1. California Employers’ Retiree Benefit Trust
OPEB Pre-funding through CalPERS
Rand Anderson, Manager
Constituent Relations Office

2. Discussion Overview New Law Trust Fund Elements Year End Reporting
Why Pre-fund?
Summary
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3. New Law
AB 554 allows ALL California government agencies to participate in the California Employers’ Retiree Benefit Trust (CERBT) Fund
Became law on January 1, 2008
Permissive legislation – agencies elect to join
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4. California Employers’ Retiree Benefit Trust Fund
Governing Board
13-member board of elected and appointed officials, composition is mandated by law
Investment policy
CalPERS managed portfolio
Expected rate of return (net)
7.75%
Total annual cost
Expected to be about 50 basis points
Minimum contribution
The lesser of $5,000 or ARC
Maximum contribution
Present value of future benefits
Disbursement frequency
Monthly (prefer less often – lower cost)
Investment return allocation
Monthly
Account activity report
Quarterly
Termination
After 3 years, trustee to trustee transfer; no penalty
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5. California Employers’ Retiree Benefit Trust Fund
CERBT
Meets IRS Section 115
Yes
Meets GC Sect
Yes
Currently Offered by CalPERS?
Yes
Irrevocable?
Yes
Actuarial Valuations required to establish Trust Acct?
Yes
Disbursements made from Fund Assets to:
Employer, for reimbursement of documented OPEB expenses
Use higher discount rate under GASB 45?
Yes
Assets reduce NOO and ARC under GASB 45?
Yes
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6. Contracting Processing Time
To complete typical OPEB actuarial valuation.
6-12 weeks after actuary starts the work
To approve contract (must be signed by presiding officer of governing body)
Depends on local agency decision making process.
CalPERS reviews and accepts contract documents and actuarial valuation report.
About 2 weeks
To make earliest initial contribution.
1 week after CalPERS acceptance of contract
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7. The Agreement Package Two signed copies of the Participation Agreement
Actuarial Valuation Report
Summary of Actuarial Information
Certification of OPEB Actuarial Information
Certification Funding Policy and GASB Reporting Compliance
Delegation of Authority to Request Disbursement
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8. On Our Website List of Actuaries Assumption Model Investment Policy
Frequently Asked Questions
to for a link to the website
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9. Financial Reporting CalPERS will
… report to each employer the audited asset balances, contributions, disbursements, plan expense, and investment return of their CERBT asset account. This report after each fiscal year ending 6/30.
… report GASB 43 CERBT fund results in aggregate (i.e., the sum of all plans) in the CalPERS Comprehensive Annual Financial Report (CAFR):
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10. Financial Reporting GASB staff told us
…get updates from participating CERBT agencies at the end of the fiscal year (6/30/XX), about
OPEB costs, if GASB 45 disclosures include amounts paid outside of the CERBT, e.g.,
* OPEB payments made directly to service providers
* OPEB related administrative expenses
ARC, if GASB 45 disclosure reports ARC on a basis different from that originally reported to CalPERS, e.g., budgeted or actual payroll rather than projected payroll.
We will issue requests for updates by June 1 each year.
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11. Financial Reporting GASB staff told us
… participating CERBT employers ought to obtain actuarial valuations on a biennial cycle.
Other
… GASB 45 requires that all contributions not transferred from an irrevocable OPEB trust (i.e., reserve account, County treasury account, etc.) must be reported as contributions, not as transferred OPEB assets.
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12. Why Pre-fund OPEB Liabilities?
Pre-funding minimizes future cost impacts
Agencies that pre-fund use higher discount rate:
- lower liabilities and ARC
Investment returns pay 75% of CalPERS pension benefits
Bond rating agencies expect an OPEB plan
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13. State of California Valuation Results*
Fiscal Year Ending
June 30, 2008
($ in billions)
Full ARC
½ ARC
Pay-As-You-Go
Discount Rate
7.75%
6.125%
4.5%
Assets needed to fund Accrued Liability as of July 1, 2007
$31.3
$38.2
$47.9
ARC for FY 2008
$2.6 $3
$3.6
Employer Contributions for FY 2008 $2
$1.4
Net OPEB obligation for FY 2008 $0 $1
$2.2
* Relies on CalPERS OPEB Actuarial Assumption Model ARC based on 30 year amortization
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14. PERF Investment Performance
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15. Contact the CalPERS CERBT Program:
Questions?
Contact the CalPERS CERBT Program:
to:
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