No preview available
Resolution No. 2023-58 | OPEB Section 115 Trust Funding and $500,000 Contribution | Adopted 10/02/2023 RESOLUTION NO. 2023-58 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GILROY ESTABLISHING ANOTHER POST EMPLOYMENT BENEFIT (OPEB) SECTION 115 TRUST ADOPTING AN OPEB FUNDING POLICY AND AUTHORIZING A ONE- TIME CONTRIBUTION OF $500,000 FROM THE GENERAL FUND (100) WHEREAS, the City of Gilroy, a municipal corporation and charter city duly organized and existing under and pursuant to the Constitution and laws of the State of California (“City”), is authorized to enter into contracts and agreements for the benefit of the City; and WHEREAS, the reasons supporting this Resolution are set forth in detail in that certain City Council Staff Report submitted for City Council consideration at its meeting of October 2, 2023 for presentation, discussion, and direction, submitted to the City Council by the City Administrator (the “Staff Report”), the contents of which Staff Report are incorporated herein by this reference; and WHEREAS, an OPEB Funding Policy has been developed for the City of Gilroy to provide guidance in the funding a Section 115 Trust; and WHEREAS, the consideration by the City Council of the adoption of this Resolution has been duly noticed pursuant to applicable laws and has been placed upon the City Council Meeting Agenda on the date set forth in the Staff Report or to such date that the City Council may have continued or deferred consideration of this Resolution, and on such date the City Council conducted a duly noticed public meeting at which the City Council provided members of the public an opportunity to comment and be heard and considered any and all testimony and other evidence provided in connection with the adoption of this Resolution; and WHEREAS, the City Council determines that adoption of this Resolution is in the public interest. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Gilroy does hereby: 1. Approve the establishment of a Section 115 Trust for OPEB and authorizes City Administrator or his/her designee to serve as the plan administrator and executive any documents necessary to establish the Section 115 Trust with Public Agency Retirement Services (PARS) for purposes of OPEB; and 2. Approve an initial one-time contribution of $500,000 to the Section 115 OPEB trust from the City’s General Fund balance and related budgetary appropriation. 3. Approve the attached Exhibit A – OPEB Funding Policy. Resolution No. 2023-58 OPEB Section 115 Trust Funding and $500,000 Contribution City Council Regular Meeting | October 2, 2023 Page 2 of 2 PASSED, APPROVED, AND ADOPTED by the City Council of the City of Gilroy at its meeting held on this 2nd day of October 2023 by the following vote: AYES: COUNCIL MEMBERS: ARMENDARIZ, BRACCO, CLINE, HILTON, MARQUES, TOVAR, BLANKLEY NOES: COUNCIL MEMBERS: NONE ABSTAIN: COUNCIL MEMBERS: NONE ABSENT: COUNCIL MEMBERS: NONE APPROVED: Marie Blankley, Mayor ATTEST: _______________________ Thai Nam Pham, City Clerk  CERTIFICATION  I, Thai Pham, City Clerk of the City of Gilroy, California, do hereby certify that the foregoing is a true and correct copy of Resolution No. 2023-58 adopted by the City Council at the meeting held on the 2nd day of October 2023. WITNESS MY HAND AND THE SEAL OF THE CITY OF Gilroy. DATE: Thai Pham, City Clerk Marie Blankley (Oct 4, 2023 15:05 PDT) Marie Blankley Oct 4, 2023 Page 1 EXHIBIT A OPEB FUNDING POLICY Purpose To assure that the City’s Other Post Employment Benefits (OPEB) plan is financially sustainable, the program should accumulate financial resources to begin prefunding the City’s OPEB liabilities with an objective to reduce the liability and ongoing contribution requirements. Background The City’s OPEB plan is a single-employer defined benefit plan administered by the City. The plan provides healthcare benefits to eligible retirees and their dependents through the California Public Employee’s Retirement System healthcare program (PEMHCA) and a post-employment retention/recognition incentive benefit program (RRIB) which requires proof of medical coverage. Benefit provisions are established and may be amended through agreements and memorandums of understanding between the City, its management employees and unions representing City employees. For all retirees under the plan, the City contributes the PEMHCA minimum contribution on the unequal method for eligible retirees and surviving spouses. No dental, vision or life insurance benefits are provided. The RRIB incentive benefit is for certain bargaining units’ retirees that retired prior to July 1, 2014 (police and fire employees), July 1, 2015 (management employees) or November 1, 2015 (AFSCME, miscellaneous employees). Prior employees that retired on or before these dates and were fifty (50) or more years of age (police and fire employees) or fifty-five (55) or more years of age (AFSCME and management employees) and previously retired from City service with a minimum of fifteen (15) years of service with the City are eligible to receive this postretirement benefit until reaching the age of sixty-five (65). Additional tiers of years of service were added to the plan to qualify for benefits. This supplemental plan has been discontinued for new participants after the dates noted above. The employer contribution under RRIB provides a temporary monthly annuity (to age 65) up to $300 per month based on service at retirement to eligible retirees. All classes of employees are covered, if eligible. The City offers a Health Reimbursement Plan (PEMHCA) for new retirees after the dates noted above. Policy It is the policy of the City to fulfill its obligation to maintain fiscally responsible management practices and to ensure that promised retirement benefits are funded. To that end, the City will meet its OPEB funding obligations as follows: 1. Section 115 OPEB Trust: The City will establish and maintain a Section 115 OPEB Trust. Assets in the Section 115 OPEB Trust may be used only for OPEB related costs and at the direction of the City Council. 2. Allocation from Annual Year-end Savings: Upon meeting the City’s General Fund Reserve Policy of 30% (20% for operations, and 10% for economic uncertainty), up to 25% (twenty-five percent), of all future year-end savings in General Fund expenditures shall be transferred to the Section 115 OPEB Trust subject to approval of the City Council. The City has a separate Pension Funding Policy (Resolution 2022-16) which also provides for allocation from annual year-end savings of the General Fund. Both policies should be reviewed in conjunction when calculating the annual year- Page 2 end savings allocation. Consideration shall be given to ensure that contributions to Section 115 trusts for OPEB and Pension are made to maintain trust balances in equal percentages in respect to their unfunded liabilities at that point in time. Special considerations shall be made by the Finance Director each year when determining potential year-end savings so as not to leave any General Fund supported funds (Worker’s Compensation and Liability Insurance Fund) with a negative fund balance. 3. Additional Discretionary Payments: Nothing is this policy shall preclude the City Council from authorizing additional discretionary payments at any time and in any amount, to the Section 115 OPEB Trust which would further reduce the OPEB liability and future contributions. 4. Biennial Actuarial Valuations and Actuarially Determined Contributions (ADC): The City will engage an OPEB actuary to determine the City’s ADC based on biennial actuarial valuations. The ADC will include the normal cost for current retirees and amortization of the unfunded liability. The City will review the valuations to validate completeness and accuracy of employee census data and the reasonableness of the actuarial assumptions. The City’s will continue to budget for contributions for the pay-go costs of OPEB for current retirees and the section 115 trust contributions will accumulate financial resources to offset the OPEB liabilities and reduce future contributions. 5. Fiscal Emergency: In the event of an economic hardship, or other unanticipated fiscal emergency, the City Council may make an emergency declaration to reduce the annual transfer to the section 115 trust, only if the existing 10% economic uncertainty reserve in the General Fund is projected to be depleted. This declaration will only apply to the fiscal year in which it was made. Ongoing fiscal challenges will require a second or third emergency declaration. 6. Periodic Review of the Policy: Funding OPEB requires a long-term plan, as such, the City will review this policy at a minimum biennial to determine if changes to the policy are warranted to ensure adequate resources are being accumulated to the OPEB benefits.  CERTIFICATE OF THE CLERK  I, THAI NAM PHAM, City Clerk of the City of Gilroy, do hereby certify that the attached Resolution No. 2023-58 is an original resolution, or true and correct copy of a city Resolution, duly adopted by the Council of the City of Gilroy at a Regular Meeting of said held on Council held Monday, October 2, 2023, with a quorum present. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Official Seal of the City of Gilroy this Wednesday, October 4, 2023. ____________________________________ Thai Nam Pham, MMC, CPMC City Clerk of the City of Gilroy (Seal)