PEBTrust is a multi-employer trust tailor-made for public entities, allowing them to prefund Other Post- Employment Benefit (OPEB) liabilities. Our trust is easy to join, simple to maintain, flexible, low-cost, and compliant with all regulations.
Investment authority for OPEB, and how it is obtained, often varies from state to state. Please contact PEBTrust@Hilltopsecurities.com for more information.
Public entities of all sizes are required by GASB 43/45 to report OPEB liabilities on their financials, placing the entire net OPEB liability on the balance sheet. This change would make unfunded OPEB liabilities even more prominent. Prefunding toward future OPEB costs such as retiree medical expenses can:
- Reduce balance sheet liabilities – the effect will be more significant under the new OPEB account rules.
- Reduce the long-term cost of providing benefits.
- Be a positive rating factor with rating agencies.
- Insulate employers from unexpected fluctuations in benefit costs, economic downturns, or natural disaster.
Creating your own trust for OPEB prefunding can be complex and time consuming. PEBTrust has many advantages over single-employer trusts and many other multi-employer trusts.
Simple execution — PEBTrust provides everything you need, including tax counsel, investment advisors, risk pool and IRS private letter ruling.
PEBTrust is a public entity — The majority of its board is selected by member employers.
Fast implementation — Start making contributions within one week after adoption — not several months.
Reduced expense — PEBTrust members typically pay lower fees through cost sharing.
Knowledgeable providers — All PEBTrust providers are knowledgeable about OPEB and public entities. Regulations are different for public sector OPEB than for private sector/ERISA plans, or defined contribution plans.
Vast investment management experience — In June 2014, the PEBTrust Board completed an RFP process and approved four prescreened investment advisory firms: Gregory W. Group, Meketa, Milliman, and Wells Fargo Advisors (Alpha Consulting). These firms have extensive experience with public sector clients. Collectively, they have pension or OPEB clients in 24 states, nearly half a billion in public sector OPEB assets, and $93 billion in pension assets under advisement (as of April 2014).
Flexibility — Each employer can select their own investment advisor, investment policy, asset allocation, and investments (e.g., mutual funds, exchange traded funds, stocks, bonds, REITs). PEBTrust’s separate accounts allow flexibility and preferred asset classes (e.g., green or local investing), and prohibited investments (e.g., tobacco, Sudan).
Separate accounts — Since its inception, PEBTrust was designed to prevent the pooling of different employers' investments, allowing investment flexibility, simpler reporting, and simpler audits. Separate accounts also prevent certain potential problems. At a different OPEB trust, pooling resulted in misallocation between employer accounts, which has taken considerable time and effort to attempt to rectify. Misallocation could result in contributions from one employer being used to pay another employer’s liabilities.
Real-time online data — Real-time account data is available online for planning, budgeting, and council or board meetings.
Additional safeguards — Your accounts are covered by the Securities Investor Protection Corporation (SIPC) and excess SIPC insurance. Cash is invested in an FDIC-insured sweep program.
Conflict avoidance — PEBTrust strives to avoid conflicts of interest in investments, administration, and performance reporting. Investment advisors and other providers are screened by PEBTrust and confirmed by its board of trustees.
No hidden fees — Trading costs are included in PEBTrust fees. There are no soft dollar arrangements, no securities lending fees (no securities lending at PEBTrust), and no fund of fund fees.
Compliance — Close attention has been paid to compliance with state and federal laws and numerous securities, banking, and audit company regulations.
Rollover from other OPEB trusts — Existing assets in a single employer or group OPEB Trust can be transferred to the PEBTrust.
Assistance with OPEB and investment education — We can help staff, councils and boards in the following areas: OPEB prefunding, OPEB trusts, GASB’s current and proposed accounting rules, investments, and review of actuarial studies. PEBTrust has experts on these technical topics, so that employers do not have to master these topics and continuously monitor for regulatory changes.
Texas risk pool — For Texas public entities, PEBTrust provides a risk pool with trustees, and trustee meetings. An investment authority for an OPEB trust can use a risk pool to make broad investments beyond the Texas Public Funds Investment Act.
Programs have certain limitations, and more details are available upon request. Some regulatory restrictions may apply.