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Council backs staff recommendation to pursue Section 115 trust to smooth CalPERS payments
Summary
After a consultant presentation on Auburn’s CalPERS unfunded actuarial liability (UAL), council members agreed to direct staff to return with documents to establish a Section 115 trust to help smooth projected pension cost increases over the next 4–6 years.
City finance staff and a consultant briefed the Auburn City Council on March 9 about strategies to manage the city’s CalPERS unfunded actuarial liability, and council members supported staff’s recommendation to pursue a Section 115 trust.
Finance Director Gretchen Hoskins introduced the item and said the city has already realized savings from a 2021 pension-obligation bond. Mike Meyer of NHA Advisors explained the mechanics: Auburn makes two payments to CalPERS (normal cost and UAL amortization); recent CalPERS volatility and assumption changes drove a renewed UAL, reported in the presentation as approximately $11.6 million based on the 2024 valuation. Meyer said a Section 115 trust would let the city invest a pension reserve more flexibly and draw down funds in high-payment years to "smooth out the mountain peak" of payments. An alternative is an additional discretionary payment (ADP) directly to CalPERS, which reduces UAL but forfeits liquidity.
"The 115 trust strategy is sound," Meyer said, adding it preserves liquidity and lets staff adapt contributions annually as new actuarial reports arrive. Council members asked about the number of retired/former employees covered (Meyer cited about 89 total members across three plans), timing, and whether the city could withdraw funds in a fiscal emergency. Staff said the action tonight is directional: establish the authority to create a 115 trust and return with the resolution and implementation details during budget development.
Council consensus favored option 1 (Section 115 trust). Staff will prepare documents for a future consent calendar to formally create the trust and to recommend a payment schedule during the annual budget process.
