09. Public Agency Retirement ServicesADMINISTRATIVE SIERVICES DEPARTMENT
CUPERTINO
CITY !-TALL
10300 TORRE AVENUE • CUPERTINO, CA 95014-3255
(408) 777-3220 • FAX (408) 777-3109
SUNIlV[ARY
Agenda Item No. ~_
SUBJECT AND ISSUE
Meeting Date: February 16, 2010
Adopt a resolution adopting the PARS Public Agency Post-Retirement Health Care Plan
Trust, to fund retiree medical benefits, Resolution No. 10- D 3~
BACKGROUND AND FISCAL IMPACT
A new accounting rule requires cities such as Cupertino to report the future long-term cost
of medical benefits for retirees, also known as other post-employment benefits or OPEB.
The cost is lower when monies for this purpose are placed in an irrevocable trust that earns
a higher rate of return. For example, the adopted 2009/10 budget saved $1 million this year
by budgeting for such an action. Keeping the funds in a trust with a certain investment mix
keeps annual costs relatively flat in the long-term while not establishing a trust will make
costs in the next five years rise up to $2 million annually.
The City controls the cost of its health plan: by capping its annual contribution toward
premiums. Employees and retirees bear the c;osts of premium increases. To additionally
manage costs, the City began to require more years of City employment and aphase-in of
the benefit for those hired since 2004. Moreover, to pay for these costs, the City established
a retiree medical sinking fund in 2004 and will have accumulated $9 million for this
purpose by June 30, 2010. AlI of these funds go toward a future Long-term cost projected to
be $14 million. These funds will go into the trust if the Council adopts tonight's resolution.
This action is currently budgeted in retiree medical fund account b42 and doesn't impact
the General Fund.
Trust proposals were reviewed from three companies, PARS {Public Agency Retirement
Services), CaIPERS, and ICMA-RC {International City/County Management Association
Retirement Corporation). Finance staff and the Audit Committee selected PARS because
of the choices of investments not offered by the other plans and because of the.
diversification from funds already invested in {~a1PERS for retirement pensions.
RECOMMENDATION
Adopt a resolution adopting the PARS Public; Agency Post-Retirement Health Care Plan
Trust, appointing the City Treasurer as Plan Administrator, and authorizing the Plan
Administrator to execute the PARS legal documents and to maintain the City's
participation in the program.
s-~
PARS Public Agency Post-Retirement Health Care Plan Trust
February 16, 2010
Page 2 of 2
Submitted by: Approved for submission:
~--.-
David Woo David W. Knapp
Deputy Treasurer City Manager
Reviewed by:
Carol A. Atwood
City Treasurer
Attachment A: Resolution 10- r3'3}
s-z
Attachment A
RESOLUTIOI\f NO. 10- (,)3 ~ -
A RESOLUTION OF THE CITY COU1vCIL OF THE CITY OF CUPERTINO
ADOPTING THE PARS PUBLIC AGENCY POST-RETIREMENT HEALTH CARE
PLAN TRUST, APPOINTING THE CITY TREASURER AS PLAN ADMINISTRATOR,
AND AUTHORIZING THE PLAN ADMINISTRATOR TO EXECUTE THE PARS
LEGAL DOCUMENTS AND TO MAINTAIN THE CITY'S PARTICIPATION IN THE
PROGRAM
WHEREAS, the City of Cupertino has an administrative policy and procedure for
medical insurance benefits provided to its retired employees; and
WHEREAS, it is determiried that it is in the best interest of the City to participate in the
PARS Public Agencies Post-Retirement Health Care Plan Trust {the "Program") to fund these
insurance benefits; and
WHEREAS, the City is eligible to participate in the Program, atax-exempt trust and plan
performing an essential governmental function within the meaning of Section 115 of the Internal
Revenue Code, as amended, and the Regulatio~zs issued thereunder, and is atax-exempt trust
under the provisions of the relevant statutory provisions of the State of California.
NOW THEREFORE, BE IT RESOLVED THAT:
The City Council hereby adopts the PARS Public Agencies Post-Retirement Health Care
Plan Trust, including the PARS Public Agencies Post-Retirement Health Care Plan, to
fund medical insurance casts for its retired employees, effective February 17, 2010; and
2. The City Council hereby appoints the City Treasurer, or his/her successor or his/her
designee as the City's Plan Administrator for the Program; and
The City's Plan Administrator is hereby ~iuthorized to execute the PARS legal documents
on behalf of the City and to take whatever additional actions are necessary to maintain
the City's participation in the Program and to maintain compliance of any relevant
regulation issued or as may be issued; therefore, authorizing him/her to take whatever
additional actions are required to administer the City's PARS plan(s).
PASSED AND ADOPTED at a regular n-eeting of the City Council of the City of
Cupertino this 16~' day of February 2010, by the following vote:
Vote
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST:
City Clerk
Council Members
APPROVED:
Mayor, City of Cupertino
9-3