Title
Adopt a Resolution to Accept the 2022-2023 Section 115 Other Post-Employment Benefits (OPEB) Trust and Pension Trust Investment Report for the Quarter Ended December 31, 2023
Staffreport
COUNCIL PRIORITY
• Fiscal Sustainability and Transparency
SUMMARY
Section 115 Other Post-Employment Benefits (OPEB) Trust and Pension Trust Investment Report for the Quarter Ended December 31, 2023 is for information only.
RECOMMENDATION
Staff recommends the City Council accept the City's Section 115 OPEB Trust and Pension Trust Investment Report for the quarter ended December 31, 2023.
BACKGROUND
OPEB Trust
In 2008-2009, the City established the Section 115 OPEB Trust with PARS. The Trust’s primary purpose is accumulating resources to generate investment income for funding the City’s future OPEB obligations. The trust account was set up with an initial contribution of $500,000, and the City has been proactively funding these future liabilities. Since it was established, the City Council has authorized various contributions into the trust. At the end of December 2023, assets in the OPEB Trust total $20,949,700, including contributions and investment earnings. The inception-to-date investment return is 5.37%.
Pension Trust
In 2021, the City Council established the Section 115 Pension Trust with PARS. The goal is setting aside funds and accumulating investment earnings to buy down the City’s unfunded CalPERS pension liabilities. At the beginning of the fourth quarter of 2023, assets in the Pension Trust totaled $17,909,100, including contributions (since inception of the fund in 2021-22) and investment earnings. On December 19, 2023, the City transferred $5,972,500 from the General Fund to the Pension Trust. On December 31, 2023, assets in the Pension Trust totaled $25,541,100. The 3-month investment return is 9.16%, and the inception-to-date investment return is -0.63%.
Analysis
QUARTERLY INVESTMENT REPORT
HighMark Capital has prepared the quarterly investment report for the OPEB Trust and Pension Trust for the period ending December 31, 2023, summarizing investment performance. The asset allocations for both the OPEB Trust and the Pension Trust for the quarter ended December follow the investment policies.
Assets in the OPEB Trust portfolio increased from $19,373,800 in the prior quarter to $20,949,700. Assets in the Pension Trust began at $17,909,100, and with the additional contribution during the quarter, is now $25,541,100. Investment fluctuations are expected due to rapidly changing market conditions.
Investment returns are as follows. Please refer to the attached investment report for details.
Trust 1 Year 3 Years 5 Years 10 Years Inception to Date
OPEB 11.06% -0.35% 4.94% 4.08% 5.37%
Pension 14.07% N/A N/A N/A -0.63%
Committee Review and Actions
The City Council Finance Committee reviewed the City Section 115 OPEB Trust and Pension Trust Investment Report for the quarter ended December 31, 2023 on February 28, 2024 and unanimously recommended the report be moved to the City Council for acceptance.
ATTACHMENTS
• Attachment A: Resolution Accepting Other Post-Employment Benefits (OPEB) and Pension Trust Investment Report
• Attachment B: Investment Report for the Quarter Ended December 31, 2023
PREPARED BY
T. Michael Yuen, Finance Director