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SAM board hears PARS briefing: retiree-health trust has $36,000; actuary flags $828,000 OPEB gap
Summary
PARS presented SAM’s Section 115 trust status: account balance about $36,133, an OPEB liability of roughly $828,000 and an actuary-suggested annual contribution of about $94,000; PARS recommended considering a higher-risk asset mix to accelerate funding.
Jennifer, a PARS representative, told the SAM board the agency established a Section 115 trust in 2019 with an initial deposit of about $26,750 and has not made regular contributions since then. "You currently have about $36,000 in the OPEB bucket," she said, citing account earnings and a January 31 balance of about $36,133.
Jennifer said an actuarial valuation by Foster & Foster, measured as of June 30, 2024, shows roughly 25 people may be eligible for retiree health benefits and an other-post-employment-benefit (OPEB) liability of about $828,000, leaving the trust funded at around 3.8% of liabilities. "The actuary quotes a long-term expected rate of return of approximately 3.97%," she said.
Dennis Mullins, PARS investment presenter, reviewed market returns and the SAM portfolio. He said the board’s current moderately conservative allocation (about 30% equities, 70% bonds) produced a 2025 portfolio return near double digits. He recommended the board consider shifting to a higher-equity allocation given a 20–30-year time horizon. "I would suggest at least considering moving the portfolio to the moderate strategy, which is 50-50," Mullins said, noting there is no penalty to change the asset mix.
Board members asked whether SAM can make additional annual contributions in addition to the actuarially determined amount. Jennifer confirmed the trust is flexible: contributions are voluntary and may be made to reduce the unfunded liability. She cited the actuary’s suggested annual contribution of about $94,000 as what would be needed to meaningfully close the liability over 20–30 years but emphasized it is a recommendation, not a requirement.
The board did not adopt a funding commitment at the meeting. Directors and staff agreed the budget process at the next meeting is the appropriate time to decide whether to increase contributions or change investment strategy, with any change referred to the finance committee and then to member boards as needed.
The presentation materials referenced US Bank as the custodian, PFM as investment manager, and Foster & Foster as the actuarial firm. PARS staff said they are available to answer follow-up questions and to provide paperwork to change allocations if the board decides to do so.
