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Del Norte County supervisors backed a proposal to transfer roughly $1 million out of a California Public Employees Retirement System-managed trust to a private firm after a representative assured them that the county wasn’t abandoning the state’s pension program.

Matt Spooner, senior consultant with Public Agencies Retirement Service (PARS), said Del Norte County wasn’t leaving CalPERS’ defined benefits program, which offers pension and other retirement benefits to its employees.

Instead, county officials are seeking to establish a trust fund with PARS that would offer greater flexibility when it comes to paying  its share of those pensions and other retirement benefits, Spooner told supervisors Tuesday.

“We’re not providing the defined benefit program — that still comes from CalPERS,” he said. “But how does the county fund that type of a program? Our program, due to its greater returns over one-, three-, five- and 10-year intervals has become a premier way for counties to fund that type of obligation for their people and their employees.”

The Board of Supervisors unanimously approved establishing the Section 115 Trust with PARS, though District 2 Supervisor Valerie Starkey asked Spooner for a more comprehensive presentation in the future.

“While we may understand it from behind the scenes, it’s always good to have these types of presentations [so] the community can see it as well,” Starkey said.

County Administrative Officer Neal Lopez said he would bring a resolution to transfer that $1 million in post-employment benefits funding to the PARS trust at a future Board of Supervisors meeting. He said those funds also include additional money that Del Norte had received as a result of insurance premiums that had been overpaid.

Lopez echoed Spooner’s comments about CalPERS pension program, saying that the discussion on Tuesday was about paying for that program.

“Establishing a savings account will allow for greater flexibility for the county to pay their employees for this benefit that is offered through CalPERS,” he said.

The Board’s decision comes nearly a year after supervisors adopted a pension management policy last March. The matter was also addressed in the county’s 2024 strategic plan and in its 2024-25 budget, Lopez said.

Representatives from the county’s Proactive Financial Management Technical Advisory Committee have been vetting PARS for about two years, Lopez’s Board report states. Investments in the Section 115 Combination Trust the firm offers are held by US Bank as the trustee and are managed by PFM Management, according to the report.

According to District 3 Supervisor Chris Howard, who sits on the Proactive Financial Management committee, the CalPERS pension and other post-employment retirement benefit trusts regularly under perform.

He explained that if CalPERS’ investments aren’t performing at 6.8 percent interest, it’s up to Del Norte County to backfill it.

“Let’s say [CalPERS] only earns 4 percent on investments, the county has to make it up to get to 6.8 percent with our funds, which creates an unfunded liability that we continue to sit on,” Howard told Redwood Voice Community News. “We want our investments to perform so we can pay down our [other post employment benefits] and other unfunded liabilities.”

According to Spooner, the cost for the service PARS will provide to the county varies based on a sliding scale based on how much money the county places in its trust.

“If you have $1 million, the fees will be slightly higher than if you have $100 million in that account,” he said, adding that PARS works with more than 40 counties in California. “If the county wants to delve more into what those potential fees may look like by various amounts, that’s also something that may have previously been shared out with the county, but we can absolutely revisit [it] at some point in time in the near future or, once again, re-share with the Board and also with the public.”

Spooner said that since CalPERS is a large entity working with many different public agencies, it doesn’t offer the “same touch point” his firm does. If the Board agreed to work with PARS, it would have a one-on-one relationship with an investment manager, he said, who can help the Board of Supervisors understand when it may need to tap into that trust as well as what risks it would be able to tolerate.

On Tuesday, Howard said he and his colleagues have been discussing the challenges that come with paying for its unfunded liabilities for “four years or longer.” He said he didn’t want to award “underperforming portfolios,” and that the State of California often makes poor investments, including poor social investments that he doesn’t agree with.

Howard also asked Spooner to speak to the ability of the county to be able to tap into that trust fund if it gets into a pinch.

“… let’s say we have a natural disaster all of a sudden, and we have a need for some of that income that we squirreled away to pay down that unfunded liability,” Howard said. “We have the flexibility to handle that income that is sitting in that trust account.”

Spooner confirmed that statement, referring to the trust fund as a savings account on steroids.