Regional School District Introduction to PARS OPEB Trust Program - PowerPoint PPT Presentation

Nashoba Regional School District Introduction to PARS OPEB Trust Program October 16, 2017

THE PARS OPEB TRUST PROGRAM One of the fastest growing OPEB trust programs in New England and the • nation Over $1.5 billion in assets and over 260 clients • IRC Section 115 multiple employer, irrevocable trust program • GASB 45/75 and M.G.L. 32B:20 compliant irrevocable trust structure • Developed in response to GASB 45 in 2006 – Trust received IRS Private Letter • Ruling in 2007 Only full-service approach in Massachusetts that includes trust • administration, trustee and investment management services Nashoba Regional School District ▎ 2

About PARS 30 years experience specializing exclusively in governmental retirement plan • consulting and administration Focus and experience with all types of local governments : school districts, • towns, cities, counties, colleges, and special districts Developed first multiple employer Section 115 OPEB trust program for • use in multiple states Administers 6 post-retirement health care trust programs • Administered over 1,400 retirement plans across 9 different states • Provided services to more than 850 client agencies and over • 375,000 plan participants Nashoba Regional School District ▎ 3

WHY SHOULD YOU PREFUND WITH PARS? Investing assets can result in a greater rate of return which then leads 1 to lower liabilities Contributions into the trust are “assets” that address liabilities on financial 2 statements Credit rating companies look more favorably on agencies who adopt an 3 irrevocable trust and prefund GASB 75 now requires liabilities to be calculated into financial statements (much 4 like GASB 68 with pensions) Prefunding now means future taxpayers and employees will not bear a 5 disproportionate burden of the costs Assets can be used as a budget stabilization tool so that in future years, rising 6 OPEB costs will not impact key public services Nashoba Regional School District ▎ 4

OPEB Actuarial Results Valuation Date: Pay-as-you-Go Prefunding Percent Change December 31, 2015 Discount Rate: 4.50% Discount Rate: 7.00% Actuarial Accrued $38,627,189 37.53% ▼ $24,132,110 Liability (AAL) Actuarial Value of Assets $0 -- $0 Unfunded Actuarial $38,627,189 37.53% ▼ $24,132,110 Accrued Liability (UAAL) Annual Required Contribution $3,193,431 32.14% ▼ $2,167,178 (ARC) for FY 2015-16 Annual Benefit Payments (Pay-as-you-Go) $947,785 -- $947,785 for FY 2015-16 Rule of thumb: For every one percent increase in the discount rate, the unfunded liability is lowered by 10-12%. Nashoba Regional School District ▎ 5

Pars Trust Team Experience Administrator of one of the One of the largest trustees One of the world’s largest largest private OPEB of OPEB assets and investment management firms, trust programs in the nation 5th largest bank in the nation with $3 trillion+ in client assets Trust Administrator Trustee/Custodian Investment manager • • Recordkeeping/sub-trust accounting Safeguard plan assets Independent low-cost • Investment advisor • Actuarial coordination • Oversight protection Portfolio analysis and management • • Plan fiduciary • Monitor contributions/process disbursements Investment strategy and asset • Custodian of assets • • Monitor plan compliance allocation development • Ongoing client liaison Local Office Boston, MA Boston, MA Valley Forge, PA Nashoba Regional School District ▎ 6

PARS New England Clients U p d a t e d : O c t o b e r 2 0 1 7 PARS provides OPEB trust services to 260+ clients across the U.S. In New England, our clients include: City of Attleboro Town of Plympton LABBB Collaborative • • • City of East Providence Town of Scituate Narragansett School System • • • City of Central Falls Town of Seymour New Shoreham SD • • • City of Pawtucket Town of Smithfield Monomoy RSD • • • Massachusetts Bay Town of South Kingstown Quincy College • • • Transportation Authority Town of Swansea Southeastern RVTSD • • Town of Barrington Town of Tiverton SEEM Collaborative RSD • • • Town of Berkeley Town of Wareham Tantasqua RSD • • • Town of Carver Town of Warren Tiverton School District • • • Town of Charlestown Town of West Warwick Valley Collaborative • • • Town of East Greenwich Town of Weymouth Upper Cape Cod RTVSD • • • Town of Eastham Town of Whitman Whitman Hanson RSD • • • Town of Glocester Plymouth County Cotuit Fire District • • • Town of Hanson So Worcester RTVSD Kent County Water District • • • Town of Johnston Berlin Bolyston RSD Wareham Fire District • • • Town of Jamestown Cape Cod Regional THSD West Barnstable Fire District • • • Town of Lakeville Central Berkshire RSD Woonsocket Education • • • Town of Lincoln Cranston Schools Department • • Town of Middleborough Dighton Rehoboth RSD • • Town of North Kingstown Dennis-Yarmouth RSD • • Town of North Smithfield East Providence Schools • • Town of Plainville Greater New Bedford RVTHSD • • Nashoba Regional School District ▎ 7

Comprehensive Program The PARS OPEB Trust offers a variety of services: Trustee Services Distribution Processing Investment Management Ongoing Compliance Monitoring Investment Fiduciary Document Preparation Actuarial Coordination Consulting Funding & Contribution Processing Custodian Services Nashoba Regional School District ▎ 8

COMPLIANT TRUST STRUCTURE GASB 45 Irrevocable • In accordance with GASB 45, the trust is: • For retiree healthcare benefits only • Not accessible by creditors • IRS REGULATIONS PARS has obtained a favorable Private Letter Ruling on the trust from the IRS. This • means participating members can be assured the income earned on the trust is exempt from federal income taxes. STATE LAW The trust satisfies the requirements of M.G.L. Section 32B 20 and has been vetted by • Massachusetts attorney’s Murphy, Hesse, Toomey & Lehane. DOCUMENTS Signature-ready program documents were completed over a 2 year period and allow the • program to be easily implemented. They have been reviewed by numerous attorneys nationwide. Nashoba Regional School District ▎ 9

Program Advantages Key Features of the PARS OPEB Trust Program include: “Turn - key” comprehensive approach • Efficient model with economies of scale • Flexible investment options with fiduciary protections • Personalized service provided to individual member • Fast, simple implementation process with signature ready documents • No start-up fees , minimum fees or contribution requirements • No IRS application process and legal fees • Local control • Ongoing compliance costs reduced • Fees that decrease as assets grow • Low investment management expenses • Nashoba Regional School District ▎ 10

Program Advantages PARS Others Combined trust administration, trustee and Investment management services only investment management services IRS-approved trust that provides immediate tax- No IRS approvals exempt status to the Agency No start up costs, minimum fees Start up-costs, minimum fees or required contributions and required contributions Economies of scale due to large sized trust No economies of scale Variety of low-cost diversified One investment management option investment approaches Local control for your Agency to determine its own assumptions, Restrictions and state mandates methods, and valuation timing Streamlined implementation that Implementation permitted only can be completed at any time at certain times of the year Fully flexible contribution and Contribution and disbursement restrictions disbursement options Ongoing compliance monitoring No compliance assistance provided provided by PARS Nashoba Regional School District ▎ 11

Investments

Investment Option A Vanguard Directed Approach The District can invest its assets in one of four investment pools which have • been designed specifically by Vanguard for the PARS OPEB Trust Program. These portfolios include: C ash Cash Cash Cash 1% 7% 1% 2% Bonds 22% Bonds Equity 38% Bonds 43% 55% Equity B onds Equity 61% 77% 92% FIXED INCOME CONSERVATIVE BALANCED GROWTH Portfolios are comprised of institutional class, index-based, mutual funds • selected for their low-weighted expense ratios Assets are pooled for economies of scale but there is no cross sharing of • earnings or liabilities Nashoba Regional School District ▎ 13