Local governments, school districts, and authorities that provide health insurance and other post employment benefits (OPEB) to retirees are required by current governmental accounting standards to quantify and report the future cost of the benefits in their financial statements. In order to avoid reporting potentially large and increasing liabilities, highly-rated governments in Virginia typically choose to fund their OPEB liabilities as they accrue. For those that fund OPEB, the VACo/VML Pooled OPEB Trust is, hands down, Virginia’s most popular investment vehicle.
The requirement to report OPEB liabilities within government financial statements began with Governmental Accounting Standards Board (GASB) Statement 45. This Statement, which was phased-in during fiscal years 2008-2010, provided for the gradual recognition of existing OPEB liabilities over an extended period of up to 30 years. More recently, however, GASB 75 was issued, replacing the gradual recognition of liabilities with a requirement that the entire unfunded liability must reported beginning in fiscal year 2018. Moreover, the net OPEB liability must be reported on the face of the financial statements. The new rule has potentially significant ramifications for the calculation of a government’s “Net Position.”
Since ignoring OPEB liabilities can be an indication of financial weakness, the vast majority of highly-rated governments in Virginia opt to fund their liabilities as they accrue. Governments also benefit because invested funds generate earnings that can help reduce the long-term cost of OPEB by as much as 50%.
The VACo/VML Trust offers a streamlined and cost-effective investment vehicle specifically designed for OPEB. As the only pooled OPEB trust fund in Virginia, the VACo/VML Trust offers participants professional investment management on par with the services provided by major pension funds. The VACo/VML Pooled OPEB Trust is also the simplest and lowest cost option available — and you avoid the expense and complexity of forming a separately-managed trust fund.
With invested assets of approximately $800 million, the VACo/VML Pooled Trust is among the largest of its kind in the nation. Investment decisions are made by a Board of Trustees composed of local officials elected at an Annual Meeting of participants. The investment consultant is Asset Consulting Group based in St. Louis, Missouri.
The VACo/VML Pooled OPEB Trust offers:
- Access to the best performing investment funds in the nation, including those with high minimum investment requirements applicable to major institutions;
- A more diversified portfolio with lower expected volatility;
- Leading professional investment advisor and managers—providing sophisticated expertise and research capabilities to help guide investment decisions;
- The lowest cost option, offering cost sharing and economies of scale;
- Directed and controlled by local government officials – i.e., participants elect trustees who oversee the Trust.
For more information, or to join the Pooled Trust, select the following links: