HomeMy WebLinkAboutSB1413_20180911_LetterToNielsonCity of San Luis Obispo, Office of the City Council, 990 Palm Street, San Luis Obispo, CA, 93401-3249, 805.781.7114, slocity.org
September 18, 2018
The Honorable Edmund G. Brown
Governor, State of California
State Capitol, First Floor
Sacramento, CA 95814
VIA Email: Leg.Unit@gov.ca.gov
RE: Senate Bill 1413 (Nielsen) Public employees’ retirement: pension prefunding
Request for Signature
Dear Governor Brown:
The City of San Luis Obispo requests your signature on SB 1413 (Nielsen), which seeks to provide the California
Public Employees’ Retirement System (CalPERS) the authority to establish a Pension Prefunding Trust Program
(PPTP).
The PPTP will allow CalPERS to establish, in accordance with Section 115 of the Internal Revenue Code (IRC),
an irrevocable trust (115 Trust) through which eligible California public agency employers may prefund their
future annual pension contributions. T he PPTP will also provide an additional option for employers to pay down
their unfunded liability as part of a defined benefit plan. Under CalPERS, the PPTP will allow eligible public
agencies to direct funds into the 115 Trust that, once deposited in the trust, can only be used to meet pension
obligations.
Public agencies that utilize the 115 Trust established through SB 1413 (Calderon) would receive the benefits of
being able to offset their unfunded pension obligations by an amount equal to their balance in the trust, the ability
to smooth annual CalPERS rate adjustments by drawing on the trust, increase the diversity of their investments
beyond general fund investments, and potentially improve their bond ratings.
Although 115 Trusts are currently available to public agencies through the private market, the City of San Luis
Obispo would benefit from a CalPERS managed trust through reduced overhead and fees, streamlined transfers
from the fund to CalPERS to pay for pension obligations, an established working relationship, and the ability to
reflect dollars set aside in a trust to be reflected in our federal GASB (Governmental Accounting Standards
Board) reporting requirements.
Given the projected increases in pension costs resulting from a combination of investment losses,
actuarial adjustments, and reduced amortization periods, this additional tool would be a welcomed resource for
fiscally responsible cities like ours.
For these reasons, the City of San Luis Obispo respectfully requests your signature on SB 1413 (Nielsen).
Sincerely,
Heidi Harmon
Mayor
San Luis Obispo
cc: Senator Jim Nielsen senator.nielsen@senate.ca.gov
Dave Mullinax dmullinax@cacities.org
Meg Desmond, League of California Cities, cityletters@cacities.org