Skip to main content

Agenda Item (IV-D-2)

Meeting11/3/2015 - Committee
Agenda ItemCommittee - Resources (IV-D-2)
SubjectEstablishment of Other Post-Employment Benefits (OPEB) Irrevocable Trust – Approval of Agreement with CalPERS, Delegation of Authority to Request Disbursements, and Resolution No. 15-15/16 – Establishment of a New Internal Service Fund
College/DistrictDistrict
Funding N/A
Recommended ActionIt is recommended that the Board of Trustees: 1) approve the agreement with CalPERS - California Employers' Retiree Benefit Trust to administer the District's Other Post-Employment Benefits irrevocable trust; 2) approve the Delegation of Authority to request disbursements from the irrevocable trust; and 3) approve the resolution to establish a new Internal Service Fund to account for financial activity associated with the District’s OPEB Obligation Funding Plan.

Background Narrative:


In April 2015, the Board of Trustees approved the Other Post-Employment Benefits (OPEB) Obligation Funding Plan consisting of the following:

• Establishment of an irrevocable trust to pay current retiree health costs and to accumulate funds for future retiree health costs to offset the OPEB liability;

• Develop a rate to apply to every dollar of payroll, in all Resources that have payroll, to cover the annual current cost (“pay-as-you-go”) plus a minimum of $250,000 annually to begin providing for future retiree health costs, including application of the rate to grant and categorical programs in accordance with OMB Circular A-21 and the State Chancellor’s Accounting Advisory – GASB 45 Accounting for Other Post-Employment Benefits;

• Investment earnings over time will contribute to the reduction of the outstanding OPEB liability, so the total amount of funds set-aside by the District and accumulated to pay for future retiree health costs will be limited to a maximum of 50% of the outstanding OPEB liability;

• At least annually, transfer all funds provided by the retiree healthcare rate to the irrevocable trust;

• Pay all retiree healthcare costs out of the irrevocable trust.

In order to implement the approved OPEB Obligation Funding Plan the District must 1) establish an irrevocable trust and, 2) establish a new Internal Service Fund to account for the financial activity of the Plan.

The District requested information from three vendors who offer OPEB irrevocable trust services. CalPERS, Public Agency Retirement Services (PARS), and Keenan & Associates were asked to provide investment performance results, total service costs, total assets under management, for profit or non-profit status, number of agencies under contract, asset allocation strategies, periodic reporting options, local control, trust administration processes, minimum contributions, and agreement termination options.

The information was accumulated and evaluated by District staff and then presented to Chancellor Burke and to the District’s bargaining unit Presidents for discussion and consideration. By unanimous consensus, CalPERS – California Employers’ Retiree Benefit Trust (CERBT) was selected as the vendor to administer the District’s OPEB irrevocable trust.

Attached for the Board of Trustees consideration is the agreement for participation in the CalPERS – CERBT program and a resolution for Delegation of Authority to request disbursements from the irrevocable trust.

Representatives from CalPERS will be in attendance and will present information on the CERBT program.

Historically, the financial activity associated with the District’s OPEB has been handled on a “pay-as-you-go” basis through the unrestricted general fund for retiree medical costs.

Approval of the OPEB Obligation Funding Plan necessitates the establishment of a new Internal Service Fund to account for the financial activity of the plan and to comply with Education Code Section 84030 and the California Community Colleges Budget and Accounting manual relative to OPEB financial transactions.

Attached for the Board of Trustees consideration is a resolution authorizing the establishment of a new internal service fund Resource.

Prepared By: Aaron Brown, Vice Chancellor, Business and Financial Services