Staff Report
PREPARED BY: STEPHEN CONWAY
FINANCE DIRECTOR
Reviewed by: Town Manager, Assistant Town Manager, and Town Attorney
110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 08/15/2017
ITEM NO: 3
ITEM NO: 11
DATE: AUGUST 8, 2017
TO: MAYOR AND TOWN COUNCIL
FROM: LAUREL PREVETTI, TOWN MANAGER
SUBJECT: IRS SECTION 115 TRUST PROVIDER:
A. APPROVE THE RECOMMENDATION OF THE FINANCE COMMITTEE TO
SELECT PUBLIC AGENCY RETIREMENT SERVICES (PARS) AS THE IRS
SECTION 115 TRUST PROVIDER FOR THE TOWN OF LOS GATOS.
B. AUTHORIZE THE TOWN MANAGER TO ENTER INTO AN AGREEMENT
WITH PARS TO SERVE AS THE IRS SECTION 115 PENSION TRUST
PROVIDER FOR THE TOWN OF LOS GATOS.
C. ADOPT A RESOLUTION ESTABLISHING THE PUBLIC AGENCIES POST-
EMPLOYMENT BENEFITS (PENSION) TRUST ADMINISTERED BY PARS.
RECOMMENDATION:
1. Approve the recommendation of the Finance Committee to select Public Agency
Retirement Services (PARS) as the IRS Section 115 Trust provider for the Town of Los
Gatos.
2. Authorize the Town Manager to enter into an agreement (Attachment 3) with PARS to
serve as the IRS Section 115 Pension Trust provider for the Town of Los Gatos.
3. Adopt a resolution (Attachment 4) establishing the Public Agency Post-Employment
Benefits (Pension) Trust administered by PARS.
REMARKS:
On May 12, 2017 the Town issued a request for proposals for IRS Section 115 providers. The
Council Finance Committee met on Monday August 7, 2017 to discuss the proposals submitted
and to consider staff’s recommendation to select PARS as its Section 115 Pension Trust
provider. Attachment 1 contains the PARS proposal. Attachment 2 contains the report and
addendum to the Finance Committee.
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SUBJECT: IRS SECTION 115 TRUST
DATE: AUGUST 08, 2017
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REMARKS (cont’d):
Staff’s recommendation was based on the following:
Supplemental retirement plans and Section 115 Trusts are the core business for PARS.
The PARS multiple employer pension trust is established with over 80 California clients.
A private letter ruling for the trust has been received from the IRS.
PARS offers full services to administer the 115 trust with a dedicated Senior Consultant
and an investment management team available to assist with developing a
recommended separate Investment Policy for the trust.
The selected trustee, U.S. Bank Trust is a leader in the industry and the Town has
positive past experience with U.S. Bank Trust.
PARS multiple employer trust offers five different investment options with the ability to
customize the options should the Town desire to choose that path.
PARS has no minimum contribution levels and a 30-day termination notice period.
The Town Council’s Finance Committee voted unanimously to accept staff’s recommendation of
PARS to the full Town Council. As part of this agenda item, the Town Council is being asked to
consider authorizing the Town Manager to an agreement with the selected trust provider.
Once an agreement has been executed, staff will begin efforts to prepare for an investment
strategy/policy for review with the Finance Committee scheduled for October 2017 along with
discussing steps to develop a long term funding strategy.
The attached resolution refers to the Public Agency Post-Employment Benefits (Pension) Trust
because that is the legal name of the Trust as approved by the Internal Revenue Service in their
Private Letter Ruling dated 6/15/2015. Staff inserted “(Pension)” to differentiate this trust from
the Town’s other post-employment benefit trust for retiree health benefits administered by the
California Employers Retirement Benefit Trust.
Once the draft investment policy and goals for the trust have been proposed by the Finance
Committee and approved by Council, staff expects to bring forward a budget adjustment for
Town Council approval to appropriate funds in FY 2017/18 with a recommended funding source
for the initial deposit amount to the new pension trust. No amounts will be deposited in the
new pension trust until that time.
FISCAL IMPACT:
There is no direct fiscal impact or out of pocket cost to the Town of Los Gatos for the PARS
trust. Funding the trust will restrict the use of the funds that are transferred to the irrevocable
trust account.
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SUBJECT: IRS SECTION 115 TRUST
DATE: AUGUST 08, 2017
S:\COUNCIL REPORTS\2017\08-15-17\115 Trust Provider Agreement\Staff Report - IRS Sec 115 Trust Provider FINAL.docx 8/10/2017 3:47 PM SLL
FISCAL IMPACT (cont’d):
PARS’ fees for administration and investment advisory services are charged as a percentage of
assets (based on initial estimate of $1M the fees would be 25 basis points or 0.25% for
administration and 35 basis points or 0.35% for investment management totaling 60 basis
points or 0.60% annually) held in the trust. The fees will be paid from trust assets. Staff
anticipates annual investment earnings will be more than adequate to pay the annual fees.
Attachments:
1. IRS Section 115 Proposal from PARS
2. 8/7/17 Finance Committee Report and Addendum
3. PARS Administrative Services Agreement and PARS Trustee Investment Management Fee
Schedule
4. Resolution adopting PARS Trust