CalPERS pitches CERBT Section 115 trust as a way for agencies to prefund retiree benefits
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Summary
CalPERS staff outlined advantages of prefunding OPEB via Section 115 trusts: tax‑free investment earnings, potential higher discount rates that lower net OPEB liabilities, and financial reporting benefits under GASB 75. CalPERS said the CERBT has about $27 billion under management and nearly 600 participating agencies.
Katie Wynne, a customer outreach analyst in CalPERS’ Pension Contracts & Prefunding Programs Division, told employers that Section 115 trusts provide a voluntary prefunding option for other post‑employment benefits (OPEB) such as retiree health insurance.
"Section 115 trusts allow public agencies additional options to grow assets and aid in making defined benefits more affordable," Wynne said. She described three advantages of prefunding: the ability to earn tax‑free investment income in the trust, the potential to receive a higher actuarial discount rate (which lowers computed total OPEB liability under GASB 75), and the ability to offset net OPEB liability dollar‑for‑dollar with trust assets.
Wynne presented a prior school example in which an initial contribution of $153,000 produced investment income in under a year and where moving to a prefunding policy increased the valuation discount rate, lowering the employer’s reported net OPEB liability.
CalPERS noted it has administered the California Employers' Retiree Benefit Trust (CERBT) since 2007; the program manages approximately $27,000,000,000 in assets and serves nearly 600 contributing agencies. Wynne described available asset allocation strategies and the program’s all‑inclusive fee model (fees are charged only to assets in trust; recent fee rate adjustment was discussed). Employers interested in prefunding were invited to schedule consultations and to contact the CERBT team via the email address provided on the CalPERS site.
