TRANSFER AND INVEST 6 MIILLION - Laserfiche WebLink

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Option #2 — Transfer the Pension Rate Stabilization Funds to CaIPERS The District could submit discretionary payments to CaIPERS above and beyond the required contributions (required contributions include funding for current employees as well as unfunded liabilities for past service). However, those funds, once on deposit, are subject to the same market risk and volatility as the existing funds invested with CalPERS. Option #3 — Transfer the funds into a trust established specifically for pension rate stabilization purposes The District could transfer the funds to a trust and invest the funds in instruments that have the potential to earn greater returns than can be achieved under the District's existing investment policies and State law. Advantages include: • The District maintains oversight of investment management and control over the risk tolerance level of the portfolio. • Funds deposited into the trust may reduce the reported on the District's balance sheet in Standards Board (GASB) Statement No. 68. • Funds in a trust for future liabilities are viewed Moody's and Standard and Poor. District's Net Pension Liability which is now accordance with Government Accounting positively by credit rating agencies such as • The pension stabilization funds may reduce reliance on on-going resources through increased earnings potential above that level achievable with the District's general investments. A disadvantage is that the funds are irrevocably deposited in the trust. However, the District can access the funds at any time provided the funds are used to pay for pension obligations, and the District can choose the amount of funds to deposit and the timing thereof. The funds can be accessed to offset rate increases to stabilize rates, can be used as a rainy -day fund when revenues are impaired and can be used to make additional payments. Also, while depositing funds into the trust has the potential to reduce net pension costs, actual earnings on the funds will likely be less than the carrying cost of the unfunded liabilities at CaIPERS (unless riskier investments are selected in an attempt to achieve high returns). The discount rate has the effect of being the interest rate charged by CalPERS on any unfunded liabilities. As a result, the District is, in essence, currently paying 7.0% interest on the unfunded liabilities. Staff is recommending a hybrid of Option #1 and Option #3, leave $2.0 million in the District's current investment portfolio and transfer $6.0 million to a trust. The District already participates in the PARS Post -Employment Benefits Trust for its Other Post - Employment Benefits (OPEB). This same trust can, and is recommended to, be used for the Pension Rate Stabilization Funds. It is also recommended that the funds be invested consisted with the District's current trust investments, in the HighMark Capital Management's Active Moderate Portfolio. Staff met with the Finance and Audit Committee of the Board of Directors on May 15, 2019; the Finance and Audit Committee members concur with staffs recommendations. HILLCREST CENTER 403 WEST HILLCREST DRIVE, THOUSAND OAKS, CALIFORNIA 91360-4223 (805) 495-6471 FAX: (805) 497-3199 E-MAIL:parks@crpd.org