BEST PRACTICES: Establishing and Administering an OPEB Trust Flashcards
Governments should create a qualified trust fund to prefund OPEB obligations.
What is the primary recommendation of GFOA for governments with substantial long-term OPEB liabilities?
To prefund their OPEB obligations through a separate trust fund.
What are the main considerations for employers when deciding the scope of an OPEB trust?
The scope of the trust, subject to applicable federal and state law, primarily providing for the prudent investment of plan assets.
What are the three main options for the legal form and governance structure of an OPEB trust?
Voluntary employees’ beneficiary association (VEBA), Section 115 trust, and 401(h) trust.
What is a Section 115 trust?
An IRC section 115 trust is established as an integral part of a governmental entity to perform an essential government function, with its governing body or oversight committee responsible for administration.
What are the fiduciary roles necessary for trust administration?
Trust administrator, custodian, and investment advisor.
What must governments obtain before creating VEBA or 401(h) trusts?
An Internal Revenue Service (IRS) determination letter.
What GASB Statement must trusts conform to, to ensure assets held can offset plan liabilities?
GASB Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans.
How should investment service providers be selected for an OPEB trust?
Through a comprehensive competitive selection process, evaluating full fee information and potential conflicts.
What are the key considerations when participating in a multi-employer trust?
Trust’s legal documentation, structure, and governance, tax considerations, governance processes, and investment features.
What should the investment policy of an OPEB trust typically cover?
Permitted investments, targets and ranges for asset allocations, and guidance on the employer’s preferences for active versus passive investment strategies.
