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HomeMy WebLinkAboutD-2 Staff Report - Establish OPEB TrustSCHEDULED ITEM D-2 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL VIA: SERGIO GONZALEZ, CITY MANAGER FROM: TALIKA M. JOHNSON, ADMINISTRATIVE SERVICES DIRECTOR DATE: JUNE 20, 2022 SUBJECT: ADOPT THE RESOLUTION AUTHORIZING PARTICIPATION IN THE PARS POST-EMPLOYMENT BENEFITS TRUST PROGRAM TO BE ADMINISTERED BY PUBLIC AGENCY RETIREMENT SERVICES (PARS) AND U.S. BANK, APPOINTING THE CITY MANAGER AS THE CITY’S PLAN ADMINISTRATOR, AND AUTHORIZING THE CITY MANAGER TO EXECUTE THE DOCUMENTS TO IMPLEMENT THE PROGRAM BACKGROUND: With the adoption of the Fiscal Year 2022/23 budget, by end of the year General Fund reserves are projected to total $37.0 million, of which $26.5 million is designated for specific purposes, and the remaining $10.5 million is undesignated or excess reserves. Of the $26.5 million designated reserves, $3.5 million ($2.0M from previously designated reserves + $1.5M of undesignated reserves set aside per Council approved priorities) is currently available for post-employment/retirement liabilities (pension and OPEB) to (a) address unexpected pension and retiree health care payments above the City’s annual budget or (b) to prefund future pension and retiree health care obligations. Staff is requesting adoption of a resolution authorizing the establishment of a post-employment benefits trust program (which can be used for pension or retiree medical) to mitigate future increases in post-employment costs, and authorization to utilize the $1.5 million to initiate prefunding the trust specifically for future retiree medical costs. RECOMMENDATIONS: Staff recommends the City Council take the following actions: 1)Adopt Resolution No. 2022-C44 to establish the PARS Post-Employment Benefits Trust Program; and 2) Authorize the City Manager, subject to the review and approval of the City’s legal counsel, to sign all necessary documents; and APPROVED CITY COUNCIL 6/20/2022 Establish OPEB and Pension Trust June 20, 2022 Page 2 3) Authorize the use of $1.5 million in General Fund Reserves as an initial deposit into the PARS Post-Employment Benefits Trust Program specifically for retiree health care. ANALYSIS: In 2012, the Government Accounting Standards Board (GASB) issued Statement No. 68, Accounting and Financial Reporting for Pensions. GASB 68 requires that governmental employers that sponsor Defined Benefit plans (i.e., CalPERS) must recognize a net pension liability (unfunded accrued liability) on their balance sheet. This is the difference between the City’s total pension liability (actuarial accrued liability) and actual plan assets. GASB 68 became effective for fiscal years starting after June 15, 2014. In 2015, the Government Accounting Standards Board (GASB) issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. GASB 75 requires the City to report costs and obligations for post-employment healthcare and other post-employment benefits (called “OPEBs”) much like the current accounting requirement to report pension obligations. Similar to GASB 68, the City must also report its net OPEB liability (difference between the total OPEB liability and assets accumulated in an irrevocable trust) on its Financial Statements. GASB 75 (which replaces the requirements of GASB 45) became effective for fiscal years beginning after June 15, 2017. Other Post-Employment Benefits (OPEB) The City’s Fiscal Year End June 30, 2021 financial statements reflected a $ 60.6 million OPEB liability, a decrease of $3.1 million from prior year, but still up by $19.1 million from the $41.2 million FY 2017/18 liability. Participation in CalPERS health plan programs contractually obligates the City to pay at least the PEMHCA minimum cost for each retiree (currently $149 per month per retiree). Furthermore, the City continues to offer 50-100% of paid retiree medical to employees with 10-20 years of service, including spousal coverage. City-paid medical benefit for employees and their spouses for the rest of the retirees’ lives is generous, and was a helpful benefit in retaining staff for 20+ years in the past, but in today’s employment market this type of benefit is not as attractive to job-seekers and financially unsustainable going forward, especially in light of rapidly increasing health-care costs and longer life expectancies. The City has a “pay-go” system for OPEB obligations. Meaning, the City pays retiree medical costs annually as incurred. Current year payments are in excess of $1.5 million and those annual payment obligations are expected to increase to $3.8 million over the next 25 years. To mitigate future costs, the City established a Health Reimbursement Arrangement (HRA) for its Executive Staff and all eight (8) of the City’s bargaining groups to replace the lifetime medical benefit for new hires. This action has a positive impact on reducing the City’s OPEB liability, but not enough of an impact where other reduction strategies should not be considered. The best option to mitigate future increases is to establish an interest bearing OPEB trust account. Establishing an OPEB trust is a commitment by the City to set aside funds strictly for the purpose of making future retiree medical payments. Funding a trust has multiple benefits: 1) funds in trust will likely yield higher interest earnings than maintaining cash in the City’s normal investment accounts; 2) funds in trust can be used as a budget stabilization tool for future unexpected spikes in annual retiree medical payment obligations, or in times where the City may need budget relief; and 3) funding a trust Establish OPEB and Pension Trust June 20, 2022 Page 3 instantly reduces the OPEB liability in the City’s financial statements and boosts the City’s credit worthiness. Chart 1 provides an illustration of expected reductions in the City’s OPEB payment obligations in future years if a trust account was funded at just over $1 million per year over the next 25 years. Chart 1 - Illustration of Projected $1 Million Annual Contribution (6.00% Trust Earnings/Discount Rate) Contributing just over $1 million annually to a trust, for the next 25 years, would drop the City’s future payment obligations back to current ranges or about 300% by end of that 25-year period. Pension The City participates in the California Public Employees’ Retirement System (CalPERS) retirement program (Plan). The CalPERS Board of Administration has made several decisions over the years to mitigate the eroded value of the pension plan from years of market turmoil, especially during the 2008/2009 recession. Such actions included lowering the discount rate/expected return rate, reducing the amortization and smoothing period to pay for gains and losses, and the latest change was adding a tiered system where the discount rate would further by lowered following years of significant market returns, meaning plan participants would not have the benefit of immediately realizing those significant gains. There are two components to the payments the City makes to CalPERS. One component is the normal cost; this is a percentage of persable payroll dollars. The second component are lump-sum payments made towards the City’s unfunded accrued liability (UAL). Considering the annual budget impact of the actions taken by the CalPERS Board, the City took several actions in recent years to mitigate rising costs. Through successful labor negotiations, City employees agreed to contribute 7.0-9.0% of the employers CalPERS share, which reduces annual normal cost payments, and in 2020, the City paid off its $80.3 million UAL debt by using $10.7 million of Enterprise Fund cash on-hand and issuing $70 million in Pension Obligation Bonds to refinance the debt at a much lower interest rate. Establish OPEB and Pension Trust June 20, 2022 Page 4 Although the City paid off its debt to CalPERS, each fiscal year the Plan may have new layers of debt. Per the City’s latest CalPERS valuation reports, the Plan would have to have a minimum of a 12% return each year to avoid any new layers of UAL. While FY 2020/21 returns came in high at over 21%, Chart 2 provides an illustration of CalPERS’ investment returns over the past 20 years, showing average returns over the last rolling 5-years were less than 10%. Chart 2 – CalPERS 20-Year Historical Investment Returns (2001-2020) As an illustration, Table 1 provides a summary of the City’s new layer of debt given CalPERS low 4.7% rate of return in FY 2019/20 and the annual payments required in the next six years towards that debt. Table 1 – CalPERS UAL Debt for FY 2019/20 Results Required Contribution Plan Fiscal Year:2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 Current Amortization Balance Normal Cost %9.78%9.60%9.50%9.30%9.20%9.10% UAL Payment 90,947$ 163,000$ 236,000$ 308,000$ 381,000$ 381,000$ 3,517,610$ Normal Cost %38.32%28.30%28.30%28.30%28.30%28.30% UAL Payment 101,400$ 159,000$ 216,000$ 274,000$ 331,000$ 331,000$ 3,111,158$ Normal Cost %13.66%13.70%13.70%13.70%13.70%13.70% UAL Payment 1,015$ 1,700$ 2,300$ 2,900$ 3,600$ 3,600$ 33,313$ Normal Cost %26.20%26.20%26.20%26.20%26.20%26.20% UAL Payment 1,137$ 1,900$ 2,600$ 3,300$ 4,000$ 4,000$ 37,531$ 194,499$ 325,600$ 456,900$ 588,200$ 719,600$ 719,600$ 6,699,612$ Projected Future Employer Contributions (Assumes 7.00% Return for Fiscal Year 2020-21) Misc Classic/ PEPRA Total UAL Payment Safety Classic Safety PEPRA Safety Second-Tier Although there are new layers of CalPERS debt, payments of these UALs are able to be managed through the annual budget process. Depending on future performance of CalPERS investments, Staff may return to get Council approval to fund a Section 115 trust relating to pension. Establish OPEB and Pension Trust June 20, 2022 Page 5 Establishing Post-Employment Benefits Trust Program Staff solicited presentations from the three (3) leading administrators with pension and retiree medical trust programs, CalPERS, Keenan, and PARS, and considered several factors on which program administrator to recommend to Council. Some considerations included: • Length of time provider has offered Trust services • Initial and ongoing support to City Staff in establishing and managing the Trust • References and current client base • Experience of partnered investment firm(s) • City’s control over its invested assets • Fees • Portfolio performance/investment returns While either of the three program administrators could service the City’s needs and are reputable, Staff is recommending Public Agency Retirement Services (PARS). In an effort to help public agencies address and manage their GASB 68 and 75 liabilities, PARS has sought and received approval from the IRS in the form of a Private Letter Ruling on its Post-Employment Benefits Trust Program. PARS has assembled leading professionals to provide the City with the necessary services required under one program to pre-fund both pension and retiree health care liabilities. This would provide the City with an alternative to CalPERS that will allow for greater local control over assets, investment by a professional fund management team selected and monitored by the City, with contributions and distributions from the trust determined at the discretion of the City. The program has been established as a multiple employer trust so that public agencies regardless of size can join the program to receive the necessary economies of scale to keep administrative fees low and avoid any setup costs. To properly offset OPEB liabilities, funds must be set aside in an exclusive benefit, irrevocable trust that cannot be accessed by creditors in order to be accounted for as assets to reduce the liabilities on the City’s financial statements. The trust permits the City, under federal and state law, to invest in a more diversified array of investments to maximize investment returns long term and reduce the City’s liabilities. To date, more than 480 public agencies have adopted programs through PARS to reduce their OPEB and pension liabilities including local agencies such as the City of West Covina, City of La Verne, City of Duarte, City of Covina, City of Temple City and City of Walnut. Expected benefits offered by the PARS Post-Employment Benefits Trust Program to the City include: • Contributions placed in an exclusive benefit trust could address the City’s unfunded liabilities • Investment flexibility with Section 115 Trust compared to restrictions on General Fund investments • Increased risk diversification of plan assets through different asset management than CalPERS • Investments can be tailored to the City’s unique demographics • Oversight and control of fund management selection, monitoring of performance and ability to replace fund management based on performance criteria • Increased flexibility on use of trust assets (i.e., trust assets can be accessed at any time as long as the assets are used to fund the City’s pension and OPEB obligations and defray reasonable expenses associated therewith) Establish OPEB and Pension Trust June 20, 2022 Page 6 • Lower investment management and administrative expenses compared to CalPERS Pension Program • Potential for positive rating agency and investor consideration. PARS has partnered with US Bank to serve as trustee and Vanguard to provide investment management services for the program. Adoption of the attached resolution, authorizes Staff to work PARS and the City’s legal counsel to sign necessary documents to establish a Section 115 Post-Employment Benefits Trust and any other documents necessary to fund the Trust. Also attached is a draft agreement, still subject to final legal review, for reference. Although establishment of the Trust allows the City to deposit funds into both the pension and OPEB accounts, at this time, Staff is only seeking authorization to fund the OPEB account. In January, Council authorized $1.5 million of the General Fund’s excess reserves to fund an OPEB trust. Placing these funds in Trust, will have a positive impact on the City’s financial statements and likely to increase in value due to higher rates of returns on the Trust investment than holding these funds in the City’s normal treasury investment accounts. Following Council’s approval to establish the Section 115 trust, Staff will return for adoption of a policy to designate the City’s investment strategy (i.e. conservative, moderate, aggressive) based on the Council’s risk tolerance, expected time of use of trust funds, annual contributions, etc. FISCAL IMPACT: Based on the latest GASB 75 actuarial report, prefunding an OPEB trust at $1.0 million per year, will pay-off the City’s current $60.6 million liability in 25 years. Approval of the recommended actions establishes an OPEB Trust and authorizes staff to transfer $1.5 million to start prefunding the Trust. Additional contributions to the Trust will be at the discretion of City Council. PARS charges a nominal fee for acting as the Trust Program Administrator. The fees on the attached draft agreement shown in exhibit 1B are the PARS fees for services, which is an annual asset fee starting at 0.25%. and going down based on asset growth. The other additional fee would be the trustee/investment management fee for the investment option selected by the City, currently Vanguard which is set at 0.07%. So, based on the investment provider option, the all-in fee (PARS + Investment Manager) for management of the initial $1.5 million deposit would be $4,800 per year. Annual yields on the investments should far outweigh the trust management fees. Prepared by: Reviewed and Approved: Talika M. Johnson Sergio Gonzalez Director of Administrative Services City Manager Attachments: 1) Resolution No. 2022-C44 authorizing establishment of PARS Post-Employment Benefits Trust 2) Draft Agreement 1 RESOLUTION NO. 2022-C44 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA APPROVING THE ADOPTION OF THE PUBLIC AGENCIES POST- EMPLOYMENT BENEFITS TRUST ADMINISTERED BY PUBLIC AGENCY RETIREMENT SERVICES (PARS) WHEREAS, PARS has made available the PARS Public Agencies Post-Employment Benefits Trust (the “Program”) for the purpose of prefunding pension obligations and/or OPEB obligations; and WHEREAS, the City of Azusa (“City”) 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, the City’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, the City’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, the City reserves the right to make contributions, if any, to the Program. NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of Azusa, California, does find and declare that: 1.The City Council hereby adopts the PARS Public Agencies Post-Employment Benefits Trust, effective June 21, 2022; and 2.The City Council hereby appoints the City Manager, or his/her successor or his/her designee as the City’s Plan Administrator for the Program; and 3.The City’s Plan Administrator is hereby authorized to execute the PARS legal and administrative documents on behalf of the City and to take whatever additional actions are necessary to maintain the City’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 the City’s Program. PASSED, APPROVED and ADOPTED this 20th day of June, 2022. ___________________________________ Robert Gonzales Mayor Attachment 1 2 ATTEST: ___________________________________ Jeffrey Lawrence Cornejo, Jr. City Clerk STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF AZUSA ) I HEREBY CERTIFY that the foregoing Resolution No. 2022-C44 was duly adopted by the City Council of the City of Azusa at a special meeting thereof, held on the 20th day of June, 2022 by the following vote of Council: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ___________________________________ Jeffrey Lawrence Cornejo, Jr. City Clerk APPROVED AS TO FORM: ___________________________________ Best Best & Krieger, LLP City Attorney Page 1 AGREEMENT FOR ADMINISTRATIVE SERVICES This agreement (“Agreement”) is made this _____ day of _____________, 2022, 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 [Agency Name] (“Agency”). WHEREAS, the Agency has adopted the PARS Public Agencies Post-Employment Benefits Trust for the purpose of pre-funding pension obligations and/or Other Post-Employment Benefits (“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 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 Attachment 2 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 nonperformance of Services to the extent such nonperformance 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, and employees, 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. 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 its performance is prevented by such cause. Such cause shall include, but not be limited to: any incidence of fire, flood, acts of God or unanticipated communicable disease, acts of terrorism or war commandeering of material, products, plants or facilities by the federal, state or local government, a material act or omission by the other party or any law, ordinance, rule, guidance or recommendation by the federal, state or local government, or any agency thereof, which becomes effective after the date of this Agreement that delays or renders impractical either party’s performance under the Agreement. 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: [Agency]; [Agency Address]; Attention: [Plan Administrator Title] 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 _______________, 2022 and ending _____________, 2025 (“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. Page 4 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. 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 Name TITLE: DATE: PARS: BY: Tod Hammeras TITLE: Chief Financial Officer DATE: Page 5 EXHIBIT 1A SERVICES PARS will provide the following services for the [Agency Name] 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 of 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 the applicable GASB pronouncements and/or statements, 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. 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: $1 to $10,000,000 0.25% $10,000,001 to $15,000,000 0.20% $15,000,001 to $50,000,000 0.15% $50,000,001 and above 0.10% 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. Page 7 EXHIBIT 1C DATA REQUIREMENTS PARS will provide the Services under this Agreement contingent upon receiving the following information. Agency is solely responsible for ensuring that all information and documentation provided to PARS is true, correct, and authorized: 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.