Board debates management of post-retirement health care fundsMembers of the Cloquet School Board heard from five different financial management companies at their July 9 meeting – all vying to administer the district’s Other Post-Employment Benefits (OPEB) trust.
By: Jeff Papas, Pine Journal
Members of the Cloquet School Board heard from five different financial management companies at their July 9 meeting – all vying to administer the district’s Other Post-Employment Benefits (OPEB) trust.
That trust, which is designed to pay for post-retirement health care costs for certain employees, was funded by a bond sale and contains just over $6 million. The trust is separate from the district’s general fund and must remain so by state law.
However, the current low-interest rate environment for fixed-rate investments has prompted the district to explore the possibility of utilizing a different fund manager.
Earlier this spring, the board voted to open the interview process to all interested and qualified parties. On Monday, the board heard from five different companies:
- Split Rock Private Trading and Wealth Management of Cloquet, Duluth and Virginia
- Ameriprise Financial of Cloquet and Minneapolis
- Wells Fargo of Minneapolis
- PFM Financial Management of Philadelphia
- PMA Financial Network of Naperville, Ill., which currently manages the district OPEB fund
Of the firms, the first two have no OPEB clients and PFM had previously made a presentation to the board.
Discussion ranged around the anticipated life of the fund – which is expected to be exhausted between 2024 and 2026 given various potential levels of expenditure – and how to best extend the life of that fund.
Presenters agreed that most school districts who have chosen a trust option to fund post-retirement benefits are highly risk-averse, a philosophy that was also noted at Monday’s meeting.
“We can’t lose any of this money (due to investment loss),” board member Duane Buytaert said. “That means it needs to be in fixed investments since we are dealing with public money.”
Board Chair Gary Huard said a vote on the issue will likely come at the board’s next meeting on Aug. 13.
In other board news, Superintendent Ken Scarbrough said discussions are under way to relocate the Kids’ Corner program after the board recently voted to fill Washington Elementary by adding an additional first-grade section. The filling of the building with classrooms will force the program to move.
Scarbrough said initial discussions were held with Queen of Peace School in Cloquet to house the program but the school had turned down the district’s proposal. Discussions are ongoing with another Cloquet group to house the program but Scarbrough would not confirm the name due to that group’s board not being fully aware of the details at press time.
Also, Cloquet Middle School Principal Tom Brenner reported to the board regarding damage to the school suffered during the July 3 storms.
Brenner said lightning knocked out the school’s air conditioning unit, which eventually forced its computer servers to shut down.
Due to building staff not being available over the holiday, Brenner discovered the issue when reporting back to work after the holiday. The servers, which are cooled by the air conditioning unit, shut themselves down automatically when the temperature rose so no damage was done to the units.
However, Brenner estimated a temperature of approximately 130 degrees existed inside the room when it was opened to outside air. The server is working normally.