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THE CITY OF 10 .a. f)L£ASANTON. CITY COUNCIL AGENDA REPORT March 15, 2011 Finance TITLE: ADOPT A RESOLUTION APPROVING PARTICIPATION IN THE CALIFORNIA EMPLOYER'S RETIREE BENEFIT TRUST FUND (CERBT) THROUGH THE CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM (CALPERS) FOR THE PURPOSE OF PREFUNDING AND INVESTING RETIREE MEDICAL BENEFITS, AND APPROVE THE TRANSFER OF FUNDS FROM THE EXISTING RETIREE MEDICAL. IRREVOCABLE TRUSTS TO THE CERBTS SUMMARY In April 2009, the City of Pleasanton established two Internal Revenue Code Section 115 Irrevocable Trusts (Trusts) with the Bank of New York to fund post employment retiree medical benefits for City and LPFD employees. The City of Livermore contributes to the LPFD Trust. Due to the instability of the equity markets and the economy in 2009, an interim strategy (to last for an estimated eighteen to twenty -four months) was implemented whereby the Trusts would be managed in -house by City staff versus being externally managed by professional money managers. Over the past two years the City staff invested the Trust funds in low risk fixed - income securities. By establishing the Trusts it allowed the City to comply with Government Accounting Standards Board (GASB) rules for the accounting of post retirement benefits required to be implemented by June 30, 2009, and to preserve the capital that had been accumulated since 1998 from the volatility that existed in the market in 2009 and 2010. In November 2010, City staff issued a Request for Proposal (RFP) to select a third party trust provider for the management of the Trusts, an entity to help staff implement a long- term investment strategy and to transfer assets into a trust with a more diversified portfolio. Staff received and evaluated four proposals and determined the California Employer's Retiree Benefit Trust (CERBT) managed by CaIPERS best meets the City's long -term needs for managing the post employment retiree medical trusts. RECOMMENDATION 1. Approve the attached resolution adopting the CERBT as the vehicle for managing the City's long -term obligation for retiree medical benefits and approve the transfer of assets into the CERI3T from the existing City Trusts. 2. Authorize the City Manager or his designee to request and receive disbursements from the Trust to pay retiree medical benefit obligations in the future. FINANCIAL STATEMENT The CERBT is a not for profit OPEB service provider managed by CaIPERS. There is no initial start up costs, however the total cost of participation was 10 basis points (1/10 of 1 %; .001) for 2009/10FY and as the program matures, the CERBT expects the average annual cost not to exceed 20 basis points. Based on the City's current assets of $9.8 million in the Trusts, the annual cost of the program will be between $9,800 and $19,600.