Investing in the SRBTF

A detailed guide on how to prepare your entity's application to invest OPEB trust funds in the SRBTF.
Most entities are approved after 90-120 days.

Jeffrey Moyer

The Details of Investing in the SRBTF

What you need for Investing in the SRBTF

The State Retiree Benefit Trust Fund (SRBTF) is an investment vehicle established by Massachusetts law that enables political subdivisions of the Commonwealth to invest funds set aside to fulfill other-post-employment-benefits (OPEB) for retirees such as healthcare or dental coverage in retirement. Governmental accounting regulations prevent commingling these assets with traditional retirement investment funds, but the SRBTF allows for these eligible state and municipal entities a “turn-key” option to set aside money to be invested through the Pension Reserves Investment Management Board (PRIM). PRIM invests over $71 billion in assets, and through this partnership with the SRBTF, delivers the same level of professionalized investment services for OPEB pre-funding.

Advantages to Investing in PRIM through the SRBTF:

  • PRIM is not a private firm, and as such, has no incentive to gather assets or profit from offering its services to state and local retirement systems.  PRIM’s interests, and its clients’ interests are totally aligned.  
  • Assets are invested along with retirement funds (annualized return of 9.6% since inception on 1/31/1985 through December 31, 2017).
  • Access to a wide fund diversity that few institutional investors can match.
  • PRIM does not charge fees. Actual expenditures of the PRIM Board and the PRIT Fund are passed through to each participant in the PRIT Fund on a pro rata basis.
  • Through economies of scale the pro rata share of expenditures is approximately 54 basis points which is PRIM’s management fee expense.
  • Support from PRIM’s dedicated client support team along with monthly statements and detailed financial reporting.
  • PRIM’s talented award-winning investment and oversight structure will keep your entity’s investment growing.

 

More details on PRIM's investment strategy can be found in their annual CAFR report, including the "Investment Policy Statement" on page 98-100.

For assistance in your application or questions on any of this information, please contact either Jeffrey Moyer or Francesco Daniele. If you would like to begin the process of joining the SRBTF on behalf of your entity, we encourage you to reach out or to fill out this brief form so that we can better direct our response. 

 

Fees for Investing in the SRBTF

Other than investment fees mentioned above, there are no fees or costs associated with applying to invest in the SRBTF. 

How to apply Investing in the SRBTF

In order for your organization to invest in the SRBTF, you must follow the steps outlined in the law as well as the SRBTF Board Policies and Procedures.  This page will outline these steps in brief and link to all relevant forms, though entities seeking to invest in the SRBTF should conduct their own full diligence on the law and seek appropriate legal or investment advice. Please see our checklist for a full list of all documents that your entity is required to submit with your application. If you have questions about this process or would like to arrange a presentation by PRIM staff, please contact Jeffrey Moyer or Paul Todisco.

Next steps for Investing in the SRBTF

  1. Step 1- Accept Chapter 20 & Establish OPEB Fund

    Entities seeking to invest in the SRBTF must first accept MGL Chapter 32B, Section 20, which governs the establishment and activity of OPEB Funds. If the political subdivision had previously accepted a different version of Section 20 to establish an OPEB fund before 11/06/16, they must vote to re-accept as part of this process. This action must be taken by a city council, town meeting, board, or other governing body as appropriate, and this sample language may be used to effect this action. This resolution allows the entity to establish an OPEB Trust Fund for the organization, and the statute permits the OPEB Trust Fund to be governed by a single Trustee or a Board of Trustees designated by the organization in accordance to statutory requirements. 

    All approved votes and resolutions made during this process should be included as part of the entity’s submission and certified as true.

  2. Step 2- Adopt an OPEB Funding Plan

    SRBTF Board policies require a minimum initial investment of $100,000, although the Board will consider smaller investments given appropriate context and justification. We recommend submitting a Funding Plan with the application that includes this initial investment and any other contributions that the entity will be making in the coming years. 

    Entities are encouraged to provide certified documentation of prior OPEB appropriations during the submission process. 

  3. Step 3- Adopt a Declaration of Trust

    Trustee(s) appointed by the governmental unit must meet and adopt a Declaration of Trust in accordance with the statutory requirements, as well as agree to invest assets into the SRBTF. These votes should be recorded and signed by all trustees and filed with an incumbency certificate to be included in the entity submission.   

    The Declaration of Trust must be filed with the entity's clerk and executive official and becomes effective 90 days after execution if no objections are made. 

  4. Step 4- Sign Investment Agreement with SRBTF

    Once the OPEB Trust has been established and given the authority to invest in the SRBTF,  the Trustee(s) can then proceed to sign the investment agreement. You should submit a signed agreement with your application, and an executed version will be returned to you once the Board approves the application.

  5. Step 5- Submit a Counsel Letter

    The SRBTF requires all entities applying to invest to submit a letter from legal counsel representing the entity that all required steps to effectuate the application have been properly taken and that all legal documents are valid and the OPEB Trust has the authority to invest in the SRBTF. Sample language is available for this action. Given that this step requires counsel to review all votes and actions taken by trustee(s), this should be one of the last steps taken.

  6. Step 6- Submit All Documents to SRBTF

    Before your entity’s application can be approved by the SRBTF Board, we must have our legal counsel review and certify that all appropriate steps have been taken. In order to be voted upon, submissions must be received one week prior to the next Board meeting. At the meeting, SRBTF counsel will report on each application and the full board will take a vote whether to approve the submission. If approved, the Board Chair will sign Investment Agreements for all accepted entities.

  7. Step 7- Transfer Beginning Balance to PRIM

    If an entity is approved at a Board meeting, PRIM staff can then process the first investment into the SRBTF. Wire instructions and other details will be made available to you at this time through PRIM’s client service team.  

More info about Investing in the SRBTF

Frequently Asked Questions- 

What are some of the benefits to investing in the PRIT Core Fund through the SRBTF?

PRIM and PRIT were created for the sole purpose of reducing the state’s unfunded pension liability through modern investment portfolio management, and investment of OPEB funds in the PRIT Core Fund is a natural adjunct to PRIM’s retirement asset-focused mission.  Because of its asset size, PRIM enjoys economies of scale, and can offer participation in the PRIT Core Fund to its investors at fees that are significantly lower than the investors could get on their own.  Participants that invest in the PRIT Core Fund also have access to alternative investments that may be unavailable to smaller investment funds, such as private equity (venture capital and special equities or buyouts), directly owned private real estate, private debt, and hedge funds, which mitigate overall portfolio risk because of their low correlation to traditional stock and bond portfolios.

Does an OPEB fund trustee or board of trustees have the option to invest in separate asset classes of the PRIT Core as an alternative to investing in the total PRIT Core?

No. This type of investment, which is called “Segmentation” by PRIM, and made available to participants investing pension assets in the PRIT Fund, is not an option available to participants investing OPEB assets in the SRBTF at this time.  

What if my governmental unit had special legislation approved to establish an OPEB liability trust fund prior to the enactment of the provisions contained in Chapter 218 of the Acts of 2016?

A governmental unit that had already established an OPEB liability trust fund prior to the enactment of Chapter 218 of the Acts of 2016 may invest in the SRBT fund pursuant to the provisions of Section 20 upon the acceptance of the provisions of Section 20, and approval by the SRBT Fund Board.  Section 20(l) establishes the votes and procedures to be followed by the various governmental units for acceptance of the statute.  A governmental unit that is already participating in the SRBTF as of the effective date of Chapter 218 is grandfathered.

Is the SRBTF a Qualified OPEB Trust under GASB 43?

Yes. The SRBTF is a qualified OPEB trust.

Are there any annual minimum or maximum contribution requirements?

The SRBT Fund Board of Trustees has set a minimum investment requirement of $100,000 or such other amounts as may be approved by the SRBT Fund Board at the request of the governmental unit.  The documentation accompanying an application must include a justification acceptable to the SRBT Fund Board for an initial investment amount below the minimum level. 

We have some funds currently invested in bonds and stocks.  Can we transfer those assets “in-kind.”?

The SRBT will only accept cash transfers into the SRBTF.  Securities, such as stocks and bonds, must be liquidated before any transfer to the SRBTF takes place. There is no required timetable for entities to transfer funds to the SRBTF.

Where can I find information on the historical returns of the PRIT Core Fund, including comparisons to market indices, and peer trust funds?

Detailed current and historical information on the PRIT Core Fund and the PRIM Board can be found on the PRIM website

Can the SRBTF provide a sample Declaration of Trust?

The SRBTF Board is not able to provide a sample document for this requirement. Entities are advised to engage their own counsel to draft a declaration suitable for their own use.

Where do I submit the documents and whom do I contact for more information?

You may contact Jeffrey Moyer, SRBTF Project Coordinator or Francesco Daniele, PRIM Senior Client Services Officer. Francesco is also available to meet with you or your local officials at any time to discuss the benefits of investing in the SRBTF, please contact the SRBTF or Francesco directly to arrange an in-person meeting. 

Downloads for Investing in the SRBTF

Contact for Investing in the SRBTF

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