HomeMy WebLinkAbout08. Adopt Resolution establishing and funding a new Section 115 Pension Trust entitled "Public Agencies Post-Employment Benefits Trust"
CENTRAL SAN BOARD OF DI RECTORS
POSIT IO N PA PER
M E E T I NG
D AT E :
J ULY 20, 2017
S UB J E C T: A D O P T R E S O L UT I O N NO . 2017-023 A UT HO R I Z I NG T HE E S TA B L I S HME NT A ND
F UND I NG O F A NE W I NT E R NA L R E V E NUE C O D E S E C T I O N 115 P E NS I O N
T R US T E NT I T L E D "P UB L I C A G E NC I E S P O S T-E MP L O YME NT B E NE F I T S
T R US T " E F F E C T I V E J ULY 20, 2017, TO B E I NI T I A L LY F UND E D W I T H T HE
$3.359 MI L L I O N E X T R A R E S E RV E F UND B A L A NC E AT T HE E ND O F F I S C A L
YE A R 2015-16. A P P R O VA L R E C O MME ND E D B Y F I NA NC E C O MMI T T E E .
S UB M I T T E D B Y:
P HI L I P L E I B E R , D I R E C TO R O F F I NA NC E A ND
A D MI NI S T R AT I O N
I NI T I AT I NG D E PART M E NT:
A D MI NI S T R AT I O N-F I NA NC E
RE V I E WE D
B Y:T HE A VA S S A L L O , F I NA NC E MA NA G E R
R oger S . B ailey
G eneral Manager
K enton L . A lm
D istrict C ounsel
I S S UE
I n F iscal Year (F Y) 2016-17, the B oard direc ted staf f to establish a new I nternal R evenue C ode S ection
115 P ension Trust (P ension Trust) as an alternative f unding source f or C entral S an’s pension obligations .
B AC K G RO UND
A t the November 10, 2016 B oard Workshop, the B oard discussed where to apply the $3.359 million
unrestricted extra reserve f unds remaining at the end of the F Y 2015-16. R epresentatives f rom P F M
A sset Management L L C were present at the workshop. T hey outlined the implications and
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ITEM 8 Page 1 of 23
advantages/dis advantages of allocating all c urrently available dollars toward reducing C entral S an’s
pension unf unded actuarial accrued liabilities (UA A L ) and the unf unded liabilities associated with C entral
S an’s existing O P E B Trust. P F M recommended that the entire $3.359 million be allocated toward
establishing a new P ension Trust f or the UA A L associated with C ontra C os ta C ounty E mployees’
R etirement A s s ociation (C C C E R A ). T he B oard concurred with P F M’s rec ommendation as prudent and
in the best interest of C entral S an and its ratepayers.
I n A pril 2017, C entral S an released a R eques t f or P roposal (R F P ) f or s ervices in connection with the
establishment and maintenance of a new P ens ion Trust that would permit C entral S an to contribute f unds
towards pens ion obligations. C entral S an would continue to pref und pens ion contributions directly to
C C C E R A f or ongoing normal and UA A L requirements, but could use the new P ension Trust f or additional
contributions towards the UA A L . F rom a balance sheet perspective, the payments to the new P ension
Trust would address f uture C entral S an pens ion obligations, but would of f er certain advantages that
contributing the f unds directly to C C C E R A would not provide. T hese inc lude the f ollowing:
L ocal c ontrol of the reserve f unds
P otential f or greater return than with C C C E R A
A ddres s f uture pension liabilities
Help of f s et pension rate increases or under-perf ormance by the retirement system
Usage of f unds f or pension obligations at anytime
C hoice of less or more aggressive inves tment strategy than retirement system
A dditional means to pre-f und pension as sets
Avoiding the "superf unding" issue that having f unds at C C C E R A c ould present when reaching a f ully
f unded s tatus.
R F P and S elec tion P rocess
I n researching the marketplace f or f irms qualif ied to provide these niche-s ervices, C entral S an learned
that three f irms have obtained I R S approval to of f er S ection 115 Trust products. C entral S an had contac t
with all three f irms and described our objec tives and indicated that an R F P would be issued to f urther
detail our needs .
Two f irms res ponded to the R F P issued in A pril 2017; P ublic A gency R etirement S ervices (PA R S ) and
P F M A sset Management L L C (P F M). B oth proposals were responsive and both f irms demonstrated they
were well qualif ied to perf orm the services requested. T hese services inc luded:
S tart-up/implementation of the trust
I nvestment and asset management
I nvestment advisory services
C ustodian and bank services
Transac tion and other services, if any
S election
T he selection c riteria was based on the f ollowing:
1. F irm Q ualif ic ations, E xperience and R ef erences 35%
2. P roposal A pproach and P ersonnel 35%
3. C ost 30%
PA R S propos al included PA R S as Trust A dministrator, Highmark C apital Management as I nvestment
Manager, and US B ank as Trustee C ustodian. P F M’s proposal included P F M A sset Management L L C
as Trust A dminis trator and provider of F iduc iary S ervices, and Wells F argo as Trustee C ustodian.
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B oth f irms sc ored very similarly with respec t to items 1 and 2. However, PA R S costs were signif icantly
lower, and as a result, achieved a higher overall score. S taf f looked at cos t purely f rom the standpoint of
f ees charged f or the services and awarded the score on that basis. However, staf f also looked at
investment perf ormance net of f ees f or both f irms f or comparable portf olios over the past f ive years. O n
this basis as well, PA R S retained an advantage. W hile C entral S an continues to consider the merits of an
active versus pas sive investment management approach (as was discus s ed with the F inance C ommittee
earlier this year), a movement towards pas s ive investments f or many ass et c lasses makes sense, and with
this there is no opportunity f or the new P ens ion Trust I nvestment manager to "add value" by looking f or
mutual f unds that will outperf orm benchmarks . A ccordingly, a f ocus on c os ts is increasingly the right
f ocus.
Term and C os ts
T he proposals provide that the investment management services can be terminated by C entral S an at any
time, but the proposal contemplated a f ive-year period f or purposes of c omparing costs between the
respondents. F ees f or PA R S based on the anticipated C entral S an depos its to the Trust are below the
$100,000 thres hold requiring board approval. Total f ees if the Trust remained in place beyond the f ive
years could begin to exceed $100,000. S taf f would report on total f ees inc urred f or the Trust over time
routinely to the B oard.
Next S teps
C entral S an will proceed with the establishment of the new P ension Trus t with PA R S by completing
necessary f orms , and when established, will c ontribute an initial deposit of $3.359 million. F uture year's
contributions will be included as a budgeted c ontribution, or as was the c as e f or F Y 2015-16, made with
available budget savings. T he investment of the initial $3.359 million is projected to be invested with
PA R S in a separate I R S approved C ombination P ension Trust similar to the O P E B Trust. A ssets in the
current O P E B Trust will be transf erred to the new C ombination Trust and will combine with the pension
assets resulting in economies of scale and lower f ees. T he risk analysis that was discussed at the
F inance C ommittee on D ecember 27, 2016 has been provided to PA R S and Highmark's investment
manager. I t is projected that a moderately c onservative portf olio would be the risk tolerance of choice,
which is a portf olio of approximately 30% equity and 70% f ixed income.
O ther f actors s upporting this allocation include the f ollowing: 1. C entral S an could potentially need the
f unds sooner to make required contributions to C C C E R A , 2. P er PA R S , 75% of their clients
establishing pension trusts select moderately conservative as an investment allocation, 3. P otential
concerns about a high point in the equity market presently, and 4. A n ability to change the allocation later.
T he portf olio c an also be either actively managed or passively managed. W hile passive management is
lower cost and may be pref erable f or equities , f or debt based investments , active managers
have demons trated to provide value in the f orm of higher returns above their costs. F or the PA R S
moderately c ons ervative portf olio, the actively managed version has shown higher historical returns than
the passively managed version
S taf f plans to move f orward with the selection process of PA R S and provide any additional documentation
or f orms that may be required to establish the new P ension Trust .
ALT E RNAT I V E S /C O NS I D E RAT I O NS
T he B oard could elect not to establish a new P ension Trust and instead make any desired optional
pension contributions directly to C C C E R A . W ith a decision to establish a S ection 115 Trust, a provider to
administer the Trust and investments is required. S election of a qualif ied f irm to perf orm these servic es is
required. T he B oard could also choose a dif f erent investment portf olio s uc h as conservative (15% equity,
85% f ixed inc ome), moderate (50% equity, 50% f ixed income), or more aggressive (70% equity, 30%
f ixed income.) T he B oard could also choos e either an actively managed, or passively managed portf olio.
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ITEM 8 Page 3 of 23
F I NANC I AL I M PAC T S
T he estimated f ees f or the new P ension Trus t with PA R S f or the f ive year period F Y 2017-18 through F Y
2021-22 are les s than $60,000. T he amount will vary depending on the ac tual amounts contributed to the
f unds and perf ormance of the f unds.
C O M M I T T E E RE C O M M E ND AT I O N
T he F inance C ommittee reviewed this matter at its meeting on J une 20, 2017 and recommended that the
B oard approve establishing and f unding the S ection 115 P ension Trust. T he F inance C ommittee did not
discuss at that meeting an investment alloc ation approach and did not take a position on that matter.
RE C O M M E ND E D B O ARD AC T I O N
A dopt resolution authorizing the establishment and f unding of a new S ec tion 115 P ension Trust using
PA R S as Trus t A dministrator, Highmark C apital Management as I nvestment Manager, and US B ank as
Trustee C ustodian; and authorize the G eneral Manager and staf f to exec ute such documents as
necessary.
T he B oard als o approves the initial investment strategy of "moderately c ons ervative", and deposits to the
Trust will be alloc ated to such portf olio. F uture changes to such investment strategy will be brought bac k to
the B oard f or approval. T he B oard f urther endorses the selection of an "ac tively managed" portf olio
consistent with this investment strategy.
Strategic Plan Tie-I n
G O A L T H R E E : B e a F iscally S ound and E ffective Water S ector U tility
Strategy 1 - Conduct Long-Range Financial Planning
AT TAC HM E NT S :
D escription
1. P roposed R esolution No. 2017-023
2. A greement f or A dministrative S ervices
3. P resentation on S ection 115 Trust
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ITEM 8 Page 4 of 23
RESOLUTION NO. 2017-
RESOLUTION OF CENTRAL CONTRA COSTA SANITARY DISTRICT
ADOPTING THE PUBLIC AGENCIES POST-EMPLOYMENT BENEFITS TRUST
ADMINISTERED BY PUBLIC AGENCY RETIRMENT SERVICES (PARS)
WHERAS, the Central Contra Cost Sanitary District (Central San) is currently
participating in the Public Agencies Post-Retirement Health Care Plan Trust for the pre-
funding of its retiree health benefits and other post-employment benefits other than
pension benefits (OPEB); and
WHEREAS, the Central San desires to set aside funds for the purpose of pre-funding its
Contra Costa County Employees’ Retirement Association (CCCERA) pension obligation
that will be held in trust for the exclusive purpose of making future contributions of
Central San’s required pension contributions and any employer contributions in excess
of such required contributions at the discretion of the District; and
WHEREAS, PARS has made available the Public Agencies Post-Employment Benefits
Trust (the “Program”) for the purpose of pre-funding both pension obligations and/or
OPEB obligations as specified in Central San’s plans, policies and/or applicable
collective bargaining agreements; and
WHEREAS, Central San is eligible to participate in the Program, a tax-exempt trust
performing an essential governmental function within the meaning of Section 115 of the
Internal Revenue Code, as amended, and the Regulations issued there under, and is a
tax-exempt trust under the relevant statutory provisions of the State of California: and
WHEREAS, Central San can manage the pre-funding of its pension and OPEB
obligations in a single trust under this Program, thereby gaining administrative and cost
efficiencies; and
WHEREAS, Central San’s adoption and operation of the Program has no effect on any
current or former employee’s entitlement to post-employment 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, Central San’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, Central San reserves the right to make contributions, if any, to the
Program.
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ITEM 8 Page 5 of 23
NOW, THEREFORE, BE IT RESOLVED THAT:
1. The Board of Directors of Central San hereby adopts the Public Agencies Post-
Employment Benefits Trust, effective July 20, 2017; and
2. The Board of Directors of Central San hereby appoints the Finance Manager, or
his/her successor or his/her designee, as Central San’s Plan Administrator for
the Program; and
3. Central San’s Plan Administrator is hereby authorized to execute the Public
Agency Retirement Services (PARS) legal and administrative documents on
behalf of Central San and take whatever additional actions are necessary to
maintain Central San’s participation in the Program and to maintain compliance
of any relevant regulation issued or as may be issued; therefore, authorizing
him/her to take whatever additional actions are required to administer Central
San’s Program; and
4. The Board of Directors hereby authorizes the Plan Administrator, in accordance
with Section 3.3 of the Public Agencies Post-Retirement Health Care Plan Trust
adopted effective November 6, 2008, to withdraw from said trust and direct the
transfer of assets held in said trust to the OPEB Account established in the name
of Central San under the Public Agencies Post-Employment Benefits Trust,
adopted herewith.
PASSED AND ADOPTED this 20th day of July 2017, by the Board of Directors of the
Central Contra Costa Sanitary District by the following vote:
AYES: Members:
NOES: Members:
ABSENT: Members:
Paul H. Causey, P.E.
President of the Board of Directors
Central Contra Costa Sanitary District
County of Contra Costa, State of California
COUNTERSIGNED:
Elaine R. Boehme, CMC
Secretary of the District
Central Contra Costa Sanitary District
County of Contra Costa, State of California
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ITEM 8 Page 6 of 23
Approved as to form:
Kenton L. Alm, Esq.
Counsel for the District
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Page 1
AGREEMENT FOR ADMINISTRATIVE SERVICES
This agreement (“Agreement”) is made this _____ day of _____________, 2017, between
Phase II Systems, a corporation organized and existing under the laws of the State of
California, doing business as Public Agency Retirement Services and PARS (hereinafter
“PARS”) and the Central Contra Costa Sanitary District (“Agency”).
WHEREAS, the Agency has adopted the PARS Public Agencies Post-Employment Benefits
Trust for the purpose of pre-funding pension obligations and/or OPEB obligations (“Plan”),
and is desirous of retaining PARS as Trust Administrator to the Trust, to provide
administrative services.
NOW THEREFORE, the parties agree:
1. Services. PARS will provide the services pertaining to the Plan as described in the
exhibit attached hereto as “Exhibit 1A” (“Services”) in a timely manner, subject to the
further provisions of this Agreement.
2. Fees for Services. PARS will be compensated for performance of the Services as
described in the exhibit attached hereto as “Exhibit 1B”.
3. Payment Terms. Payment for the Services will be remitted directly from Plan assets
unless the Agency chooses to make payment directly to PARS. In the event that the
Agency chooses to make payment directly to PARS, it shall be the responsibility of the
Agency to remit payment directly to PARS based upon an invoice prepared by PARS and
delivered to the Agency. If payment is not received by PARS within thirty (30) days of
the invoice delivery date, the balance due shall bear interest at the rate of 1.5% per
month. If payment is not received from the Agency within sixty (60) days of the invoice
delivery date, payment plus accrued interest will be remitted directly from Plan assets,
unless PARS has previously received written communication disputing the subject
invoice that is signed by a duly authorized representative of the Agency.
4. Fees for Services Beyond Scope. Fees for services beyond those specified in this
Agreement will be billed to the Agency at the rates indicated in the PARS’ standard fee
schedule in effect at the time the services are provided and shall be payable as described
in Section 3 of this Agreement. Before any such services are performed, PARS will
provide the Agency with a detailed description of the services, terms, and applicable rates
for such services. Such services, terms, and applicable rates shall be agreed upon in
writing and executed by both parties.
5. Information Furnished to PARS. PARS will provide the Services contingent upon the
Agency’s providing PARS the information specified in the exhibit attached hereto as
“Exhibit 1C” (“Data”). It shall be the responsibility of the Agency to certify the
accuracy, content and completeness of the Data so that PARS may rely on such
information without further audit. It shall further be the responsibility of the Agency to
deliver the Data to PARS in such a manner that allows for a reasonable amount of time
for the Services to be performed. Unless specified in Exhibit 1A, PARS shall be under
no duty to question Data received from the Agency, to compute contributions made to the
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ITEM 8 Page 8 of 23
Page 2
Plan, to determine or inquire whether contributions are adequate to meet and discharge
liabilities under the Plan, or to determine or inquire whether contributions made to the
Plan are in compliance with the Plan or applicable law. In addition, PARS shall not be
liable for non performance of Services to the extent such non performance is caused by or
results from erroneous and/or late delivery of Data from the Agency. In the event that the
Agency fails to provide Data in a complete, accurate and timely manner and pursuant to
the specifications in Exhibit 1C, PARS reserves the right, notwithstanding the further
provisions of this Agreement, to terminate this Agreement upon no less than ninety (90)
days written notice to the Agency.
6. Records. Throughout the duration of this Agreement, and for a period of five (5) years
after termination of this Agreement, PARS shall provide duly authorized representatives
of Agency access to all records and material relating to calculation of PARS’ fees under
this Agreement. Such access shall include the right to inspect, audit and reproduce such
records and material and to verify reports furnished in compliance with the provisions of
this Agreement. All information so obtained shall be accorded confidential treatment as
provided under applicable law.
7. Confidentiality. Without the Agency’s consent, PARS shall not disclose any
information relating to the Plan except to duly authorized officials of the Agency, subject
to applicable law, and to parties retained by PARS to perform specific services within
this Agreement. The Agency shall not disclose any information relating to the Plan to
individuals not employed by the Agency without the prior written consent of PARS,
except as such disclosures may be required by applicable law.
8. Independent Contractor. PARS is and at all times hereunder shall be an independent
contractor. As such, neither the Agency nor any of its officers, employees or agents shall
have the power to control the conduct of PARS, its officers, employees or agents, except
as specifically set forth and provided for herein. PARS shall pay all wages, salaries and
other amounts due its employees in connection with this Agreement and shall be
responsible for all reports and obligations respecting them, such as social security,
income tax withholding, unemployment compensation, workers’ compensation and
similar matters.
9. Indemnification. PARS and Agency hereby indemnify each other and hold the other
harmless, including their respective officers, directors, employees, agents and attorneys,
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, PARS’ or Agency’s,
as the case may be, negligent acts, errors or omissions with respect to the performance of
their respective duties hereunder.
10. Compliance with Applicable Law. The Agency shall observe and comply with federal,
state and local laws in effect when this Agreement is executed, or which may come into
effect during the term of this Agreement, regarding the administration of the Plan.
PARS shall observe and comply with federal, state and local laws in effect when this
Agreement is executed, or which may come into effect during the term of this
Agreement, regarding Plan administrative services provided under this Agreement.
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Page 3
11. Applicable Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of California. In the event any party institutes legal
proceedings to enforce or interpret this Agreement, venue and jurisdiction shall be in any
state court of competent jurisdiction.
12. Force Majeure. When a party’s nonperformance hereunder was beyond the control and
not due to the fault of the party not performing, a party shall be excused from performing
its obligations under this Agreement during the time and to the extent that it is prevented
from performing by such cause, including but not limited to: any incidence of fire, flood,
acts of God, acts of terrorism or war, commandeering of material, products, plants or
facilities by the federal, state or local government, or a material act or omission by the
other party.
13. Ownership of Reports and Documents. The originals of all letters, documents, reports,
and data produced for the purposes of this Agreement shall be delivered to, and become
the property of the Agency. Copies may be made for PARS but shall not be furnished to
others without written authorization from Agency.
14. Designees. The Plan Administrator of the Agency, or their designee, shall have the
authority to act for and exercise any of the rights of the Agency as set forth in this
Agreement, subsequent to and in accordance with the written authority granted by the
Governing Body of the Agency, a copy of which writing shall be delivered to PARS.
Any officer of PARS, or his or her designees, shall have the authority to act for and
exercise any of the rights of PARS as set forth in this Agreement.
15. Notices. All notices hereunder and communications regarding the interpretation of the
terms of this Agreement, or changes thereto, shall be effected by delivery of the notices
in person or by depositing the notices in the U.S. mail, registered or certified mail, return
receipt requested, postage prepaid and addressed as follows:
(A) To PARS: PARS; 4350 Von Karman Avenue, Suite 100, Newport Beach, CA
92660; Attention: President
(B) To Agency: Central Contra Costa Sanitary District; 5019 Imhoff Place, Martinez,
CA 94553; Attention: _________________ [Plan Administrator]
Notices shall be deemed given on the date received by the addressee.
16. Term of Agreement. This Agreement shall remain in effect for the period beginning
______________, 2017 and ending _____________, 2020 (“Term”). This Agreement
may be terminated at any time by giving thirty (30) days written notice to the other party
of the intent to terminate. Absent a thirty (30) day written notice to the other party of the
intent to terminate, this Agreement will continue unchanged for successive twelve month
periods following the Term.
17. Amendment. This Agreement may not be amended orally, but only by a written
instrument executed by the parties hereto.
18. Entire Agreement. This Agreement, including exhibits, contains the entire
understanding of the parties with respect to the subject matter set forth in this Agreement.
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Page 4
In the event a conflict arises between the parties with respect to any term, condition or
provision of this Agreement, the remaining terms, conditions and provisions shall remain
in full force and legal effect. No waiver of any term or condition of this Agreement by
any party shall be construed by the other as a continuing waiver of such term or
condition.
19. Attorneys Fees. In the event any action is taken by a party hereto to enforce the terms of
this Agreement the prevailing party herein shall be entitled to receive its reasonable
attorney’s fees.
20. Counterparts. This Agreement may be executed in any number of counterparts, and in
that event, each counterpart shall be deemed a complete original and be enforceable
without reference to any other counterpart.
21. Headings. Headings in this Agreement are for convenience only and shall not be used to
interpret or construe its provisions.
22. Effective Date. This Agreement shall be effective on the date first above written, and
also shall be the date the Agreement is executed.
AGENCY:
BY:
Plan Administrator
TITLE:
DATE:
PARS:
BY:
Tod Hammeras
TITLE: Chief Financial Officer
DATE:
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ITEM 8 Page 11 of 23
Page 5
EXHIBIT 1A
SERVICES
PARS will provide the following services for the Central Contra Costa Sanitary District
Public Agencies Post-Employment Benefits Trust:
1. Plan Installation Services:
(A) Meeting with appropriate Agency personnel to discuss plan provisions,
implementation timelines, actuarial valuation process, funding strategies, benefit
communication strategies, data reporting, and submission requirements for
contributions/reimbursements/distributions;
(B) Providing the necessary analysis and advisory services to finalize these elements of
the Plan;
(C) Providing the documentation needed to establish the Plan to be reviewed and
approved by Agency legal counsel. Resulting final Plan documentation must be
approved by the Agency prior to the commencement of PARS Plan Administration
Services outlined in Exhibit 1A, paragraph 2 below.
2. Plan Administration Services:
(A) Monitoring the receipt of Plan contributions made by the Agency to the trustee of the
PARS Public Agencies Post-Employment Benefits Trust (“Trustee”), based upon
information received from the Agency and the Trustee;
(B) Performing periodic accounting of Plan assets, reimbursements/distributions, and
investment activity, based upon information received from the Agency and/or
Trustee;
(C) Coordinating the processing of distribution payments pursuant to authorized direction
by the Agency, and the provisions of the Plan, and, to the extent possible, based upon
Agency-provided Data;
(D) Coordinating actions with the Trustee as directed by the Plan Administrator within
the scope this Agreement;
(E) Preparing and submitting a monthly report of Plan activity to the Agency, unless
directed by the Agency otherwise;
(F) Preparing and submitting an annual report of Plan activity to the Agency;
(G) Facilitating actuarial valuation updates and funding modifications for compliance
with GASB 45/75, if prefunding OPEB obligations;
(H) Coordinating periodic audits of the Trust;
(I) Monitoring Plan and Trust compliance with federal and state laws.
3. PARS is not licensed to provide and does not offer tax, accounting, legal, investment or
actuarial advice.
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Page 6
EXHIBIT 1B
FEES FOR SERVICES
PARS will be compensated for performance of Services, as described in Exhibit 1A based
upon the following schedule:
An annual asset fee shall be paid from Plan Assets based on the following schedule:
For Plan Assets from: Annual Rate:
$0 to $5,000,000 0.225%
$5,000,001 to $10,000,000 0.225%
$10,000,001 to $15,000,000 0.180%
$15,000,001 to $50,000,000 0.135%
$50,000,001 and above 0.090%
Annual rates are prorated and paid monthly. The annual asset fee shall be calculated by
the following formula [Annual Rate divided by 12 (months of the year) multiplied by the
Plan asset balance at the end of the month]. Trustee and Investment Management Fees
are not included.
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Page 7
EXHIBIT 1C
DATA REQUIREMENTS
PARS will provide the Services under this Agreement contingent upon receiving the
following information:
1. Executed Legal Documents:
(A) Certified Resolution
(B) Adoption Agreement to the Public Agencies Post-Employment Benefits Trust
(C) Trustee Investment Forms
2. Contribution – completed Contribution Transmittal Form signed by the Plan
Administrator (or authorized Designee) which contains the following information:
(A) Agency name
(B) Contribution amount
(C) Contribution date
(D) Contribution method (Check, ACH, Wire)
3. Distribution – completed Payment Reimbursement/Distribution Form signed by the
Plan Administrator (or authorized Designee) which contains the following
information:
(A) Agency name
(B) Payment reimbursement/distribution amount
(C) Applicable statement date
(D) Copy of applicable premium, claim, statement, warrant, and/or administrative
expense evidencing payment
(E) Signed certification of reimbursement/distribution from the Plan Administrator
(or authorized Designee)
4. Other information pertinent to the Services as reasonably requested by PARS and
Actuarial Provider.
July 20, 2017 Regular Board Meeting Agenda Packet - Page 56 of 151
ITEM 8 Page 14 of 23
SECTION 115 TRUST ESTABLISHMENT
FOR PENSION OBLIGATIONS
PHIL LEIBER, DIR. FIN & ADMIN.
JULY 20, 2017
July 20, 2017 Regular Board Meeting Agenda Packet - Page 57 of 151
ITEM 8 Page 15 of 23
HISTORY
•Board has previously focused on methods
to address unfunded liabilities
•November 10, 2016 Workshop —PFM
recommended and Board agreed with
proposal to establish Section 115 Trust
•RFP issued in April 2017
•Finance Committee on June 20, 2017
recommended establishing and funding
the Trust
July 20, 2017 Regular Board Meeting Agenda Packet - Page 58 of 151
ITEM 8 Page 16 of 23
PURPOSE
•Set aside funds for pre-funding CCCERA
obligations for purpose of making future
contributions of Central San’s required
pension contributions and any employer
contributions in excess of such required
contributions at the discretion of the
District
July 20, 2017 Regular Board Meeting Agenda Packet - Page 59 of 151
ITEM 8 Page 17 of 23
PROPOSAL
•Resolution establishes and authorizes
funding of a Section 115 Trust with PARS
as Trust Administrator, Highmark Capital
Capital Management as Investment
Manager
•Selects Moderately Conservative Portfolio,
actively managed, as initial investment
approach
July 20, 2017 Regular Board Meeting Agenda Packet - Page 60 of 151
ITEM 8 Page 18 of 23
INVESTMENT ALTERNATIVES
Portfolio Approximate %
Equity
Money Market Money Market
Conservative <20%
Moderately
Conservative
<40%
Moderate <60%
Balanced/
Moderately
Aggressive
50-70%
Capital
Appreciation
65-85%
1.Risk questionnaire of Finance Committee by PFM on
12/27/16
2.75% of PARS clients establishing pension Trust
choose this.
-Long term obligations yes, but potentially a desire to use funds earlier
towards required pension contributions.
3.Start conservative given potential high point in equity
markets
4.Could change to Moderate at a future date.
Recommended based on:
July 20, 2017 Regular Board Meeting Agenda Packet - Page 61 of 151
ITEM 8 Page 19 of 23
ACTIVE VS. PASSIVE
Portfolio Investment
Selection
Moderately
Conservative
Actively
Managed
Passively
Managed
1.For debt related investments, managers have been
able to demonstrate value above their fees.
2.Highmark Moderately Conservative actively managed
portfolio has outperformed the passively managed
portfolio
Recommended based on:
July 20, 2017 Regular Board Meeting Agenda Packet - Page 62 of 151
ITEM 8 Page 20 of 23
INITIAL FUNDING
•$3.359 million from FY 2015-16 budget
savings
•Additional contributions will be determined
annually; assuming for planning purposes
$2.5 million
July 20, 2017 Regular Board Meeting Agenda Packet - Page 63 of 151
ITEM 8 Page 21 of 23
RESOLUTION
July 20, 2017 Regular Board Meeting Agenda Packet - Page 64 of 151
ITEM 8 Page 22 of 23
ADDITIONALLY,
•Board approves initial selection of
Highmark Moderately Conservative
portfolio, actively managed.
July 20, 2017 Regular Board Meeting Agenda Packet - Page 65 of 151
ITEM 8 Page 23 of 23