Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Finance Pension topic
No spam. Unsubscribe anytime.
Newark council approves Section 115 trust with PARS, authorizes up to $12 million initial investment
Summary
Council voted unanimously to create an IRS-approved Section 115 pension trust administered by PARS and to commit up to $12 million of existing pension/OPEB reserves for initial funding; staff says the trust aims to reduce long-term pension costs and improve budget stability.
The Newark City Council on Oct. 24 voted unanimously to establish a Section 115 pension trust administered by Public Agency Retirement Services (PARS) and to fund the new trust with up to $12 million from the city's pension and OPEB reserve.
Finance Director Kristen Lee told the council the trust is intended to prefund pension liabilities and OPEB and to provide a pool that can earn higher net investment returns than CalPERS's pooled structure, potentially reducing long-term costs. Lee said the city's total pension liability to CalPERS is roughly $375 million with a funded ratio near 67 percent and an unfunded accrued liability of about $124 million; the city's pension and OPEB reserve has grown to roughly $13 million and staff proposed up to $12 million as an initial transfer into the trust.
Why it matters: Establishing a Section 115 trust is a common municipal strategy to prefund retirement-related liabilities. Staff argued the trust gives the city local control of investments, may improve creditworthiness and helps buffer budget volatility from market fluctuations.
What the council approved
- Trust structure and administrator: The council authorized the city to join PARS' combination (pension + OPEB) Section 115 trust. PARS will provide trust administration; U.S. Bank will act as trustee and PFM Asset Management is named as investment sub-advisor for indexed investment options.
- Funding authorization: The council authorized transferring up to $12,000,000 from the city's existing pension and OPEB reserve into the Section 115 trust. Lee said there are no set-up costs and that PARS's fee schedule is tiered and decreases as assets grow.
- Investment approach: Staff recommended beginning with PARS' index-based (passive) platform and selecting a conservative or balanced allocation; the council did not specify an immediate reallocation strategy beyond authorizing the trust and initial funding.
Council discussion and public comment
Council members asked about monitoring and reporting frequency, fees and how quickly an investment selection would be made. Rachel Saunders of PARS and an investment representative from PFM participated by Zoom to answer technical questions about reporting cadence and portfolio options. Lee said monthly and quarterly statements, plus an annual review, would be available; investment values change daily but staff will provide periodic reports and a fuller update six months after funding.
Public comment included support for the city taking additional steps to stabilize pension costs. No members of the public spoke in opposition at the meeting.
Outcome
The council adopted two resolutions: one to join PARS' trust program and one to authorize carrying forward and transferring up to $12,000,000 from the pension and OPEB reserve into the new Section 115 trust. The motions passed unanimously (5-0).
Ending
Staff said they will return with the trust documentation, complete account setup with U.S. Bank and meet with PFM to finalize the initial investment allocation. The council asked for at least one progress update within six months of the initial funding.
