F.12 - Unfunded OPEB LiabilityUnfunded OPEB Liability
The City of Grand Terrace provides certain medical benefits to eligible retirees.To be
eligible to receive the benefits,retirees must have retired directly from the City under
CalPERS with a service or disability retirement.Such benefits are commonly referred to as
Other Post-Employment Benefits (“OPEB”).
At present,Public Agencies have two options for covering OPEB costs.One option is
referred to as “pay-as-you-go,”where an employer makes the required insurance premium
payments for its retirees as those premiums are due,out of its current year operating
budget.This is the City’s current method.The other option is “pre-funding,”where funds
are set aside in a dedicated trust account.Establishing and funding an OPEB trust ensures
than an employer can meet its future obligations by leveraging the higher yields,thus
decreasing the amount needed to be paid by the City’s General Fund.
Unfunded OPEB Liability
The Government Accounting Standards Board (GASB 75)requires agencies to account for and
disclose their OPEB costs for all active and retired employees.
As of the most recent valuation (June 2019)the City's Net OPEB Liability is $1,964,307 million
for benefits already earned.
At its meeting of June 14,2022,Council indicated they would like to further explore the use of a
Section 115 Trust to address the City’s unfunded liabilities.This report to the City Council is a
recommendation to setup a Section 115 Trust to better plan for and manage the City’s OPEB
unfunded liability.
At its meeting of September 13,2022,Council approved the Prefunding Agreement and elected to
pre-fund Other Post-Employment Benefits (OPEB”)through California Employers’Retiree Benefit
Trust (“CERBT”)fund administered through the California Public Employees’Retirement System
(“CalPERS”)with an initial investment of $100,000 from the sale of the fire station.Council
requested staff bring back the three (3)CERBT Strategy Risk Levels.
Unfunded OPEB Liability
Asset Class Target
Allocation
Strategy 1 Strategy 2 Strategy 3
Global Equity 59%40%22%
Fixed Income 25%43%49%
Treasury Inflation-
Protected Securities
5%5%5%
Real Estate
Investment Trusts
8%8%8%
Commodities 3%4%5%
Unfunded OPEB Liability
Staff recommends the City Council approve Strategy 2 for funding the Other Post-
Employment Benefits (“OPEB”)through the California Employers’Retiree Benefit Trust
(“CERBT”)fund administered through the California Public Employees’Retirement
System (“CalPERS”).
Unfunded OPEB Liability
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