Multiple-Employer Structure

The multiple-employer structure provides economies of scale with investment, administrative, legal, compliance and cost efficiencies. There are only a few collective, IRS-approved OPEB trusts available. Such trusts have some of the advantages of a CalPERS or CalSTRS pension system, as participating agencies benefit from accumulating assets together for investment and administrative purposes. Investment and other costs decrease with asset accumulation. In addition, with a multiple-employer trust that has received an IRS Private Letter Ruling on a multiple-employer basis, there is no need for each entity joining the trust to undergo this long and costly process.  Each individual agency that joins the trust is covered by the PLR as soon as the documents are signed and the trust is implemented.  Finally, another advantage of the multiple-employer structure is the ease and speed with which and entity can join the trust and begin funding.  Because the trust is already designed, already has a covering PLR, and provides signature ready trust documents, the implementation process is streamlined and an entity can quickly approve and join the trust.

Individual-Employer Structure

To set up an individual trust an entity could hire its own attorney, design its own trust, obtain its own PLR, and administer its own trust. This approach, however, may prove to be staff intensive and costs can be higher than with using a multiple-employer structure since providers would expect lower asset accumulations.  An individual trust program is better suited for entities that seek maximum flexibility and are willing to incur legal costs if necessary for formal IRS approval of the trust’s tax qualified status. This approach may work better for larger public agencies with higher asset amounts that do not need the economies of scale associated with a multiple-employer structure and can absorb the additional legal and IRS costs if needed and are not in a hurry to begin funding. An individual trust allows for more flexibility in that trust documents can be changed by the without concurrence of other agencies (though this is rarely an issue with multiple-employer trusts). Any changes still must be reviewed by the trustee and in compliance with state and federal law. An individual trust allows for individualized reporting and administration as well. 

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The following is a table that illustrates some of the differences between the two trust types: