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1.14%. Thus, the City should, on average, exceed its rate of return by depositing funds into the PARS Section 115 Trust. The City will use those investment earnings to help pay its increased annual pension contributions. BACKGROUND At the Council Meeting of December 19, 2017, John Bartel, President, Bartel Associates, LLC, presented the actuarial valuation of the City's pension plan with CaIPERS. The presentation outlined the City's pension Unfunded Actuarial Liability (UAL) as of June 30, 2016, that totaled $160 million. This figure is expected to grow over the next several years which will impact the City's annual contribution into the system. The City's annual CaIPERS contributions are projected to grow from $14.2 million in FY 2017/18 to $21.6 million in 2021/22, and continue increasing to $28.5 million in 2026/27. Mr. Bartel presented a variety of options to address the City's growing pension expenses, including participating in a Section 115 Trust Program, to help mitigate the City's pension cost increases over time. Below is a summary of the benefits of a Section 115 Trust Program: 1) Local Control Over Assets 2) Pension Rate Stabilization 3) Investment Flexibility 4) Addresses Unfunded Pension Liabilities 5) Improved Credit Rating At the conclusion of Mr. Bartel's presentation, Council directed the Council's Audit/Finance Committee to work with staff on a strategy to address the City's short- and long-term pension obligations with an emphasis on selecting a Section 115 Pension Trust Fund. The Committee met on January 9, 2018 at the conclusion of which directed staff to issue a Request for Proposal (RFP) to select a Section 115 pension trust provider. Staff issued a RFP on January 10, 2018 for Section 115 pension trust providers. Section 115 Trust Programs that fund pension costs is relatively new to local governments in California. There are currently only three independent retirement plan administrators Public Agency Retirement Services (PARS), Public Financial Management Group (PFM), and Keenan. Of those, only PARS and PFM have received the Private Letter Ruling (PLR) from the Internal Revenue Service (IRS)1. Effective January 2, 2018 the IRS will no longer be providing PLRs. As such, Keenan does not have a PLR. Staff received proposals from the three eligible firms. Staff reviewed the proposals and scored PARS the highest based on years of experience administering Section 115 trusts, the number of similar trusts under their management, overall better investment returns, and fees. See table below for comparison of the three Section 115 Trust proposals. 'A PLR allows (1) the income from the Trust to be excluded from gross income under Section 115 of the Internal Revenue Code and (2) the Trust is not required to file annual federal income tax returns. Page 2 of 5