REQUEST FOR SIGNATURE: SB 1413 (Nielsen) Public employees’ retirement: pension prefunding.

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SB 1413 seeks to provide the California Public Employees’ Retirement System (CalPERS) the authority to establish a Pension Prefunding Trust Program (PPTP).

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Dear Legislator,

The CITY OF CITY requests your signature on SB 1413 (Nielsen), which seeks to provide the California Public Employees’ Retirement System (CalPERS) the authority to establish a Pension Prefunding Trust Program (PPTP).

The PPTP will allow CalPERS to establish, in accordance with Section 115 of the Internal Revenue Code (IRC), an irrevocable trust (115 Trust) through which eligible California public agency employers may prefund their future annual pension contributions. The PPTP will also provide an additional option for employers to pay down their unfunded liability as part of a defined benefit plan. Under CalPERS, the PPTP will allow eligible public agencies to direct funds into the 115 Trust that, once deposited in the trust, can only be used to meet pension obligations.

Public agencies that utilize the 115 Trust established through SB 1413 (Calderon) would receive the benefits of being able to offset their unfunded pension obligations by an amount equal to their balance in the trust, the ability to smooth annual CalPERS rate adjustments by drawing on the trust, increase the diversity of their investments beyond general fund investments, and potentially improve their bond ratings.

Although 115 Trusts are currently available to public agencies through the private market, the CITY OF CITY would benefit from a CalPERS managed trust through reduced overhead and fees, streamlined transfers from the fund to CalPERS to pay for pension obligations, and an established working relationship, and the ability to reflect dollars set aside in a trust to be reflected in our federal GASB reporting requirements.

Given the projected increases in pension costs resulting from a combination of investment losses,
actuarial adjustments, and reduced amortization periods, this additional tool would be a welcomed resource.

For these reasons, the CITY OF CITY respectfully requests your signature on SB 1413 (Nielsen).

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REQUEST FOR SIGNATURE: SB 1413 (Nielsen) Public employees’ retirement: pension prefunding.

Current Actions Items

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