Simple, cost effective with a prudent
This question has been discussed and debated at length elsewhere, so we will limit our comments to a few basic points that we believe you should consider in your planning.
Loss of control of district funds deposited to the trust – It’s perhaps the only significant disadvantage, but it’s a very real concern. In our opinion, the best way to address this concern is through a funding policy that does not have full funding (a zero Unfunded Accrued Liability) as its goal. Our actuaries are currently recommending funding policies that would result in plans being funded up to about 70% of the Accrued Liability. For a number of very good reasons, this 70% target should allow a district to achieve all of the advantages of a trust while minimizing any possible disadvantages.
There may be considerations specific to your agency in developing a funding policy. Employers with declining enrollment and a level or shrinking property tax base should usually fund sooner rather than later. Districts with declining enrollment and a rapidly increasing local property tax base may wish to at least partly delay pre-funding until property tax revenues can provide a more accessible source of pre-funding the GASB 45 liability. Districts with both increasing enrollment and increasing revenue bases may wish to express the pre-funding commitment as a percentage of increasing payroll. Your actuary can work with you to establish a pre-funding pattern that best suits your needs.