FROM: James D. Herberg, General Manager
Originator: Lorenzo Tyner, Assistant General Manager
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INTERNAL REVENUE CODE SECTION 115 TRUST PENSION ACCOUNT
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GENERAL MANAGER'S RECOMMENDATION
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RECOMMENDATION:
Information Item.
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BACKGROUND
The Orange County Sanitation District (Sanitation District) provides various benefits to its employees, including retirement and other post-employment benefits. Each year, staff considers various options to fund these benefits, paying down any unfunded liabilities, making additional payments to Orange County Employees Retirement System (OCERS) and Internal Revenue Code section 115 trust (115 trust) opportunities.
The Sanitation District Board of Directors has requested staff provide information on the 115 trust concept so that the Board can determine if additional investigation is warranted.
ADDITIONAL INFORMATION
Two of the Sanitation District's core benefits are its retirement program, which is administered by OCERS, and its Other Post-Employment Benefits (OPEB) which is administered internally. The Sanitation District contributes funds to OCERS annually to fund its pension costs. Separately, it maintains funds to cover the costs of its OPEB program.
The Board may be most familiar with CalPERS, the agency that provides pension services for all the cities that are member agencies of the Sanitation District and most cities in California. However, the Sanitation District retirement administration and services are provided by OCERS. OCERS provides similar services as CalPERS, but is a completely separate entity from CalPERS and maintains different investment policies and strategies. OCERS tends to invest more conservatively than CalPERS and has a higher funding level.
To enhance its pension returns and eliminate any unfunded liabilities, the Sanitation District has used a strategy of paying off any unfunded liabilities immediately and, as appropriate, overfunding its pensi...
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