Rand Anderson, Manager Constituent Relations Office

1. California Employers’ Retiree Benefit Trust OPEB Pre-funding through CalPERS Rand Anderson, Manager Constituent Relations Office

2. Discussion Overview • New Law • Trust Fund Elements • Year End Reporting • Why Pre-fund? • Summary

3. New Law • AB 554 allows ALL California government agencies to participate in the California Employers’ Retiree Benefit Trust (CERBT) Fund • Became law on January 1, 2008 • Permissive legislation – agencies elect to join

4. California Employers’ Retiree Benefit Trust Fund

5. California Employers’ Retiree Benefit Trust Fund CERBT Meets IRS Section 115 Yes Meets GC Sect 53620-22 Yes Currently Offered by CalPERS? Yes Irrevocable? Yes Actuarial Valuations required to establish Trust Acct? Yes Disbursements made from Fund Assets to: Employer, for reimbursement of documented OPEB expenses Use higher discount rate under GASB 45? Yes Assets reduce NOO and ARC under GASB 45? Yes

6. Contracting Processing Time

7. The Agreement Package • Two signed copies of the Participation Agreement • Actuarial Valuation Report • Summary of Actuarial Information • Certification of OPEB Actuarial Information • Certification Funding Policy and GASB Reporting Compliance • Delegation of Authority to Request Disbursement

8. On Our Website • List of Actuaries • Assumption Model • Investment Policy • Frequently Asked Questions • email to CORE4U@calpers.ca.gov for a link to the website

9. CalPERS will … report to each employer the audited asset balances, contributions, disbursements, plan expense, and investment return of their CERBT asset account. This report after each fiscal year ending 6/30. … report GASB 43 CERBT fund results in aggregate (i.e., the sum of all plans) in the CalPERS Comprehensive Annual Financial Report (CAFR): Financial Reporting

10. GASB staff told us …get updates from participating CERBT agencies at the end of the fiscal year (6/30/XX), about OPEB costs, if GASB 45 disclosures include amounts paid outside of the CERBT, e.g., * OPEB payments made directly to service providers * OPEB related administrative expenses ARC, if GASB 45 disclosure reports ARC on a basis different from that originally reported to CalPERS, e.g., budgeted or actual payroll rather than projected payroll. We will issue requests for updates by June 1 each year. Financial Reporting

11. GASB staff told us … participating CERBT employers ought to obtain actuarial valuations on a biennial cycle. Other … GASB 45 requires that all contributions not transferred from an irrevocable OPEB trust (i.e., reserve account, County treasury account, etc.) must be reported as contributions, not as transferred OPEB assets. Financial Reporting

12. Why Pre-fund OPEB Liabilities? • Pre-funding minimizes future cost impacts • Agencies that pre-fund use higher discount rate: - lower liabilities and ARC • Investment returns pay 75% of CalPERS pension benefits • Bond rating agencies expect an OPEB plan

13. State of California Valuation Results* * Relies on CalPERS OPEB Actuarial Assumption Model ARC based on 30 year amortization

14. PERF Investment Performance

15. Questions? Contact the CalPERS CERBT Program: Email to: core4u@calpers.ca.gov