FROM: James D. Herberg, General Manager
Originator: Lorenzo Tyner, Assistant General Manager
SUBJECT:
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PENSION COST STRATEGIES
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GENERAL MANAGER'S RECOMMENDATION
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RECOMMENDATION: Recommend to the Board of Directors to:
Direct staff to advertise a Request for Proposals (RFP) to select a multiple-employer Internal Revenue Service Code Section 115 Trust Pension Account.
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BACKGROUND
The Orange County Sanitation District (Sanitation District) provides pension benefits to its employees through the Orange County Employee Retirement System (OCERS) at an annual cost of approximately $15 million. Staff continually examines strategies to support and minimize these costs. After an initial presentation, the Administration Committee directed staff to provide additional information and analysis of options to address funding these benefits ranging from advance payments to implementing an Internal Revenue Service Code Section 115 Trust Pension Account (115 Trust).
Staff researched different options for Board consideration as described below. All options involve moving funds from the Sanitation District investment portfolio to a different investment vehicle with an opportunity to obtain higher yields. Once contributed into one of these strategies, fund use is limited to pension costs. Although the staff report will review four sub-options, there are two main alternatives:
1) Make an advanced payment to OCERS
Advantages: Potentially higher yields than the Sanitation District's investment portfolio, lower fees, avoids trust establishment and administration, comparable yields to 115 Trust
Disadvantages: Less investment control and flexibility, all retirement funds under a single manager
2) Implement a 115 Trust Pension Account
Advantages: Potentially higher yields than the Sanitation District's investment portfolio, provides for additional control over funds, diversity of investment managers, comparable yields to OCERS
Disadv...
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