge & Cox Income-I
PGIM Total Return Bond - R6
DoubleLine Core Fixed Income - I
First American Government Obligations Z
Agenda Item #13.2.
For Institutional Investor or Investment Professional Use Only | See Important Disclosures HighMark Plus (Active)
Composite Inception Date 10/2006
No of Holdings in Portfolio 19
PARS DIVERSIFIED PORTFOLIOS
BALANCED
INVESTMENT OBJECTIVE
ANNUAL RETURNS
ASSET ALLOCATION — BALANCED PORTFOLIO
Comprehensive Investment Solution
HighMark® Capital Management, Inc.’s (HighMark)
diversified investment portfolios are designed to
balance return expectations with risk tolerance.
Key features include: sophisticated asset allocation
and optimization techniques, four layers of
diversification (asset class, style, manager, and
security), access to rigorously screened, top tier
money managers, flexible investment options, and
experienced investment management.
Rigorous Manager Due Diligence
Our manager review committee utilizes a rigorous
screening process that searches for investment
managers and styles that have not only produced
above-average returns within acceptable risk
parameters, but have the resources and commitment
to continue to deliver these results. We have set high
standards for our investment managers and funds.
This is a highly specialized, time consuming
approach dedicated to one goal: competitive and
consistent performance.
Flexible Investment Options
In order to meet the unique needs of our clients,
we offer access to flexible implementation strategies:
HighMark Plus utilizes actively managed mutual
funds while Index Plus utilizes index-based
securities, including exchange-traded funds. Both
investment options leverage HighMark’s active asset
allocation approach.
Risk Management
The portfolio is constructed to control risk through
four layers of diversification – asset classes (cash,
fixed income, equity), investment styles (large cap,
small cap, international, value, growth), managers
and securities. Disciplined mutual fund selection and
monitoring process helps to drive return potential
while reducing portfolio risk.
WHY THE PARS DIVERSIFIED
BALANCED PORTFOLIO?
Q4 2023
* Returns less than one year are not annualized. **Breakdown for Blended Benchmark: From 10/1/2012 – Present: 32% S&P500, 6% Russell Mid Cap, 9% Russell 2000, 4% MSCI EM (net), 7% MSCI EAFE (net), 27% Bloomberg US Agg, 6.75% ICE BofA 1-3 Yr US Corp/Gov’t, 1.25% ICE BofA US High Yield Master II, 2% Wilshire REIT, and 5% FTSE 1 Mth US T-Bill. From 4/1/2007 – 9/30/2012:
the blended benchmark was 51% S&P 500; 3% Russell 2000, 6% MSCI EAFE (net), 5% ICE BofA 1-3 Year Corp./Govt, 30% Bloomberg US Agg, 5% FTSE 1 Mth US T-Bill. Prior to April 2007: the blended benchmark was 60% S&P 500, 5% ICE BofA 1-3Yr Corp/Gov, 30% Bloomberg US Agg, and 5% FTSE 1 Mth US T-Bill.
To provide growth of principal and
income. While dividend and
interest income are an important
component of the objective’s
total return, it is expected that
capital appreciation will comprise
a larger portion of the total return.
Strategic Range Policy Tactical
Equity 50 – 70% 60% 59%
Fixed Income 30 – 50% 35% 38%
Cash 0 – 20% 5% 3%
ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees, but Net of Embedded Fund Fees)
HighMark Plus Composite (Active)
Gross Net
Current Quarter* 9.84% 9.75%
Blended Benchmark*,** 9.36%
Year To Date* 15.39% 14.98%
Blended Benchmark*,** 15.19%
1 Year 15.39% 14.98%
Blended Benchmark** 15.19%
3 Year 2.89% 2.53%
Blended Benchmark** 3.46%
5 Year 8.25% 7.86%
Blended Benchmark** 8.45%
10 Year 6.21% 5.83%
Blended Benchmark** 6.61%
Index Plus Composite (Passive)
Gross Net
Current Quarter* 9.60% 9.50%
Blended Benchmark*,** 9.36%
Year To Date* 14.31% 13.91%
Blended Benchmark*,** 15.19%
1 Year 14.31% 13.91%
Blended Benchmark** 15.19%
3 Year 3.06% 2.69%
Blended Benchmark** 3.46%
5 Year 7.97% 7.58%
Blended Benchmark** 8.45%
10 Year 6.05% 5.67%
Blended Benchmark** 6.61%
PORTFOLIO FACTS
Index Plus (Passive)
Composite Inception Date 10/2007
No of Holdings in Portfolio 12
Efficient Frontier
Risk (Standard Deviation)
Reward (Rate of Return)
Conservative
Moderately Conservative
Moderate
Capital Appreciation
Balanced
(Gross of Investment Management Fees, but Net of Embedded Fund Fees)
HighMark Plus Composite (Active)
2008 -25.72%
2009 21.36%
2010 14.11%
2011 -0.46%
2012 13.25%
2013 16.61%
2014 4.70%
2015 0.04%
2016 6.81%
2017 15.46%
2018 -4.88%
2019 19.85%
2020 13.85%
2021 11.44%
2022 -15.28%
2023 15.39%
Index Plus Composite (Passive)
2008 -23.22%
2009 17.62%
2010 12.76%
2011 1.60%
2012 11.93%
2013 15.63%
2014 6.08%
2015 -0.81%
2016 8.26%
2017 13.39%
2018 -5.05%
2019 19.59%
2020 12.07%
2021 12.63%
2022 -14.97%
2023 14.31%
Agenda Item #13.2.
HIGHMARK CAPITAL MANAGEMENT
350 California Street
Suite 1600
San Francisco, CA 94104
800-582-4734
ABOUT THE ADVISER
HighMark® Capital Management, Inc. (HighMark) has
over 100 years (including predecessor organizations) of institutional money management experience with $9.2
billion in assets under management*. HighMark has a
long term disciplined approach to money management
and currently manages assets for a wide array of
clients.
ABOUT THE PORTFOLIO MANAGEMENT TEAM
Andrew Brown, CFA®
Senior Portfolio Manager
Investment Experience: since 1994
HighMark Tenure: since 1997
Education: MBA, University of Southern California;
BA, University of Southern California
Salvatore “Tory” Milazzo III, CFA®
Senior Portfolio Manager
Investment Experience: since 2004
HighMark Tenure: since 2014
Education: BA, Colgate University
J. Keith Stribling, CFA®
Senior Portfolio Manager
Investment Experience: since 1985
HighMark Tenure: since 1995
Education: BA, Stetson University
Christiane Tsuda
Senior Portfolio Manager
Investment Experience: since 1987
HighMark Tenure: since 2010
Education: BA, International Christian University, Tokyo Anne Wimmer, CFA®
Senior Portfolio Manager
Investment Experience: since 1987
HighMark Tenure: since 2007
Education: BA, University of California, Santa Barbara
Asset Allocation Committee
Number of Members: 10
Average Years of Experience: 29
Average Tenure (Years): 18
Manager Review Group
Number of Members: 3
Average Years of Experience: 29
Average Tenure (Years): 13
*Assets under management (“AUM”) include assets for which HighMark provides continuous and regular supervisory and management services. As of 6/1/2023 HighMark previously listed Assets under Advisement (“AUA”) are no longer advised by HighMark.
For Institutional Investor or Investment Professional Use Only | See Important Disclosures The performance records shown represent size-weighted composites of tax exempt accounts that meet the following criteria:
Accounts are managed by HighMark with full investment authority according to the PARS Balanced active and passive objectives.
The composite name has been changed from PARS Balanced/Moderately Aggressive to PARS Balanced on 5/1/2013. The adviser to the PARS portfolios is U.S. Bank, and HighMark serves as sub-adviser to U.S. Bank to manage these portfolios.
U.S. Bank may charge clients as much as 0.60% annual management fee based on a sliding scale. U.S. Bank pays HighMark 60% of the annual management fee for assets sub-advised by HighMark under its sub-advisory agreement with U.S. Bank. The 0.36% paid to HighMark, as well as other expenses that may be incurred in the management of the portfolio, will reduce the portfolio’s returns. Assuming an investment for five years, a 5% annual total return, and an annual subadvisory fee rate of 0.36% deducted from the assets at market at the end of each year, a $10 million initial value would grow to $12.53 million after fees (Net-of-Fees) and $12.76 million before fees (Gross-of-Fees). Gross returns are presented before management and custodial fees but after all trading expenses and reflect the reinvestment of dividends and other income. A client's return will be reduced by the advisory fees and other expenses it may incur as a client. Additional information regarding the firm’s policies and procedures for calculating and reporting performance results is available upon request.
Performance results are calculated and presented in U.S. dollars and do not reflect the deduction of investment advisory fees, custody fees, or taxes but do reflect the deduction of trading expenses. Returns are calculated based on trade-date accounting.
Blended benchmarks represent HighMark’s strategic allocations between equity, fixed income, and cash and are rebalanced monthly. Benchmark returns do not reflect the deduction of advisory fees or other expenses of investing but assumes the reinvestment of dividends and other earnings. An investor cannot invest directly in an index. The unmanaged S&P 500 Index is representative of the performance of large companies in the U.S. stock market. The MSCI EAFE Index is a free floatadjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The Russell Midcap Index measures the performance of the midcap segment of the U.S. equity universe. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The ICE BofA U.S. High Yield Master II Index tracks the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market. Wilshire REIT index measures U.S. publicly traded Real Estate Investment Trusts. The unmanaged Bloomberg U.S. Aggregate Bond Index is generally representative of the U.S. taxable bond market as a whole. The ICE BofA 1-3 Year U.S. Corporate & Government Index tracks the bond performance of the ICE BofA U.S. Corporate & Government Index, with a remaining term to final maturity less than 3 years.
The unmanaged FTSE 1-Month U.S. Treasury Bill Index tracks the yield of the 1-month U.S. Treasury Bill.
HighMark Capital Management, Inc. (HighMark) is an investment adviser registered with the U.S. Securities and Exchange Commission and a subsidiary of U.S. Bank National Association ("U.S. Bank"). U.S. Bank is a separate entity and subsidiary of U.S. Bancorp. U.S. Bank is not responsible for and does not guarantee the products, services or performance of HighMark.
HighMark manages institutional separate account portfolios for a wide variety of for-profit and nonprofit organizations, public agencies, and public and private retirement plans. Individual account management and construction will vary depending on each client's investment needs and objectives. U.S. Bank provides certain services to HighMark and is compensated for these services. Investments employing HighMark strategies are NOT insured by the FDIC or by any other Federal Government Agency, are NOT Bank deposits, are NOT guaranteed by the Bank or any Bank affiliate, and MAY lose value, including possible loss of principal.
350 California Street
Suite 1600
San Francisco, CA 94104
800.582.4734
www.highmarkcapital.com
HOLDINGS
STYLE
Small Cap
7.9%
Interm-Term Bond
34.3%
Mortgage Backed Securities
Large Cap Core 3.3%
17.8%
Large Cap Growth
6.5%
Mid Cap
6.5%
Intl Stocks
11.1%
Cash
3.3%
Large Cap Value
7.5%
Real Estate
1.8%
Holdings are subject to change at the
discretion of the investment manager.
HighMark Plus (Active) Index Plus (Passive)
Columbia Contrarian Core I3 iShares Core S&P 500 ETF
Vanguard Growth & Income Adm iShares S&P 500 Value ETF
Dodge & Cox Stock Fund iShares S&P 500 Growth ETF
iShares S&P 500 Value ETF iShares Russell Mid-Cap ETF
Harbor Capital Appreciation - Retirement Vanguard Real Estate ETF iShares S&P 500 Growth ETF iShares Russell 2000 Value ETF iShares Russell Mid-Cap ETF iShares Russell 2000 Growth ETF Vanguard Real Estate ETF iShares Core MSCI EAFE ETF
Undiscovered Managers Behavioral Value-R6 Vanguard FTSE Emerging Markets ETF Emerald Growth Fund-I iShares MBS ETF
DFA Large Cap International Portfolio iShares Core U.S. Aggregate Dodge & Cox International Stock First American Government Obligations Z MFS International Growth - R6
Hartford Schroders Emerging Markets Eq
iShares MBS ETF
Dodge & Cox Income-I
PGIM Total Return Bond - R6
DoubleLine Core Fixed Income - I
First American Government Obligations Z
Agenda Item #13.2.
For Institutional Investor or Investment Professional Use Only | See Important Disclosures
PARS DIVERSIFIED PORTFOLIOS
CAPITAL APPRECIATION
INVESTMENT OBJECTIVE
ANNUAL RETURNS
ASSET ALLOCATION — CAPITAL APPRECIATION PORTFOLIO
Comprehensive Investment Solution
HighMark® Capital Management, Inc.’s (HighMark)
diversified investment portfolios are designed to
balance return expectations with risk tolerance.
Key features include: sophisticated asset allocation
and optimization techniques, four layers of
diversification (asset class, style, manager, and
security), access to rigorously screened, top tier
money managers, flexible investment options, and
experienced investment management.
Rigorous Manager Due Diligence
Our manager review committee utilizes a rigorous
screening process that searches for investment
managers and styles that have not only produced
above-average returns within acceptable risk
parameters, but have the resources and commitment
to continue to deliver these results. We have set high
standards for our investment managers and funds.
This is a highly specialized, time consuming
approach dedicated to one goal: competitive and
consistent performance.
Flexible Investment Options
In order to meet the unique needs of our clients,
we offer access to flexible implementation strategies:
HighMark Plus utilizes actively managed mutual
funds while Index Plus utilizes index-based
securities, including exchange-traded funds. Both
investment options leverage HighMark’s active asset
allocation approach.
Risk Management
The portfolio is constructed to control risk through
four layers of diversification – asset classes (cash,
fixed income, equity), investment styles (large cap,
small cap, international, value, growth), managers
and securities. Disciplined mutual fund selection and
monitoring process helps to drive return potential
while reducing portfolio risk.
WHY THE PARS DIVERSIFIED
CAPITAL APPRECIATION PORTFOLIO?
Q4 2023
* Returns less than one year are not annualized. **Breakdown for Blended Benchmark: 39.5% S&P500, 7.5% Russell Mid Cap,
10.5% Russell 2000, 5.25% MSCI EM (net), 10.25% MSCI EAFE (net), 16% Bloomberg US Agg, 3% ICE BofA 1-3 Yr US Corp/Gov’t, 1% ICE BofA US High Yield Master II, 2% Wilshire REIT, and 5% FTSE 1 Mth US T-Bill.
To provide growth of principal.
The major portion of the assets
are invested in equity securities
and market fluctuations are
expected.
Strategic Range Policy Tactical
Equity 65 - 85% 75% 74%
Fixed Income 10 - 30% 20% 22%
Cash 0 - 20% 5% 4%
ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees, but Net of Embedded Fund Fees)
Consolidated Composite
Gross Net
Current Quarter* 10.40% 10.30%
Blended Benchmark*,** 10.22%
Year To Date* 17.32% 16.91%
Blended Benchmark*,** 17.62%
1 Year 17.32% 16.91%
Blended Benchmark** 17.62%
3 Year 4.22% 3.84%
Blended Benchmark** 4.74%
5 Year 9.71% 9.32%
Blended Benchmark** 10.05%
10 Year 7.23% 6.85%
Blended Benchmark** 7.64%
PORTFOLIO FACTS
Consolidated Composite
Composite Inception Date 01/2009
No of Holdings in Portfolio 19
Efficient Frontier
Risk (Standard Deviation)
Reward (Rate of Return)
Conservative
Moderately Conservative
Moderate
Capital Appreciation
Balanced
(Gross of Investment Management Fees, but Net of Embedded Fund Fees)
Consolidated Composite
2008 N/A
2009 23.77%
2010 12.95%
2011 -1.35%
2012 13.87%
2013 20.33%
2014 6.05%
2015 -0.26%
2016 8.79%
2017 16.72%
2018 -5.82%
2019 22.62%
2020 14.50%
2021 14.96%
2022 -16.08%
2023 17.32%
Agenda Item #13.2.
HIGHMARK CAPITAL MANAGEMENT
350 California Street
Suite 1600
San Francisco, CA 94104
800-582-4734
ABOUT THE ADVISER
HighMark® Capital Management, Inc. (HighMark) has
over 100 years (including predecessor organizations) of institutional money management experience with $9.2
billion in assets under management*. HighMark has a
long term disciplined approach to money management
and currently manages assets for a wide array of
clients.
ABOUT THE PORTFOLIO MANAGEMENT TEAM
Andrew Brown, CFA®
Senior Portfolio Manager
Investment Experience: since 1994
HighMark Tenure: since 1997
Education: MBA, University of Southern California;
BA, University of Southern California
Salvatore “Tory” Milazzo III, CFA®
Senior Portfolio Manager
Investment Experience: since 2004
HighMark Tenure: since 2014
Education: BA, Colgate University
J. Keith Stribling, CFA®
Senior Portfolio Manager
Investment Experience: since 1985
HighMark Tenure: since 1995
Education: BA, Stetson University
Christiane Tsuda
Senior Portfolio Manager
Investment Experience: since 1987
HighMark Tenure: since 2010
Education: BA, International Christian University, Tokyo Anne Wimmer, CFA®
Senior Portfolio Manager
Investment Experience: since 1987
HighMark Tenure: since 2007
Education: BA, University of California, Santa Barbara
Asset Allocation Committee
Number of Members: 10
Average Years of Experience: 29
Average Tenure (Years): 18
Manager Review Group
Number of Members: 3
Average Years of Experience: 29
Average Tenure (Years): 13
*Assets under management (“AUM”) include assets for which HighMark provides continuous and regular supervisory and management services. As of 6/1/2023 HighMark previously listed Assets under Advisement (“AUA”) are no longer advised by HighMark.
For Institutional Investor or Investment Professional Use Only | See Important Disclosures The performance records shown represent a size-weighted composite of tax exempt accounts that meet the following criteria: Accounts are managed by HighMark with full investment authority according to the PARS Capital Appreciation active and passive objectives.
The adviser to the PARS portfolios is U.S. Bank, and HighMark serves as sub-adviser to U.S. Bank to manage these portfolios. U.S. Bank may charge clients as much as 0.60% annual management fee based on a sliding scale. U.S. Bank pays HighMark 60% of the annual management fee for assets sub-advised by HighMark under its sub-advisory agreement with U.S. Bank. The 0.36% paid to HighMark, as well as other expenses that may be incurred in the management of the portfolio, will reduce the portfolio’s returns. Assuming an investment for five years, a 5% annual total return, and an annual sub-advisory fee rate of 0.36% deducted from the assets at market at the end of each year, a $10 million initial value would grow to $12.53 million after fees (Net-of-Fees) and $12.76 million before fees (Gross-of-Fees). Gross returns are presented before management and custodial fees but after all trading expenses and reflect the reinvestment of dividends and other income. A client's return will be reduced by the advisory fees and other expenses it may incur as a client. Additional information regarding the firm’s policies and procedures for calculating and reporting performance results is available upon request. Performance results are calculated and presented in U.S. dollars and do not reflect the deduction of investment advisory fees, custody fees, or taxes but do reflect the deduction of trading expenses. Returns are calculated based on trade-date accounting.
Blended benchmarks represent HighMark’s strategic allocations between equity, fixed income, and cash and are rebalanced monthly. Benchmark returns do not reflect the deduction of advisory fees or other expenses of investing but assumes the reinvestment of dividends and other earnings. An investor cannot invest directly in an index. The unmanaged S&P 500 Index is representative of the performance of large companies in the U.S. stock market. The MSCI EAFE Index is a free float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The ICE BofA U.S. High Yield Master II Index tracks the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market. Wilshire REIT index measures U.S. publicly traded Real Estate Investment Trusts. The unmanaged Bloomberg U.S. Aggregate Bond Index is generally representative of the U.S. taxable bond market as a whole. The ICE BofA 1-3 Year U.S. Corporate & Government Index tracks the bond performance of the ICE BofA U.S. Corporate & Government Index, with a remaining term to final maturity less than 3 years. The unmanaged FTSE 1-Month U.S. Treasury Bill Index tracks the yield of the 1-month U.S. Treasury Bill.
HighMark Capital Management, Inc. (HighMark) is an investment adviser registered with the U.S. Securities and Exchange Commission and a subsidiary of U.S. Bank National Association ("U.S. Bank"). U.S. Bank is a separate entity and subsidiary of U.S. Bancorp. U.S. Bank is not responsible for and does not guarantee the products, services or performance of HighMark. HighMark manages institutional separate account portfolios for a wide variety of for-profit and nonprofit organizations, public agencies, and public and private retirement plans. Individual account management and construction will vary depending on each client's investment needs and objectives. U.S. Bank provides certain services to HighMark and is compensated for these services. Investments employing HighMark strategies are NOT insured by the FDIC or by any other Federal Government Agency, are NOT Bank deposits, are NOT guaranteed by the Bank or any Bank affiliate, and MAY lose value, including possible loss of principal. 350 California Street
Suite 1600
San Francisco, CA 94104
800.582.4734
www.highmarkcapital.com
HOLDINGS
STYLE
Small Cap
9.6%
Interm-Term Bond
20.3%
Mortgage Backed
Securities
2.0%
Large Cap Core
22.3%
Large Cap Growth
8.0%
Mid Cap
8.0%
Intl Stocks
14.6%
Cash
3.9%
Large Cap Value
9.2%
Real Estate
2.1%
Holdings are subject to change at the
discretion of the investment manager.
HighMark Plus (Active) Index Plus (Passive)
Columbia Contrarian Core I3 iShares Core S&P 500 ETF
Vanguard Growth & Income Adm iShares S&P 500 Value ETF
Dodge & Cox Stock Fund iShares S&P 500 Growth ETF
iShares S&P 500 Value ETF iShares Russell Mid-Cap ETF
Harbor Capital Appreciation - Retirement Vanguard Real Estate ETF iShares S&P 500 Growth ETF iShares Russell 2000 Value ETF iShares Russell Mid-Cap ETF iShares Russell 2000 Growth ETF Vanguard Real Estate ETF iShares Core MSCI EAFE ETF
Undiscovered Managers Behavioral Value-R6 Vanguard FTSE Emerging Markets ETF Emerald Growth Fund-I iShares MBS ETF
DFA Large Cap International Portfolio iShares Core U.S. Aggregate Dodge & Cox International Stock First American Government Obligations Z MFS International Growth - R6
Hartford Schroders Emerging Markets Eq
iShares MBS ETF
Dodge & Cox Income-I
PGIM Total Return Bond - R6
DoubleLine Core Fixed Income - I
First American Government Obligations Z
Agenda Item #13.2.
Prepared for
Mandy Kellogg
City of St. Helena
Establishment, Administration, and Management Services of a Section 115 Trust for Pension
Monday, April 29, 2024
Prepared by:
CalPERS
Prefunding Programs
Contact Person:
Darren Lathrop
Customer Outreach & Support Manager
CalPERS Prefunding Programs
(916) 795-0751 Desk
(916) 291-0391 Cell
[email protected]
Agenda Item #13.2.
California Public Employees’ Retirement System
Prefunding Programs
400 Q Street, Sacramento, CA 95811
888 CalPERS (or 888-225-7377) | TTY: (877) 249-7442 | www.calpers.ca.gov April 29, 2024
Attention: Mandy Kellogg
City of St. Helena
1088 College Avenue
St. Helena, CA 94574
Subject: Establishment, Administration, and Management Services of a Section 115 Trust for Pension
Dear Mandy,
Thank you for inviting the California Employers' Pension Prefunding Trust (CEPPT) to submit a comprehensive proposal to provide Section 115 pension prefunding trust management services on behalf of the City of St. Helena. We fully understand the scope of services being requested for proposal, the timeline of these services, and would be honored to serve to the City in this capacity. Hence, we have proposed a firm and irrevocable offer for the next 120 days.
The CERBT & CEPPT Program (Prefunding Programs) team, staffed by 14 full time employees collectively responsible for the administration, reporting, and customer outreach and support of the CalPERS Prefunding Programs trust funds (CERBT & CEPPT). All 14 members of the Prefunding Programs team operate out of CalPERS central office in Sacramento.
I will serve as the City’s primary contact and have been working for CalPERS with the Prefunding Programs since 2022. Before joining CalPERS, I have spent more than 20 years in the private sector with a background in Marketing, Sales, and Business Administration. During this time at Associated Materials Inc., I held positions of Senior Branch Manager and Territory Sales Manager. My team and I are responsible for providing all educational and outreach efforts, including presentations and performance updates for participating CEPPT employers. My contact information is:
(916) 795-0751 Desk
(916) 291-0391 Cell
[email protected]
Agenda Item #13.2.
Our Prefunding Programs team holds office at our Sacramento Headquarters located at 400 Q Street, Sacramento, CA 95811.
We anticipate that the City will find that the Prefunding Program Team is lead by very motivated, customer friendly, and knowledgeable leaders. The team leaders have a combined 40+ years of experience in administering Section 115 Trusts.
We hope our response to this RFP and the attached documents convey our intentions and responsibilities to you. We are fully committed to serving the City in its efforts to prefund pension contributions.
Sincerely,
Darren Lathrop
Customer Outreach and Support Manager
CalPERS Prefunding Programs
(916) 795-0751 Desk
(916) 291-0391 Cell
[email protected]
Agenda Item #13.2.
City of St. Helena
Establishment, Administration, and Management Services of a Section 115 Trust for Pension II. Table of Contents
I. Part 1 | Cover Letter
II. Table of Contents
III. Part 1 | Executive Summary
IV. Statement of Understanding
V. Part 2 | Firm Qualifications and Experience
VI. Part 3 | Consultant Identification and Team
VII. Part 4 | Proposed Project Workplan
VIII. Part 5 | Total Cost and Hourly Rates
IX. CalPERS Attachments
• Attachment 1 – CEPPT Investment Policy
• Attachment 2 – CEPPT Fund Facts
• Attachment 3 – Prefunding Programs Employers
Agenda Item #13.2.
City of St. Helena
Establishment, Administration, and Management Services of a Section 115 Trust for Pension www.calpers.ca.gov/ceppt 5
III. Executive Summary
The California Public Employees’ Retirement System (CalPERS) is an agency of the State of California (State) charged to administer defined benefit pension, employer pension contribution prefunding, health benefits, long-term care insurance, other post-employment benefit (OPEB) prefunding, and supplemental income defined contribution programs, for the benefit of State, school, and local public agency employees. CalPERS is the largest public employee retirement fund (PERF) in the United States. CalPERS has been a retirement system administrator and has managed the PERF trust fund on behalf of California public employer defined benefit retirement plans since 1932. Presently, CalPERS manages about $487 billion in PERF assets on behalf of about 2 million members and 2,890 California public employers.
The California Public Employers’ Retiree Benefit Trust (CERBT) fund began operations in March of 2007. Presently, the CERBT manages about $20.5 billion in assets on behalf of 603 California public employers. The California Employers’ Pension Prefunding Trust (CEPPT) fund began operations in July of 2019. Presently, the CEPPT manages about $224 million in assets on behalf of 94 California public employers. CalPERS is one of the largest IRC Section 115 trust providers in the country as measured by participating employers and assets under management.
Currently, a total of 628 California employers prefund their OPEB and/or Pension contributions and participate in the CalPERS Prefunding Programs.
The function of the CEPPT is to help employers prefund pension costs by delivering the highest investment returns consistent with appropriate investment risk at the lowest cost possible. We fulfill that function by concurrently delivering five key advantages that sets apart the CalPERS Prefunding Programs from our competitors:
1. World renowned investment management expertise with unmatched resources and economies of scale.
2. Annual financial reporting compliant with governmental accounting standards and trust level reporting completed by CalPERS on behalf of the employer.
3. Streamlined administrative processes and procedures that pertain to and range from dayto-day trust operations to the ability to have sub-accounting and multi-strategy selection options.
4. Excellent customer service and support from a knowledgeable team dedicated to helping employers achieve their funding goals.
5. Lowest total participation costs offering the most long-term savings.
It is our belief that the City will benefit the most by establishing and maintaining CEPPT accounts with CalPERS. We are the only ones who can offer all five of these advantages simultaneously and cannot be matched by any for-profit commission-based competitor out there.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration, and Management Services of a Section 115 Trust for Pension www.calpers.ca.gov/ceppt 6
IV. Statement of Understanding and Approach
We fully understand the scope of services being requested for proposal (RFP), the timeline of these services, and would be honored to serve to the City in this capacity.
CalPERS is able to provide Section 115 pension trust formation, administration and investment management services as outlined below.
• Offer an IRS-approved irrevocable funding vehicle to protect the City’s assets. • Implement the trust program within 90 days of executing the agreement. CEPPT employer assets are pooled within each strategy with CEPPT employer assets accounted for separately/individually
• Work directly with City staff to assist and guide on the selection of asset allocation strategies for the trust based on the City’s investment objectives and risk tolerance and compliance with the City’s Investment Policy.
• Provide a full-service program that includes trust administration, trustee and investment management services.
• Provide assurance of portfolio compliance with applicable policies and laws. • Provide education/presentations regarding the pension trust program to Council and other City staff.
• Upon City’s request, staff will be available to meet with City’s Chief Financial Officer and other staff and provide reports and updates as to trust performance. • Provide quarterly and annual comparative performance analyses and evaluation reports of the investments of the trust.
• With City staff, assist and support the development of a pension prefunding policy. • Coordinate all contributions into the trust and process any requests for appropriate distribution.
CalPERS meets the vendor qualification and requirements as stated in RFP Document Section III, Scope of Services.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration, and Management Services of a Section 115 Trust for Pension www.calpers.ca.gov/ceppt 7
Part 2 | Firm Qualifications and Experience
The proposal should state the size of the Firm, the size of the Firm’s staff, the location of the office from which the work on this engagement is to be performed.
For the Firm’s office assigned responsibility for the Section 115 Trust for Pension Services, list the most significant engagements (maximum of 5) performed in the last five (5) years that are similar in organizational type, size and complexity to the engagement described in this request for proposal. These engagements should show experience with local governments establishing, administering, and management services of a Section 115 Trust for Pension. Indicate the scope of work, date engagement partners, total hours, and the name and telephone number of the principal client contact and, if available, a link to the final published report.
Established in 1932, CalPERS is an agency of the State of California (State) charged to administer defined benefit pension, employer pension contribution prefunding, health benefits, long-term care insurance, other post-employment benefit (OPEB) prefunding, and supplemental income defined contribution programs (SIP), for the benefit of State, school, and local public agency employees. As an agency of the State, CalPERS is overseen by the Governor and State Legislature. CalPERS is formed and governed under the California State Constitution (Article XVI) and the California Government Code. CalPERS is operated in compliance with State regulations and publishes financial reports compliant with governmental accounting standards.
CalPERS is the largest public employee retirement fund (PERF) in the United States. CalPERS has been a retirement system administrator and has managed governmental retirement plans for more than 90 years. Through nine decades of successful operation, CalPERS has established international reputation for prudent investment management and system administration.
Presently, CalPERS manages about $487 billion of pension assets in worldwide markets on behalf of about 2 million members. CalPERS provides pension services to about 2,890 California public employers. CalPERS is headquartered in Sacramento and has 7 regional offices located throughout California that employ about 2,875 workers.
CalPERS is one of the largest IRC Section 115 trust provider in the United States. Currently, a total 628 California employers (including 157 Cities or Towns) prefund their OPEB and/or pension contributions and participate in the CalPERS Prefunding Programs.
The CEPPT fund program is described in California Public Employees’ Retirement Law, Chapter 19, Government Code Sections 21710-21716, as a special trust fund in the State Treasury for the purpose of allowing State and local public agency employers that provide a defined benefit pension plan to their employees to prefund their required pension contributions. Senate Bill 1413 (SB1413), which enacted the CEPPT, was approved by the California Governor on September 21, 2018. The CEPPT is a fiduciary fund and will be reported in compliance with applicable Governmental Accounting Standards Board (GASB) Statements including No. 84 (GASB 84). The CEPPT is administered in a manner compliant with Internal Revenue Code (IRC) Section 115 and is operated in compliance with applicable laws and regulations. The CalPERS Agenda Item #13.2.
City of St. Helena
Establishment, Administration, and Management Services of a Section 115 Trust for Pension www.calpers.ca.gov/ceppt 8
Board of Administration (CalPERS Board) are the fiduciaries of the CEPPT which began operations in July of 2019.
There are 14 full time staff members dedicated to maintaining high levels of customer service, administration, and operational support to our CEPPT participating agencies. There are an additional five full time staff members dedicated to the investment services for the CEPPT Funds. All members of the Prefunding Programs operate out of CalPERS Headquarters in Sacramento, CA.
Primary Contact:
Darren Lathrop
CalPERS
400 Q Street
Sacramento, CA 95811
(916) 291-0391
[email protected]
Reference Contact Information
City of Burbank Craig Wood, Deputy Finance Director
275 E Olive Ave, Burbank, CA 91502
(818) 238-5512
[email protected]
CERBT - 8/20/2007 to present
CEPPT - 8/19/2020 to present
City of Buena Park Sung Hyun, Director of Finance
6650 Beach Boulevard, Buena Park, CA 90622
(714) 562-3713
[email protected]
CERBT - 6/5/2009 to present
CEPPT - 10/31/2019 to present
City of Belvedere Amber Johnson, Administrative Services Manager 450 San Rafael Ave, Belvedere, CA
(415) 435-8904
[email protected]
CEPPT - 5/7/2021 to present
City of Laguna Woods Elizabeth Torres, Administrative Services Director/City Treasurer
24264 El Toro Road, Laguna Woods, CA 92637
(949) 639-0555
[email protected]
CERBT - 2/8/2016 to present
CEPPT - 4/20/2021 to present
Agenda Item #13.2.
City of St. Helena
Establishment, Administration, and Management Services of a Section 115 Trust for Pension www.calpers.ca.gov/ceppt 9
City of Torrance Sheila Poisson, Finance Director
3031 Torrance Blvd., Torrance, CA 90503
310-618-5854
[email protected]
CERBT - 12/23/2015 to present
CEPPT - 7/13/2021 to present
Agenda Item #13.2.
City of St. Helena
Establishment, Administration, and Management Services of a Section 115 Trust for Pension www.calpers.ca.gov/ceppt 10
Part 3 | Consultant Identification and Team
The Firm shall identify the principal supervisory and management staff, including engagement partners, managers, other supervisors, and specialists, who would be assigned to the rate study. The Firm should also provide information on direct Section 115 Trust for Pension services experience, including the scope of services requested by the City, of each person, and information on relevant continuing professional education for the past three (3) years and membership in professional organizations relevant to the performance of this service.
The Firm should provide as much information as possible, including resumes, regarding the number, qualifications, experience, and training of the specific staff to be assigned to this agreement. The Firm should also indicate how the quality of staff over the term of the agreement will be assured.
Engagement partners, managers, other supervisory staff, and specialists may be changed if those personnel leave the Firm, are promoted, or are assigned to another office. These personnel may also be changed for other reasons with the express prior written permission of the City of St. Helena. However, in either case, the City of St. Helena reserves the right to approve or reject replacements. This shall also apply to the consultants and firm specialists mentioned in response to this request for proposal.
Other personnel may be changed at the discretion of the Firm provided that replacements have substantially the same or better qualifications or experience and there is continuity of key staff to ensure an efficient process.
The CERBT & CEPPT Program (Prefunding Programs) team, staffed by 14 full time employees collectively responsible for the administration reporting, and customer outreach of the CalPERS Prefunding Programs trust funds (CERBT & CEPPT). All 14 members of the Prefunding Programs team operate out of CalPERS central office in Sacramento.
The City’s primary contact is Darren Lathrop, CalPERS Prefunding Programs Customer Outreach and Support Manager for the CERBT and CEPPT. Darren has been working for CalPERS with the Prefunding Programs since 2022. Before joining CalPERS, Darren spent more than 20 years in the private sector with a background in Marketing, Sales, and Business Administration. During his time at Associated Materials Inc., he held positions of Senior Branch Manager and Territory Sales Manager. Darren is responsible for providing all educational and outreach efforts, including presentations and performance updates for participating CEPPT employers.
Darren Lathrop
(916) 291-0391
[email protected]
Agenda Item #13.2.
City of St. Helena
Establishment, Administration, and Management Services of a Section 115 Trust for Pension www.calpers.ca.gov/ceppt 11
Colleen Cain-Herrback is the CalPERS Prefunding Programs overseeing both the CERBT and CEPPT. Colleen joined the Prefunding Programs team in 2016 after working for 2 years in CalPERS program areas performing budget analysis, and 5 years in CalPERS Human Resources Division. Prior to joining CalPERS in 2009, Colleen worked for 5 years with the Sacramento Kings NBA organization in their Human Resources Office. Colleen earned a BS in Business Administration from California State University, Sacramento. Colleen manages all IRC Section 115 Trust program support for participating employers.
Colleen Cain-Herrback
(916) 505-2506
[email protected]
Robert Sharp is the Assistant Division Chief for CalPERS Prefunding Programs which includes oversight of the CERBT, CEPPT, and SIP Programs. Robert is responsible for overseeing the operational support teams that provide account support services to CalPERS contracting agencies. Prior to joining CalPERS in 2005, Robert worked for 6 years in the private sector in the banking and insurance industry. Robert earned a Bachelor of Arts degree from California State University, Sacramento.
Robert Sharp
(916) 397-0756
[email protected]
The CalPERS Investment Office (INVO) staff, under policy guidance of the CalPERS Board, manages and oversees the investments of the CERBT and CEPPT. The CalPERS Affiliate Investments Program (AIP) area will offer support to the City’s CEPPT account with 5 full time employees.
Christine Reese, AIP Investment Director, leads this team who work out of the CalPERS INVO.
Christine has more than 25 years of experience in the investment management industry, working with leading financial institutions such as BlackRock, State Street Bank & Trust, and Union Bank of California. Christine has managed the CalPERS AIP team from 2013-present.
Prior to CalPERS, Christine was an independent consultant for BlackRock, State Street Bank & Trust for 9 years, Principle of Product Development for Barclays Global Investors for 5 years, and Assistant Vice President, Trading for Union Bank of California for 4 years. Christine earned a Bachelor of Science, Magna Cum Laude, from the University of Delaware and Certificate of Project Management from UC Berkeley Extension.
CalPERS has chosen to utilize State Street Global Advisors (SSGA) to externally manage all of the CEPPT asset classes. The daily investment of these asset classes is performed by SSGA following the strategies and instructions of CalPERS. SSGA maintains investment portfolios which are managed passively to emulate the CalPERS performance benchmarks of those asset classes.
CalPERS also utilizes SSGA in part or whole for several other trust funds including the PERF, Judges Retirement System (JRS), and the Legislators Retirement System (LRS).
Agenda Item #13.2.
City of St. Helena
Establishment, Administration, and Management Services of a Section 115 Trust for Pension www.calpers.ca.gov/ceppt 12
State Street Bank (SSB) is contracted to provide CEPPT investment custody services. SSB is a global investment management service company. Its operating history in the USA extends back to 1792. CalPERS Prefunding Programs have used SSB custodial services since the CERBT began operation in 2007.
Northeast Retirement Services, Inc. (NRS) provides CEPPT employer account record keeping.
Daily reports of account transactions and balances are available through the Prefunding Programs Online Record Keeping system. NRS is contracted to deliver web-based asset account record access to CEPPT employers. Employers may access their accounts online. CalPERS Prefunding Programs have used NRS for record keeping services since 2010.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration, and Management Services of a Section 115 Trust for Pension www.calpers.ca.gov/ceppt 13
Part 4 | Proposed Project Workplan
1. Provide a plan as to how you will administer the requested services outlined in this RFP.
2. Describe the firm’s approach and timeframes to completing the services described in Section III. Scope of Services.
3. Describe the firm’s approach to onboarding and transitioning a new client.
4. Include thorough discussions of methodologies you believe are essential to accomplishing this project including your firm’s philosophy, including your approach to managing Section 115 trust programs. Please address the following questions in the response:
a. What are your approaches to rebalancing or reallocating asset classes, styles, and sectors? How do you add value in this process?
b. Describe the investment options available. Please provide 1, 3, and 5-year return history and underlying expense ratios for each fund/portfolio. Do your total portfolio returns comply with Global Investment Performance Standards? c. How are portfolios managed (e.g. by team, individua manager)? d. Describe your firm’s in-house technical and research capabilities. Are outside sources used by the firm on a regular basis?
e. What technical analysis (if any) do you use?
f. Briefly describe your firm’s investment management philosophy, including your approach to managing governmental portfolios.
5. Identify the staff who would be assigned to each task, including sub-consultants and subcontractors.
6. List any necessary equipment, training, or installation services required.
The purpose of the CEPPT is to prefund employer pension contributions by delivering the highest investment return consistent with a given level of investment risk for an appropriate investment time horizon, at the lowest cost possible. To achieve this purpose, the CEPPT program offers employers a broadly diversified investment portfolio, consisting of public market securities, authorized by an investment policy approved by the CalPERS Board. This investment portfolio is offered to employers in the form of two risk efficient, broadly diversified asset allocation strategies. These two CEPPT asset allocation strategies (CEPPT strategies) invest in the same four underlying set of asset classes. The asset allocation strategies differ from one another only in the extent to which they participate in each asset class. By altering the portion of assets allocated to each asset class in a systematic way, the long term expected rate of investment return and the investment return volatility of each asset allocation strategy are made materially different from one another.
If the City establishes a CEPPT Participation Agreement with CalPERS it will delegate the investment fiduciary responsibility of the City’s CEPPT assets to the CalPERS Board. This delegation of investment fiduciary responsibility includes the adoption of the CEPPT Investment Policy . The design of the CEPPT Investment Policy ensures that investors, managers, consultants, and other participants selected by CalPERS take prudent and careful action while Agenda Item #13.2.
City of St. Helena
Establishment, Administration, and Management Services of a Section 115 Trust for Pension www.calpers.ca.gov/ceppt 14
managing the portfolios. Additionally, use of the CEPPT Investment Policy ensures sufficient flexibility in managing investment risks and returns associated with the CEPPT. The CEPPT Investment Policy should be read in conjunction with and is subject to applicable conditions contained within the CalPERS Total Fund Investment Policy. The CEPPT Investment Policy shall also be managed to comply with all applicable INVO policies.
The CalPERS Board directs the investment strategy and investments of the CEPPT in accordance with the CEPPT Investment Policy. CalPERS INVO staff, under policy guidance of the CalPERS Board, manages the investments of the CEPPT. CalPERS employs more than 400 INVO staff who are devoted to the management of investments, investment risk, and investment policy compliance. CalPERS has chosen to utilize SSGA to externally manage all CEPPT asset classes except liquidity which is constrained to frictional/operational cash flows managed by CalPERS AIP staff. CalPERS AIP staff oversee SSGA.
CalPERS provides turnkey IRC Section 115 trust administration, including governance, custody, recordkeeping, financial reporting compliant with governmental accounting standards, and trust legal compliance some examples of which include:
• Establishment and implementation of the 115 trust accounts including sub-accounts • Design, implementation and review of the CEPPT investment policies • Receiving contributions from participating employers and establishing separate employer prefunding accounts in the prefunding plan
• Investing contributed amounts and income, if any
• Disbursing employer account amounts to pay for valid employer costs • Daily reports of account transactions and balances are available through the Prefunding Programs online record keeping system
• Monthly reports of time-weighted investment performance are published on our web pages called “Fund Fact Sheets”
• Quarterly employer account statements are posted for download from the Prefunding Programs online record keeping system
• Audited ACFR compliant with GASB 74 & 84 issued by CalPERS • Regular trust account updates, plan reviews, training and education to employer staff and stakeholders
The table below provides details regarding assumptions of 1-10 year forecasted expected rates of investment return for the CEPPT strategies. These expected rates of return are net of all fees assuming a fee rate of 25 basis points. Also illustrated is the corresponding level of expected investment return volatility as measured by the standard deviation of expected investment returns for the same 1-10-year period. This data was generated from 2022 capital market assumptions and constraints.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration, and Management Services of a Section 115 Trust for Pension www.calpers.ca.gov/ceppt 15
CEPPT Strategies Strategy 1 Strategy 2
Expected 1-10 Year Net
Compound Rate of
Investment Return
4.50% 3.50%
Standard Deviation of
Expected Investment
Returns
8.8% 6.1%
The table below provides details regarding the asset class target allocations and policy ranges for each CEPPT strategy along with the investment performance benchmarks for each major asset classification utilized.
Asset Classification Benchmark Strategy 1 Strategy 2
Global Equity MSCI ACWI IMI (Net) 37%
+/- 5%
21%
+/- 5%
Fixed Income
Bloomberg
U.S. Aggregate Bond
Index
44%
+/- 5%
61%
+/- 5%
Global Real Estate
(REITs)
FTSE EPRA/NAREIT
Developed Liquid
(Net)
14%
+/- 5%
9%
+/- 5%
Treasury Inflation
Protected Securities
(TIPS)
Bloomberg US TIPS
Index
(Series L)
5%
+/- 3%
9%
+/- 3%
Liquidity 91-Day Treasury Bill 0%
+ 2%
0%
+2%
See “Attachment 2 – CEPPT Fund Fact Sheets”.
CalPERS ensures compliance with the CEPPT Investment Policy by setting asset class target allocations and policy ranges for each of the asset classes being utilized which are provided in the CEPPT Investment Policy. The CalPERS Board has established procedures which are followed by CalPERS staff to ensure that CEPPT Investment Policy compliance is maintained.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration, and Management Services of a Section 115 Trust for Pension www.calpers.ca.gov/ceppt 16
The CEPPT investments are monitored and evaluated daily to ensure that their ability to provide CEPPT participating employers with optimally efficient and prudent investment options is maintained. Major asset classifications and the CEPPT strategies are determined using a rigorous methodology that includes an exhaustive study, analysis, and review of the CEPPT Investment Policy at least once every four years with a less exhaustive review performed at least every two years. CalPERS has developed and implemented an asset liability analytical framework to conduct its asset allocation work for the CEPPT Investment Policy, which may be modified periodically to reflect the changing nature of investment market and economic conditions. Using a mean variance optimization approach that incorporates forecasted capital market assumptions (asset class returns), volatilities, and liability information for each trust, an efficient frontier is constructed depicting the portfolios with the highest expected return for a range of volatilities given the assumptions. The policy portfolios on the efficient frontier provide investment options of the highest degree of diversification given varying levels of risk. A range of potential policy portfolios that best balance the investment objectives, risk tolerances, and liquidity constraints of the CEPPT trust are then presented for CalPERS Board approval. Once a policy portfolio is approved, the CEPPT Investment Policy is approved by the CalPERS Board which identifies the strategic asset allocation targets to be invested in each asset class. Policy targets are typically implemented over an appropriate transition period (depending on the degree of change) to efficiently manage transaction costs and market effect. Upon adoption of significant CEPPT Investment Policy changes, CalPERS staff will implement the changes within a reasonable time period. The CEPPT portfolio will be managed in a manner that minimizes any tracking error.
The Asset Liability Management (ALM) process is an integrated review of our assets and liabilities to inform decisions designed to achieve a sound and sustainable fund. The goal of the ALM process is to balance the expected cost of future OPEB and pension payments with the expected future investment returns. During the process, the CalPERS board reviews its overall risks, taking into consideration the long-term sustainability of the system.
This formal process runs on a four-year cycle and includes a review of CalPERS’ investment portfolios and retirement plan liabilities. Capital Market Assumptions are primarily based on expectations of future investment returns. Liability projections are based on demographic and economic factors and trends, including membership dynamics, future salary and payroll growth, retirement ages, inflation, and life expectancy.
This innovative and transparent approach is overseen by the board and used to make sound decisions that applies to the Public Employees’ Retirement Fund (PERF) and our other Affiliate Funds.
CEPPT employer assets are pooled within each CEPPT strategy for investment purposes and objectives, however, CEPPT employer assets are accounted for separately in individual CEPPT employer accounts using a unitized methodology where each CEPPT employer owns units of a CEPPT strategy. Unitization makes asset valuation simple and allows for efficient liquidity.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration, and Management Services of a Section 115 Trust for Pension www.calpers.ca.gov/ceppt 17
CEPPT employers control their individual CEPPT funding policies. Prefunding Programs staff view the decision about which CEPPT strategy(s) to utilize as a funding policy decision rather than an investment policy decision. The City is responsible for this ongoing decision which is based on investment return volatility, plan funded status, sources of future funding, and cash payments required by the benefit plan. Since the underlying asset classes are the same for each CEPPT strategy, the City’s choice of CEPPT strategy(s) is guided by what is best in terms of financial commitment, prefunding objective, and plan cash flow requirements, rather than in which particular securities should assets be invested. To help make this decision easier, City staff may choose to utilize both CEPPT strategies concurrently.
All CEPPT contributions (initial and ongoing) are treated identically with respect to their timely deployment into CEPPT strategies. CEPPT contributions can be made daily, weekly, monthly, quarterly, or annually which is something for the City to consider when moving money into the CEPPT. Many employers have mentioned their concerns to Prefunding Programs staff about market timing risk and prefer smaller, more frequent contributions to address their concerns.
CalPERS has chosen to utilize and oversee SSGA to externally manage all of the CEPPT asset classes. SSB is contracted to provide CEPPT investment custody services. NRS is contracted to deliver web-based account record access which City staff can view daily. Prefunding Programs staff provide a GASB 84 compliant financial report to all participating employers through the CalPERS Annual Comprehensive Financial Report (ACFR) which is independently audited.
CalPERS retains highly skilled internal and external legal counsel who advise on all matters of CEPPT legal compliance including the legal basis for a prospective employer to participate in an IRC Section 115 trust fund.
We have provided a hypothetical implementation schedule assuming the City’s is planning to award the RFP on May 14, 2024.
The contracting documents will be reviewed and approved in a few business days (not more than 10 business days, but usually 2-3 business days). The trust is fully implemented and set-up for the City as soon as the CEPPT contract has been executed and signed by CalPERS.
Contributions will be accepted as early as one day after the date of the City’s contract agreement is approved by CalPERS.
Prefunding Program staff will work with the City staff and City’s incumbent 115 trust provider to facilitate the Trust to Trust transfer to the City’s CEPPT account. City staff and City’s incumbent 115 trust provider determines the timeline of the transfer. CEPPT is ready to accept the transfer one day after the City’s CEPPT contract has been executed and signed.
Agenda Item #13.2.
City of St. Helena
Establishment, Administration, and Management Services of a Section 115 Trust for Pension www.calpers.ca.gov/ceppt 18
Hypothetical Implementation Schedule
RFP issued March 27, 2024
Deadline for receiving questions April 12, 2024
Proposals due April 29, 2024
Vendor selected at City Council May 14, 2024
City completes and submits CEPPT contracting documents May 17, 2024 CEPPT Participation Agreement executed May 23, 2024
CEPPT welcome letter packet mailed to City May 24, 2024 CEPPT onboarding teleconference Week of May 27
CEPPT cash flow strategy discussion for fiscal year 2023-24 May/June 2024 Initial CEPPT contribution Employer Determined
CEPPT Q1 statement as of 09302023 uploaded to NRS October 15, 2024 CEPPT Q2 statement as of 12312023 uploaded to NRS January 15, 2025 CEPPT Q3 statement as of 03312024 uploaded to NRS April 15, 2025 CEPPT account updates 1-2x/year ongoing
Agenda Item #13.2.
City of St. Helena
Establishment, Administration, and Management Services of a Section 115 Trust for Pension www.calpers.ca.gov/ceppt 19
Part 5 | Total Cost and Hourly Rate
The proposal should contain all pricing information related to establishing, administering, and management services of a Section 115 Trust for Pension as described in this request for proposal. The total all-inclusive maximum cost to be proposed is to contain all direct and indirect costs including all out-of-pocket expenses.
The CEPPT is a self-funded, not for profit, trust funds in which participating employers pay for all expenses. These expenses consist of administrative expenses borne by CalPERS to administer and oversee the trust assets, investment management fees and administrative fees paid to SSGA for their role in managing the CEPPT investment trust asset classes, custody services paid to SSB and recordkeeping fees paid to NRS to administer individual employer accounts. Because the CEPPT both cannot retain a profit from their services, the CEPPT charges a total participation cost fee rate that covers all services. This total participation cost fee rate is expressed in basis points (bps). A basis point (bp) is 1/100th of a single percent. This fee rate is applied to and deducted from the participating employer's daily CEPPT asset balance. CEPPT participating employers are never billed or invoiced. The CEPPT total participation cost fee rate is currently 25bps of assets under management. There are no other CEPPT fees.
CEPPT Fee Rate Category Breakdown
Source of CEPPT Fees Basis Points
External investment management fees ~2.00
External investment operating expenses to fund
managers
~3.10
Internal investment fees ~2.40
Custodial services fees ~0.80
Online Record Keeping fees ~1.50
Program administration fees ~15.20
Total: 25.00
There is no start-up implementation fee. No fee is charged until assets are placed in the employer account. There are no one-time fees. There are no fees for initial and ongoing compliance and legal fees. There are no minimum fees. There are no front-end and back-end fees/loads. There are no transaction fees. There are no standard fees vs. custom services fees.
There are no termination fees, or any other fees related to the transfer of the City’s assets to another qualified trust. CEPPT employers pay the actual cost of trust fund operations. CalPERS is a state agency and does not retain any profit from trust operation. The fee rate may change.
Our fee rate is not scalable like our competitors. We charge all of our customers, regardless of their size, the lowest possible cost at all times. We start less expensive than any other trust Agenda Item #13.2.
City of St. Helena
Establishment, Administration, and Management Services of a Section 115 Trust for Pension www.calpers.ca.gov/ceppt 20
fund and we stay less expensive than any other trust fund. This is a huge advantage for our customers because it creates a favorable mathematical probability, they will save the greatest amount of money at the same level of investment risk exposure over a given time period. The longer that time period the greater the probability. Additionally, when they draw down their account balances and actually use the money for its intended purpose, they don’t have to pay more in fees.
CEPPT contributions and disbursements are always voluntary actions decided upon by the participating employer and never required by CalPERS. Contributions can be made at any time and frequency via check, wire, or ACH.
The 25 basis point CEPPT total participation cost fee rate is applied to and deducted from the participating employer's daily CEPPT asset balance. CEPPT participating employers are never billed or invoiced.
Agenda Item #13.2.
CalPERS Attachments
Agenda Item #13.2.
Attachment 1
CEPPT Investment Policy
Agenda Item #13.2.
CalPERS Investment Policy for the California
Employers’ Pension Prefunding Trust
Effective Date
This policy is effective as of October 1, 2022.
Contents
Introduction 2
Strategic Objective 2
Responsibilities 2
Investment Approach & Parameter 2
Investment Constraints/ Limitations 3
Glossary of CalPERS Specific Terms 3
Policy Document History 3
Appendices 3
Appendix 1: Reporting to the Investment Committee ............................................................... 3 Appendix 2: Investment Responsibilities .................................................................................... 4 Appendix 3: Investment Constraints/Limitations ....................................................................... 5 Appendix 4: Policy Document History ........................................................................................ 6 Agenda Item #13.2.
California Employers’ Pension Prefunding Trust Policy
October 1, 2022 Page 2 of 6
Introduction
The California Public Employees’ Retirement System (CalPERS) Total Fund Investment Policy, adopted by the CalPERS Investment Committee (Committee), sets forth CalPERS’ overarching investment beliefs, purposes, and objectives with respect to all its investment programs.
This document sets forth the investment policy (Policy) for the policy portfolios (Portfolios) of the California Employers’ Pension Prefunding Trust Fund (CEPPT or Fund). The design of this Policy ensures that investors, managers, consultants, and other participants selected by CalPERS take prudent and careful action while managing the Portfolios. Additionally, use of this Policy ensures sufficient flexibility in managing investment risks and returns associated with the Fund.
The Fund was established January 1, 2019 for public employers to prefund their required pension contributions. There are two separate Portfolios (Strategy 1 and Strategy 2) for the Fund, that provide employers a choice of asset allocation strategies.
This Policy should be read in conjunction with and is subject to applicable conditions contained within the CalPERS Total Fund Investment Policy. This Policy shall also be managed to comply with all applicable Investment Office policies.
Strategic Objective
The Fund seeks to offer to employers distinct investment alternatives given their specific liabilities and cash flow needs.
Responsibilities
Details regarding various levels of responsibility for this Fund are provided in Appendix 1, Reporting to the Investment Committee, and Appendix 2, Investment Responsibilities.
Investment Approach & Parameter
A. Performance Objective and Benchmark
The benchmark for the Portfolios is specified in the CalPERS Total Fund Investment Policy benchmark appendix.
B. Strategic Asset Allocation Process
A comprehensive Asset Allocation Strategy analysis shall be completed periodically that follows the schedule and process as described in the CalPERS Total Fund Investment Policy, Asset Allocation Strategy Section, and Reporting to the Investment Committee appendix. As further described in the Asset Allocation Strategy Section, the schedule may be altered to accommodate pending Board actions.
Agenda Item #13.2.
California Employers’ Pension Prefunding Trust Policy
October 1, 2022 Page 3 of 6
C. Restrictions, Prohibitions and Authorized Securities Restrictions, Prohibitions and Authorized Securities of the Fund are governed by the CalPERS Total Fund Investment Policy for internal funds and defined in each Manager’s contract with CalPERS for external funds.
All transactions involving derivatives are governed by the CalPERS Total Fund Investment Policy, Global Derivatives and Counterparty Risk Section.
Investment Constraints/ Limitations
See Appendix 3 for Fund investment constraints/limitations.
Glossary of CalPERS Specific Terms
Bold italicized terms appearing in the Policy are CalPERS specific in nature and are defined in the CalPERS Specific Glossary of Terms.
Policy Document History
See Appendix 4 for historical details of Investment Committee adoption and revisions of this Policy.
Appendices
Appendix 1: Reporting to the Investment Committee
The following tables provide details regarding reporting to the Investment Committee:
1. Investment Office Staff
2. General Pension Consultant
Table 1: Investment Office Staff Reporting Responsibilities Ref # Report Content Frequency
1. Staff shall provide a review that will include, but is not limited to, asset class allocations compared to Policy targets and ranges (as applicable), current market value,
performance, and risk metrics.
No less than annually
2. Staff shall report concerns, problems, material changes, and all violations of the Policy. These reports shall include explanations of any violations and appropriate
recommendations for corrective action
At the next
Committee meeting,
or sooner if deemed
necessary
Agenda Item #13.2.
California Employers’ Pension Prefunding Trust Policy
October 1, 2022 Page 4 of 6
Table 2: General Pension Consultant Reporting Responsibilities Ref # Report Content Frequency
1. The Consultant shall monitor, evaluate, and report on the performance of the Fund relative to the benchmarks and this Policy and other applicable CalPERS Policies.
No less than annually
Appendix 2: Investment Responsibilities
The following sections provide details regarding investment related responsibilities for the:
• Investment Committee
• Investment Office Staff
• General Pension Consultant
• External Manager
Investment Committee Responsibilities
1. Approve asset classes for investment and set a policy target allocation, permissible range, and benchmark for each asset class.
Investment Office Staff Responsibilities
1. All aspects of portfolio management, including monitoring, trading, analyzing, evaluating performance relative to the appropriate benchmark, and selecting and contracting with managers.
2. Provide individualized asset allocation strategy recommendations to the Committee, including selection of asset class benchmarks, and Policy targets and ranges.
3. Manage the asset class allocations of the Fund within Policy ranges approved by the Committee, in accordance with Policy guidelines.
4. Monitor internal and external managers in the implementation of, and compliance with, the Policy.
5. Develop and maintain investment procedures, program guidelines, and sub-program guidelines.
General Pension Consultant Responsibilities
1. Provide independent perspective and counsel to the Committee, to include routine communication with the Investment Office Staff and periodic reviews of processes and procedures.
External Manager Responsibilities
1. Manage the Fund in accordance with each manager’s contract with CalPERS and the Policy.
Agenda Item #13.2.
California Employers’ Pension Prefunding Trust Policy
October 1, 2022 Page 5 of 6
2. Communicate and cooperate with Investment Office Staff and authorized third parties regarding the management of the Fund.
Appendix 3: Investment Constraints/Limitations
Portfolio Asset Class Allocation Targets & Ranges
The following tables provide details regarding the asset allocation targets and ranges for each CEPPT strategy. Upon adoption of significant policy changes, Staff will implement the changes within a reasonable time period.
Table 3.1: Allocation Targets and Ranges – Strategy 1, Effective October 1, 2022 Asset Class Policy Target Policy Range
Relative to Target
Global Equity 37% +/- 5%
Fixed Income 44% +/- 5%
Treasury Inflation-Protected Securities
(TIPS) 5% +/- 3%
Real Estate Investment Trusts (REITs) 14% +/- 5%
Liquidity* 0% + 2%
Total 100%
*The Liquidity asset class is constrained to frictional/operational cash flows Table 3.2: Allocation Targets and Ranges – Strategy 2, Effective October 1, 2022 Asset Class Policy Target Policy Range
Relative to Target
Global Equity 21% +/- 5%
Fixed Income 61% +/- 5%
Treasury Inflation-Protected Securities
(TIPS) 9% +/- 3%
Real Estate Investment Trusts (REITs) 9% +/- 5%
Liquidity* 0% + 2%
Total 100%
*The Liquidity asset class is constrained to frictional/operational cash flows.
Target Tracking Error
The Portfolios will be managed in a manner that minimizes any tracking error.
Agenda Item #13.2.
California Employers’ Pension Prefunding Trust Policy
October 1, 2022 Page 6 of 6
Appendix 4: Policy Document History
Table 4: CEPPT Fund Policy History
Date Detail
2019-06-18 Approved by the Investment Committee.
2022-10-01 Administrative changes to the strategic asset allocation targets and ranges as approved by the Committee on March 14, 2022 (agenda item 7b).
Agenda Item #13.2.
Attachment 2
CEPPT Fund Facts – March 2024
Agenda Item #13.2.
California Employers' Pension Prefunding Trust (CEPPT)
CEPPT Strategy 1
March 31, 2024
Asset Class Target
Allocation
Target
Range Benchmark
Global Equity 37% ± 5% MSCI All Country World
Index IMI (Net)
Fixed Income 44% ± 5% Bloomberg US Aggregate
Bond Index
Treasury Inflation-Protected
Securities ("TIPS") 5% ± 3% Bloomberg US TIPS Index,
Series L
Real Estate Investment
Trusts ("REITs") 14% ± 5% FTSE EPRA/NAREIT
Developed Index (Net)
Cash - + 2% ICE BofA US 3-Month
Treasury Bill Index
Assets Under Management
As of the specified reporting month-end:
CEPPT Strategy 1 Annual Expense Ratio
$172,519,265 0.25%
CEPPT Strategy 1 Performance as of March 31, 2024
SKHD Since Inception*
1 Month 3 Months Fiscal YTD 1 Year 3 Years* 5 Years* 10 Years* (October 1, 2019) Gross Return 1,3 2.08% 2.37% 8.06% 10.02% 1.43% - - 4.46% Net Return 2,3 2.06% 2.32% 7.87% 9.76% 1.19% - - 4.22%
Benchmark Return 2.12% 2.33% 7.98% 9.89% 1.23% - - 4.35% Standard Deviation 4 - - - - 11.46% - - 11.27%
* Returns for periods greater than one year are annualized. 1 Gross returns are net of SSGA operating expenses.
2 Net returns are net of SSGA operating expenses, investment management, administrative and recordkeeping fees. 3 Expenses are described in more detail on page 2 of this document. 4 Standard deviation is based on gross returns and is reported for periods greater than 3 years.
Objective
The CEPPT Strategy 1 portfolio seeks to provide capital appreciation and income consistent with its strategic asset allocation. There is no guarantee that the portfolio will achieve its investment objective.
Strategy
The CEPPT Strategy 1 portfolio is invested in various asset classes that are passively managed to an index. CalPERS periodically adjusts the composition of the portfolio in order to match the target allocations. Generally, equities are intended to help build the value of the employer's portfolio over the long term while bonds are intended to help provide income and stability of principal. Also, strategies invested in a higher percentage of equities seek higher investment returns (but assume more risk) compared with strategies invested in a higher percentage of bonds.
Compared with CEPPT Strategy 2, this portfolio has a higher allocation to equities than bonds. Historically, equities have displayed greater price volatility and, therefore, this portfolio may experience greater fluctuation of value. Employers that seek higher investment returns, and are able to accept greater risk and tolerate more fluctuation in returns, may wish to consider this portfolio.
CalPERS Board may change the list of approved asset
classes in composition as well as targeted allocation
percentages and ranges at any time.
Composition
Asset Class Allocations and Benchmarks
The CEPPT Strategy 1 portfolio consists of the following asset classes and corresponding benchmarks:
Portfolio Benchmark
The CEPPT Strategy 1 benchmark is a composite of underlying asset class market indices, each assigned the target weight for the asset class it represents.
Target vs. Actual Asset Class Allocations
The following chart shows policy target allocations compared with actual asset allocations as of the specified reporting month-end. CalPERS may temporarily deviate from the target allocation for a particular asset class based on market, economic, or other considerations.
Agenda Item #13.2.
California Employers' Pension Prefunding Trust (CEPPT)
CEPPT Strategy 1
March 31, 2024
Asset Class Target Allocations Strategy 1 Strategy 2
Global Equity 37% 21%
Fixed Income 44% 61%
Treasury-Inflation Protected Securities 5% 9%
Real Estate Investment Trusts 14% 9%
General Information
Information Accessibility
The CEPPT Strategy 1 portfolio consists of assets managed internally by CalPERS and/or by external managers. Since it is not a mutual fund, a prospectus is not available and daily holdings are not published. CalPERS provides a quarterly statement of the employer's account and other information about the CEPPT. For total market value, detailed asset allocation, investment policy and performance information, please visit our website at www.calpers.ca.gov.
Portfolio Manager Information
The CalPERS Board, through its Investment Committee, directs the CEPPT investment strategy based on policies approved by the Board of Administration. State Street Global Advisors (SSGA) manages all underlying investments for CEPPT, which include: Global Equity, Fixed Income, Real Estate Investment Trusts, and Treasury Inflation-Protected Securities.
Custodian and Record Keeper
State Street Bank serves as custodian for the CEPPT. Northeast Retirement Services serves as recordkeeper.
Expenses
CEPPT is a self-funded trust in which participating employers pay for all administrative and investment expenses. Expenses reduce the gross investment return by the fee amount. The larger the expenses, the greater reduction of investment return. Currently, CEPPT expense ratios are 0.25%.
This equates to $2.50 per $1,000 invested. The expenses consist of administrative expenses borne by CalPERS to administer and oversee the Trust assets, investment management and administrative fees paid to SSGA to manage all asset classes, and recordkeeping fees paid to Northeast Retirement Services to administer individual employer accounts.
The expenses described herein are reflected in the net asset value per unit.
The expense ratio is subject to change at any time and without prior notification due to factors such as changes to average fund assets or market conditions. CalPERS reviews the operating expenses annually and changes may be made as appropriate. Even if the portfolio loses money during a period, the expenses will still be charged.
What Employers Own
Each employer invested in CEPPT Strategy 1 owns units of this portfolio, which invests in pooled asset classes managed by CalPERS and/or external advisors. Employers do not have direct ownership of the securities in the portfolio.
Price
The value of the portfolio changes daily based upon the market value of the underlying securities. Just as prices of individual securities fluctuate, the portfolio's value also changes with market conditions.
Principal Risks of the Portfolio
The CEPPT fund is a trust fund dedicated to prefunding employer contributions to defined benefit pension plans for eligible state and local agencies. CEPPT is not, however, a defined benefit plan. There is no guarantee that the portfolio will achieve its investment objectives or provide sufficient funding to meet employer obligations.
An investment in the portfolio is not a bank deposit, nor is it insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC), CalPERS, the State of California or any other government agency.
There are risks associated with investing, including possible loss of principal. The portfolio's risk depends in part on the portfolio's asset class allocations and the selection, weighting and risks of the underlying investments. For more information about investment risks, please see the document entitled "CEPPT Principal Investment Risks" located at www.calpers.ca.gov.
Fund Performance
Performance data shown on page 1 represents past performance and is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an employer's units, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than historical performance data shown. For current performance information, please visit www.calpers.ca.gov and follow the links to California Employers' Pension Prefunding Trust.
CEPPT Strategy Risk Levels
CalPERS offers employers the choice of one of two investment strategies. Projected risk levels among risk strategies vary, depending upon the target asset class allocations. Generally, equities carry more risk than fixed income securities.
Agenda Item #13.2.
California Employers' Pension Prefunding Trust (CEPPT)
CEPPT Strategy 2
March 31, 2024
Asset Class Target
Allocation
Target
Range Benchmark
Global Equity 21% ± 5% MSCI All
IMI (Net)
Country World Index
Fixed Income 61% ± 5% Bloomberg US Aggregate
Bond Index
Treasury Inflation-Protected
Securities ("TIPS") 9% ± 3% Bloomberg US TIPS Index,
Series L
Real Estate Investment
Trusts ("REITs") 9% ± 5% FTSE EPRA/NAREIT
Developed Index (Net)
Cash - + 2% ICE BofA US 3-Month
Treasury Bill Index
Assets Under Management
As of the specified reporting month-end:
CEPPT Strategy 2 Annual Expense Ratio
$51,362,573 0.25%
CEPPT Strategy 2 Performance as of March 31, 2024
SKHE Since Inception*
1 Month 3 Months Fiscal YTD 1 Year 3 Years* 5 Years* 10 Years* (January 1, 2020) Gross Return 1,3 1.58% 1.07% 5.70% 6.37% -0.15% - - 1.60% Net Return 2,3 1.56% 1.01% 5.52% 6.12% -0.38% - - 1.37% Benchmark Return 1.63% 1.02% 5.64% 6.29% -0.21% - - 1.50% Standard Deviation 4 - - - - 9.18% - - 8.48%
* Returns for periods greater than one year are annualized. 1 Gross returns are net of SSGA operating expenses.
2 Net returns are net of SSGA operating expenses, investment management, administrative and recordkeeping fees. 3 Expenses are described in more detail on page 2 of this document. 4 Standard deviation is based on gross returns and is reported for periods greater than 3 years.
Objective
The CEPPT Strategy 2 portfolio seeks to provide capital appreciation and income consistent with its strategic asset allocation. There is no guarantee that the portfolio will achieve its investment objective.
Strategy
The CEPPT Strategy 2 portfolio is invested in various asset classes that are passively managed to an index. CalPERS periodically adjusts the composition of the portfolio in order to match the target allocations. Generally, equities are intended to help build the value of the employer's portfolio over the long term while bonds are intended to help provide income and stability of principal. Also, strategies invested in a higher percentage of equities seek higher investment returns (but assume more risk) compared with strategies invested in a higher percentage of bonds.
Compared with CEPPT Strategy 1, this portfolio has a lower allocation to equities and a higher allocation to bonds. Historically, funds with a lower percentage of equities have displayed less price volatility and, therefore, this portfolio may experience comparatively less fluctuation of value. Employers that seek greater stability of value, in exchange for possible lower investment returns, may wish to consider this portfolio.
CalPERS Board may change the list of approved asset classes in composition as well as targeted allocation percentages and ranges at any time.
Composition
Asset Class Allocations and Benchmarks
The CEPPT Strategy 2 portfolio consists of the following asset classes and corresponding benchmarks:
Portfolio Benchmark
The CEPPT Strategy 2 benchmark is a composite of underlying asset class market indices, each assigned the target weight for the asset class it represents.
Target vs. Actual Asset Class Allocations
The following chart shows policy target allocations compared with actual asset allocations as of the specified reporting month-end. CalPERS may temporarily deviate from the target allocation for a particular asset class based on market, economic, or other considerations.
Agenda Item #13.2.
California Employers' Pension Prefunding Trust (CEPPT)
CEPPT Strategy 2
March 31, 2024
Asset Class Target Allocations Strategy 1 Strategy 2
Global Equity 37% 21%
Fixed Income 44% 61%
Treasury-Inflation Protected Securities 5% 9%
Real Estate Investment Trusts 14% 9%
General Information
Information Accessibility
The CEPPT Strategy 2 portfolio consists of assets managed internally by CalPERS and/or by external managers. Since it is not a mutual fund, a prospectus is not available and daily holdings are not published. CalPERS provides a quarterly statement of the employer's account and other information about the CEPPT. For total market value, detailed asset allocation, investment policy and performance information, please visit our website at www.calpers.ca.gov.
Portfolio Manager Information
The CalPERS Board, through its Investment Committee, directs the CEPPT investment strategy based on policies approved by the Board of Administration. State Street Global Advisors (SSGA) manages all underlying investments for CEPPT, which include: Global Equity, Fixed Income, Real Estate Investment Trusts, and Treasury Inflation-Protected Securities.
Custodian and Record Keeper
State Street Bank serves as custodian for the CEPPT. Northeast Retirement Services serves as recordkeeper.
Expenses
CEPPT is a self-funded trust in which participating employers pay for all administrative and investment expenses. Expenses reduce the gross investment return by the fee amount. The larger the expenses, the greater reduction of investment return. Currently, CEPPT expense ratios are
0.25%. This equates to $2.50 per $1,000 invested. The expenses consist of administrative expenses borne by CalPERS to administer and oversee the Trust assets, investment management and administrative fees paid to SSGA to manage all asset classes, and recordkeeping fees paid to Northeast Retirement Services to administer individual employer accounts.
The expenses described herein are reflected in the net asset value per unit. The expense ratio is subject to change at any time and without prior notification due to factors such as changes to average fund assets or market conditions. CalPERS reviews the operating expenses annually and changes may be made as appropriate. Even if the portfolio loses money during a period, the expenses will still be charged.
What Employers Own
Each employer invested in CEPPT Strategy 2 owns units of this portfolio, which invests in pooled asset classes managed by CalPERS and/or external advisors. Employers do not have direct ownership of the securities in the portfolio.
Price
The value of the portfolio changes daily based upon the market value of the underlying securities. Just as prices of individual securities fluctuate, the portfolio's value also changes with market conditions.
Principal Risks of the Portfolio
The CEPPT fund is a trust fund dedicated to prefunding employer contributions to defined benefit pension plans for eligible state and local agencies. CEPPT is not, however, a defined benefit plan. There is no guarantee that the portfolio will achieve its investment objectives or provide sufficient funding to meet employer obligations.
An investment in the portfolio is not a bank deposit, nor is it insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC), CalPERS, the State of California or any other government agency.
There are risks associated with investing, including possible loss of principal. The portfolio's risk depends in part on the portfolio's asset class allocations and the selection, weighting and risks of the underlying investments. For more information about investment risks, please see the document entitled "CEPPT Principal Investment Risks" located at www.calpers.ca.gov.
Fund Performance
Performance data shown on page 1 represents past performance and is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an employer's units, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than historical performance data shown. For current performance information, please visit www.calpers.ca.gov and follow the links to California Employers' Pension Prefunding Trust.
CEPPT Strategy Risk Levels
CalPERS offers employers the choice of one of two investment strategies. Projected risk levels among risk strategies vary, depending upon the target asset class allocations. Generally, equities carry more risk than fixed income securities.
Agenda Item #13.2.
Attachment 3
Prefunding Program Employers
Agenda Item #13.2.
www.calpers.ca.gov/ceppt www.calpers.ca.gov/cerbt
1 Associations/Councils of Governments
Association of Bay Area Governments
Association of Monterey Bay Area Governments
Butte County Association of Governments
City/County Association of Governments of San Mateo
County
Sacramento Area Council of Governments (Dual)
San Diego Association of Governments
San Gabriel Valley Council of Governments (CEPPT)
San Luis Obispo Council of Governments
Santa Barbara County Association of Governments
Southern California Association of Governments
San Benito County Council of Governments
Cemetery Districts
Auburn Public Cemetery District
Placer County Cemetery District #1
Roseville Public Cemetery District
Vacaville – Elmira Cemetery District (CEPPT)
Cities & Towns
City of Agoura Hills (Dual)
City of American Canyon
City of Anaheim
City of Antioch
City of Arcata (Dual)
City of Avalon
City of Baldwin Park
City of Barstow
City of Bellflower
City of Belmont
City of Belvedere (CEPPT)
City of Brentwood
City of Buena Park (Dual)
City of Burbank (Dual)
City of Burlingame
City of Calexico
City of Campbell
City of Capitola
City of Carlsbad
City of Carson
City of Cathedral City
City of Cerritos
City of Citrus Heights
City of Colusa
City of Concord
City of Corona
City of Cotati (CEPPT)
City of Daly City
City of Davis
City of Diamond Bar
City of Downey
City of Dublin
City of Eastvale
City of El Cajon
City of El Centro
City of El Segundo
City of Encinitas
City of Fairfield
City of Fort Bragg
City of Fountain Valley
City of Fremont
City of Gardena
City of Grand Terrace
City of Guadalupe (CEPPT)
City of Hawaiian Gardens
City of Hayward (Dual)
City of Huntington Beach
City of Huntington Park
City of Indian Wells
City of Indio
City of Industry (Dual)
City of Irwindale (Dual)
City of La Habra
City of La Mesa
City of La Mirada
City of La Palma
City of La Puente
City of La Quinta
City of Lafayette
City of Laguna Woods (Dual)
City of Larkspur
City of Lathrop
City of Lindsay (Dual)
City of Live Oak
City of Livingston
City of Loma Linda
City of Lompoc
City of Los Altos
City of Los Banos
City of Lynwood
City of Malibu
City of Manhattan Beach
City of Martinez
City of Maywood (Dual)
City of Menlo Park
City of Merced
City of Mill Valley
City of Milpitas
City of Mission Viejo
City of Monterey
City of Monterey Park
City of Moorpark
City of Moreno Valley
City of Morgan Hill
City of Mountain View
City of Murrieta
City of Napa
Agenda Item #13.2.
www.calpers.ca.gov/ceppt www.calpers.ca.gov/cerbt
2 City of Newark
City of Newport Beach
City of Norco
City of Oakland
City of Ojai (Dual)
City of Ontario
City of Palm Desert
City of Palo Alto
City of Paramount
City of Perris
City of Pico Rivera
City of Pismo Beach
City of Pittsburg
City of Pleasanton
City of Rancho Cordova
City of Rancho Mirage
City of Redondo Beach
City of Redwood City
City of Reedley
City of Richmond
City of Ridgecrest
City of Rocklin
City of Rohnert Park
City of Rolling Hills
City of Sacramento
City of Salinas
City of Sand City
City of San Carlos
City of San Clemente
City of San Diego
City of San Gabriel
City of San Luis Obispo (Dual)
City of San Marino (Dual)
City of San Mateo
City of San Rafael
City of San Ramon
City of Santa Fe Springs (Dual)
City of Santa Monica
City of Santee
City of Scotts Valley
City of Seal Beach
City of Shasta Lake (Dual)
City of Sierra Madre (Dual)
City of Solvang
City of Sonora (CEPPT)
City of South Pasadena
City of South San Francisco
City of Stanton
City of Temecula
City of Thousand Oaks
City of Tracy (CEPPT)
City of Torrance (Dual)
City of Vacaville
City of Vallejo
City of Vernon
City of West Hollywood
City of West Sacramento
City of Westlake Village (Dual)
City of Westminster
City of Yorba Linda
City of Yreka (Dual)
Town of Corte Madera
Town of Fairfax
Town of Hillsborough
Town of Los Altos Hills
Town of Los Gatos (Dual)
Town of Portola Valley
Town of Ross
Town of San Anselmo
Town of Truckee
Community Services Districts
Big Bear City Community Services District
Brooktrails Township Community Services District
Castroville Community Services District
Clear Creek Community Services District
Cosumnes Community Services District
Denair Community Services District
Dublin San Ramon Services District
El Dorado Hills Community Services District
Groveland Community Services District
Heritage Ranch Community Services District
Hidden Valley Lake Community Services District
Jurupa Community Services District
Kensington Police Protection & Community Services
District
Marinwood Community Services District
McCloud Community Services District (Dual)
McKinleyville Community Services District
Nipomo Community Services District
Northstar Community Services District (CEPPT)
Olympic Valley Public Service District (Dual)
Rancho Murieta Community Service District
Tamalpais Community Services District
Templeton Community Services District
Counties
County of Butte
County of Del Norte
County of Marin
County of Monterey
County of Nevada
County of Placer
County of San Luis Obispo
County of San Mateo
County of Santa Clara
Agenda Item #13.2.