Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Pensions topic
No spam. Unsubscribe anytime.
Mount Shasta council adopts pension management policy after presentation on CalPERS exposure
Summary
Council approved a pension management policy directing annual reviews and tools such as a 115 trust and refinancing to reduce the city’s long-term CalPERS liability; the policy passed unanimously.
The Mount Shasta City Council on a unanimous vote adopted a pension management policy after a detailed presentation from a municipal adviser on the city’s CalPERS liabilities.
The policy directs staff to review pension liabilities annually and consider a mix of tools — including refinancing existing unfunded liabilities and using a 115 trust — to mitigate the city’s exposure to CalPERS’ assumed 6.8% return and to target an 85% funded ratio.
Andrew Flynn, a registered municipal adviser with California Municipal Advisors, told the council that CalPERS sets a long-term assumed investment return that influences both normal contributions and amortization of unfunded liabilities. Flynn said the city’s objective in the policy is to build a disciplined, year‑to‑year framework for smaller, incremental actions and occasional larger transactions to reduce the long-term cost of the unfunded liability.
Flynn described a 115 trust as an IRS‑authorized vehicle that can hold dollars dedicated to pension obligations and provide flexibility: funds in the trust can be used to pay down unfunded liabilities or to cover normal contributions if the trust becomes overfunded. He said the trust can act as a buffer against market swings but warned that fees and governance must be managed within a clear policy.
During public comment, Johanna Altorfer raised questions about the 115 trust’s governance, fees and risks, citing concerns about limited employee control and administrative costs. Flynn replied that those concerns are why the council should adopt an overarching policy and select low‑fee providers; he noted CalPERS and several established providers offer lower‑fee options.
Council members asked how a municipality might instead borrow to pay down pension obligations and Flynn explained that borrowing to pay pensions is taxable under IRS rules but can still be economically viable and is one of the tools the finance committee recommended exploring. He emphasized pensions are a rolling obligation — new liabilities accrue as employees earn benefits — so the policy is intended to keep the city proactive rather than to “solve” the liability once and for all.
A motion to adopt the pension management policy carried 5-0.
The policy calls for staff to report pension metrics and recommended actions each budget cycle, to consider refinancing where appropriate, and to evaluate creating or using a 115 trust to smooth funding over time.
