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AN ORDINANCE ESTABLISHING A FUNDING FRAMEWORK THAT USES BOTH ANNUAL APPROPRIATIONS AND THE OPEB TRUST FUND TO PAY THE COST OF OTHER POST-EMPLOYMENT BENEFITS.
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CITY PROPOSAL:
The city of Duluth does ordain:
Section 1. that Chapter 20 of the Duluth City Code 1959, as amended, is hereby amended by adding a new Article IV thereto which reads as follows:
Article IV. Funding Retiree Healthcare Costs.
Sec. 20-36 Policy and purpose.
Minnesota Statues, Section 353.95 provides for the establishment of an irrevocable other post-employment benefits ("OPEB") trust fund to finance payments owed by the city on behalf of retired employees for health insurance costs. Since the establishment of the city's OPEB trust fund in 2007, the City has accumulated significant assets from the investment of annual contributions made into the fund.
In order to provide budgetary certainty, predictability and stability, while ensuring the viability and sustainability of the retiree health benefits for eligible employees and retirees, the city is seeking to create provide a long-term funding framework that protects the value of the City's OPEB trust while at the same time providing financial resources sufficient to meet future retiree insurance obligations. The assets accumulated in the trust, in conjunction with the current interest rate environment, provide the City with an opportunity to purchase fixed income investments through the State Board of Investment that will guarantee future cash flows. The future cash flows reduce the city's dependence on annual appropriations and pooled investment earnings to fund future retiree insurance costs.
Sec. 20-37. Definitions
(a) OPEB trust fund. An irrevocable trust fund established pursuant to Minn. Stat. Sec. 353.95 to fund and pay for post-employment benefits;
(b) Pooled portfolio. All city cash balances that are pooled and invested to maximize investment income. The pooled portfolio excludes special purpose portfolios suc...
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