CPUD considers investment opportunity
During the Dec. 17 regular CPUD board meeting, the Chester Public Utility District general manager invited Mitch Barker, executive vice president of Public Agency Retirement Services (PARS), headquartered in Newport Beach, to present to the directors information on how his firm could provide superior retirement plans to the district that would benefit future retirees.
Barker said his company provided ways to prefund retirement remunerations by setting aside money in a trust account that earned substantially higher returns over the long term than could be realized from more traditional investment vehicles such as CDs.
Addressing the board, he said, “Think of PARS as trust administrators approved by the IRS to prefund tax-exempt retirement benefits taken from the general fund or from a reserve account for district employees for one or two purposes: to set money aside for either Other Post Employment Benefits (OPEB) for medical, or to hold money for employee pensions to fund future obligations,” that includes earning interest at much higher rates that are also tax exempt.
“We’ve provided this service to over 400 agencies,” he continued, including, “Plumas and Lassen counties as well as other North State county agencies and school districts.”
US Bank is the Trustee, Barker noted, “so they’re the actual custodians of the trust funds,” which are placed in investments in a diversified market.
Since the money is coming out of the general fund and placed into a trust account, he said the rules are highly restrictive — meaning that those funds cannot be invested in stocks or equities for example, because there is potentially very high market risk.
In the case of PARS, he stated that different options allow the district to control the amount of potential risk as it sees fit, from low to moderate risk.
A portfolio manager is always available to answer questions in person at board meetings or at anytime via email or phone call to provide recommendations Barker added.
Although risk is still a factor in any investment, “If you decide to employ us, the board can set goals toward a risk tolerance level,” that the board feels most comfortable with, “and the portfolio manager will make a recommendation on a strategy to manage the money accordingly.”
The district also has the option to use money that’s been invested in the trust for reimbursements for future expenses when needed, or choose instead to send any portion of the money to CalPERS retirement plan down the road.
However, unlike the monies held in a PARS account, revenue placed in CalPERS cannot be withdrawn until benefits are due.
A key feature to investing with PARS he said is that there is no set up fees charged to the district or any minimums to participate in the program. The company also won’t charge fees until assets are invested at a time the district deems appropriate to do so. Plus Barker noted there are no fees to withdraw funds from the account or should an account be discontinued.
Each board member was handed a packet of information that could be reviewed at a later date and approved by the next regular meeting in January should the board decide to move forward on the investment opportunity set forth by Barker.