MASTER OPEB TRUST DECLARATION BY THE BOARD OF INVESTMENTS FOR THE LOS ANGELES COUNTY EMPLOYEES RETIREMENT ASSOCIATION

Transcription

1 MASTER OPEB TRUST DECLARATION BY THE BOARD OF INVESTMENTS FOR THE LOS ANGELES COUNTY EMPLOYEES RETIREMENT ASSOCIATION This Master OPEB Trust Declaration ("Declaration") is made this thirteenth day of July, by the Board of Investments ("Trustee") for the Los Angeles County Employees Retirement Association ("LACERA") in order to establish the LACERA Master OPEB Trust (the "Master Trust") with reference to the following: WHEREAS. the County of Los Angeles (the "County") and the Superior Court of California. County of Los Angeles (the "Court") have established a retiree health and dental program C'OPEB Program") for the benefit of retired employees, as well as certain dependents and survivors of such employees; OPES WHEREAS, LACERA, In its capacity as an employer, participates In the County's Program; WHEREAS, the County established and maintains a trust (the "County Trust") pursuant to that certain Trust and Investment Services Agreement between the County and the Trustee datcd May 15, 2012, as amended by that certain First Amendment to the Trust and Investment Services Agreement dated May 31, 2016 (the "County Trust and Investment Services Agreement"). for the purpose of holding and investing assets to fund and pay benefits under the County's OPES Program, and such County Trust includes contributions from both the County and LACERA. in its capacity as an employer; WHEREAS, the Court established and maintains a trust (the "Court Trust") pursuant to that certain Trust and Investment Services Agreement between the Court and the Trustee dated J unc (the "Court Trust and Investment Services Agreement"), for the purpose of holding and investing assets to fund and pay benetits under its OPES Program; WHEREAS, Trustee is the trustee of both the County 'frust and the Court Trust (each, a "Participating Trusf') and provides trustee and related services for each Participating Trust pursuant to the County Trust and Investment Services Agreement and the Court Trust and Investment Services Agreement (each, a "Trust and Investment Services Agreement"); WHEREAS, the Trustee is authorized by each 'T'rust and Investment Services Agreement III co-invest and commingle all or any portion of the assets of the Participating Trusts with certain other assets. including through a group trust, and the Trustee is establishing this Master Trust by adoption of this Declaration in order to co-invest and commingle the assets of the Participating Trusts; NOW THEREFORE, the Trustee declares as follows: I. ESTABLISHMENT OF THE TRUST (a) Trust Purpose. 'fhe Master Trust is hereby established for the purpose of coinvesting and commingling assets of the Participating Trusts for investment purposes. -1-

2 (b) Trustee. The Trustee will act as trustee of the Master Trust, under the terms and conditions of this Declaration. (c) Master Trust Assets. The assets of the Master Trust shall consist of such money and property that may be transferred to or received by the Master Trust from Participating Trusts (which include assets received by the Participating Trusts from the County, LACERA and the Court), as and to the extent determined by the Trustee in its sole and absolute discretion under the terms of the Trust and Investment Services Agreements, together with any income on such assets, less all loss or diminution in value of such assets (the "Master Trust Assets"). 2. EST ABLISHMENT OF SUBFUNDS AND ACCOUNTS (a) Master Trust Subfunds. The Master Trust Assets may be invested collectively or may be divided into funds determined by the Trustee (each, a "Subfund"), and each Subfund shall be unitized to rctlcct the interest of each Participating Trust in each Subfund. The Trustee shall keep a record of the available Subfunds. Notwithstanding anything to the contrary, the Trustee in its sole and absolute discretion may at any time: (i) add to or subtract from the Subfunds maintained and offered as investment alternatives; (ii) change the investment description or purpose of any Subfund; (iii) allocate Master Trust assets to the various Subfunds; and (iv) transfer Master 'rrust Assets among such Subfunds. (b) Participating Trust Accounts. The Trustee shall maintain a bookkeeping accounting system whereby the beneficial interest of each Participating Trust in the Master Trust or in each Subfund is identifiable (the "Participating Trust Accounts"). The contributions of each Participating Trust, and the disbursements made with respect to each Participating Trust, shall be credited to or charged against such Participating Trust Accounts; provided, however, the Participating Trust Accounts need not be invested separately or segregated, and shall be maintained only as bookkeeping entries to reflect the interests of each Participating Trust. The Trustee shall adjust. account for, and allocate investment transactions, valuations of assets, rates of return and expenses with respect to the Master Trust Assets as a whole (or each Subfund as the case may be) and with respect to each separate Participating Trust Account, and those records shall be available at all reasonable times to the Participating Trusts and to the County and Court (each, an Employer"). At no time may any Participating Trust assign any portion of its equity or interest in its Participating Trust Account. (c) Investment Managers. The Trustee shall be responsible for managing and directing the investment of the Master Trust Assets, provided that the Trustee may, in its sole and absolute discretion, enter into a contract or contracts with one or more investment managers for the purpose of providing the investment management services required hereunder, including for one or more Subfunds. 3. PA YMENTS FROM TRUST The Trustee, acting as trustee of a Participating Trust, may withdraw from the Master 'frllst any or all of a Participating Trust's Participating Trust Account upon advance notice to the Trustee, which withdrawal request shall be implemented within a reasonable settlement period as determined by the Trustee in its sole and absolute discretion under the circumstances at the time -2-

3 of a withdrawal request. Insofar as the Trustee is also the trustee of the Participating Trusts, the Trustee may act in accordance with the terms of the applicable Trust and Investment Services Agreement in implementing any decision on behalf of a Participating Trust to withdraw any or all of its Participating Trust Account. 4. POWERS AND DUTIES OF THE TRUSTEE (a) Investments. The Trustee shall have sale and exclusive authority, control over and responsibility for directing the investment and management of the Master Trust Assets, including through Subfunds. The Trustee shall not issue a direction in violation of the terms of this Declaration and any Trust and Investment Services Agreement. The Trustee shall have all!lowers ne;:cessarily and reasonably implied from its investment and management responsibilities, including but not limited to: (i) Adopt investment policies and asset allocation formulas consistent with the purpose of the Master Trust described in Section 1(a); (ii) Invest and reinvest the principal and income of the Master Trust, without distinction between principal and income, in any form or type of investment, financial instrument, or financial transaction deemed prudent by the Trustee, including without limitation in such securities or in such property, real or personal, tangible or intangible, or part interest therein, wherever situated, whether or not productive of income, or consisting of wasting assets, as the Trustee deems proper, including but not limited to stocks, common or preferred, trust and participation certificates, interests in investment companies, limited partnerships, limited liability companies and other similar investment funds or vehicles. leaseholds, fee titles, beneticial interest in any trusts, equipment trust certificates, bonds, debentures, notes, mortgages and other evidences of indebtedness or ownership. and to retain the same for such period of time as it dccms appropriate; (iii) Without limiting Trustee's powers described in Section 4(a)(ii), hold Mastcr Trust Assets (A) in cash, (8) in obligations issued or fully guaranteed as to payment of principal or interest of the U.S. Government, (C) in commercial paper, (D) in variable-amount demand notes, or (E) in accounts (bearing a rate of interest that is reasonable for such accounts at the time helel) of a bank acting as a fiduciary with respect to Master Trust Assets that it holds; (iv) Without limiting the Trustee's powers described in Section 4(a)(ii), to invest in guaranteed investment contracts issued by insurance companies, including group annuity contracts. and similar investments issued by banking institutions located either domestically or internationally; (v) Without limiting the Trustee's powers described in Section 4(a)(ii), to lend securitjes upon a secured basis, permitting custody and control and voting authority of the securities to pass to the borrower during the period of the loan and to receive a lending fee or other consideration, and without limiting the foregoing, to engage in any securities lending program on behalf of the Master Trust, and in connection therewith to direct or manage the investment of cash collateral and other assets received as collateral; -3-

4 (vi) Without limiting the Trustee's powers described in Section 4(a)(ii), hold such portion of the Master Trust in non-u.s. currencies as deemed desirable by the Trustee consummating investment transactions and in facilitating investment of income and other payments accruing to investment assets held by the Trust; (vii) Establish and maintain bank, brokerage, commodity, currency and other similar accounts. whethcr in the United States or in any other country, to enter agreements in connection therewith and, from time to time, to deposit securities or other Master Trust Assets in such accounts; (viii) To vote, either in person or by general or limited proxy, or refrain from voting, any corporate securities for any purpose; to exercise or sell any option, subscription or conversion rights; to consent to or join in any voting trusts, reorganizations, consolidations, mergers, foreclosures and liquidations, and in connection therewith to deposit securities with or under the direction of any protective committee; and to accept and hold any securities or other property received through the exercise of any of the foregoing powers; (ix) To lease or grant options to lease Master Trust property for any period of lime even though commencing in the future and even though extending beyond the termination of the Mastcr Trust; (x) To borrow money, extend or renew any exlst1i1g indebtedness and mortgage or pledge any property in the Trust; no mortgagee shall be obliged to see to the application of any mortgage money or inquire into the validity, expediency or propriety of any such mortgage; (xi) To convey, assign, transfer, exchange, partition, grant options with respect to, sell at a public or private sale or otherwise dispose of any and all of the Master Trust Assets and any reinvestments thereof from time to time for such price and upon such terms as the Trustee sees tit; no purchaser shall be obliged to see to the application of any purchase money or inquire into the validity, expediency or propriety of any such sale or other disposition; (xii) Without limiting the generality of any of the foregoing, to perform all acts whether or not expressly authorized herein which the Trustee deems necessary or desirable for the protection and operation of the Master Trust; and (xiii) Without limiting the generality of any of the foregoing, to co-invest and commingle all or any portion of the Master Trust Assets with the Retirement Fund assets (including through a group trust under Revenue Rulings and ), but without any obligation to do so. For purposes of this Declaration, the term "Retirement Fund" shall mean the employees retirement fund established under California Government Code section for the purposes of holding the assets of the retirement system administered by LACERA. (b) Management of the Master Trust by Trustee. Subject to the rights expressly reserved to Employers under the Trust and Investment Services Agreements, the Trustee shall have the sole and exclusive authority, control over and responsibility for the management and investment of Master Trust Assets, including through Subfunds. The Trustee shall have all -4-

5 powers necessarily and reasonably implied from such authority, control and responsibility, including, but not limited to, the following: (i) To invest the Master Trust Assets pursuant to this Declaration and to enter into and carry out every agreement with respect to the Master Trust that may be necessary or advisable to discharge its investment responsibility; (ii) To cause a state or federally chartered depository institution, the deposits of which arc insured by the Federal Deposit Insurance Corporation, or any trust company licensed under state or federal law to conduct the business of a trust company or any Federal Reserve Bank, to act as custodian for the Master Trust Assets; (iii) To cause any securities or other property, real or personal, belonging to the Master Trust to be held or registered in the Trustee's name or in the name of a nominee or in such other form as the Trustee deems best, provided that the books and records of the Trustee shall at all times show that all such investments are part of the Master Trust; (iv) To employ and delegate any powers granted hereunder to investment advisers. investment consultants, investment managers, other investment professionals, agents, allorneys. custodians, and employees, and pay their reasonable compensation and expenses; (v) To defend, settle, compromise, contest, prosecute, foreclose on or abandon claims in favor of or against the Trust, and all costs, expenses (including without limitation, attorneys' fees) and disbursements in connection therewith shall be a charge against the Trust; (vi) To organize (under the laws of any state) corporations, partnerships, limited liability companies or trusts for the purpose of acquiring and holding title to any property which the Master Trust acquires; (vii) To make, execute, and file any and all tax elections, filings, returns and forms deemed necessary, desirable or appropriate under the provisions of any U.S., non-u.s., state or local laws and regulations; and (viii) To perform any and all other acts necessary or appropriate for the administration of the Master Trust and, in the exercise of any power or discretion, to execute and deliver all necessary instruments and give full receipts and discharges. 5. FIDUCIARY RESPONSIBILITIES AND INDEMNITIES (a) Relationship of Fiduciaries. The Trustee is a fiduciary. Except as otherwise provided herein, the Trustee shall be solely responsible for its own acts or omissions and for the acts and omissions of its agents and assigns with respect to the Master Trust. The Trustee shall be liable for a breach of duty committed by another fiduciary with respect to the Master Trust (a "co-fiduciary") under the following circumstances: (i) where the Trustee participates in the breach of duty committed by a co-fiduciary, (ii) where the Trustee improperly or negligently delegates its duties to a co-fiduciary, (iii) where the Trustee approves, knowingly acquiesces in, or conceals a breach of duty committed by a co-fiduciary, (iv) where the Trustee negligently enables a co-fiduciary to commit a breach of duty, or (v) where the Trustee fails to take -5-

6 reasonable steps to compel a co-fiduciary to redress a breach of duty if the fiduciary knows of, or has information from which he or she reasonably should have known of, the breach of duty. (b) Fiduciary Duties. Subject to the other terms of this Declaration, including but not limited to Sections 5(c) and (d), the Trustee, and its officers and employees shall: (i) Discharge their duties under this Declaration solely in the interest of, and tar the exclusive purpose of, the Participating Trusts. No part of the principal or income of the Master Trust shall be used tar, or diverted to, purposes other than the exclusive benetit of the Participating Trusts. (ii) Discharge their duties under this Declaration with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims and in accordance with the terms of this Declaration. (iii) Diversify the investments of the Master Trust so as to minimize the risk of loss and to maximize the rate of retum, unless under the circumstances it is clearly not prudent to do so. (c) Limitation of Liability. The Trustee's liability shall be limited with regard to the Master Trust and Trustee's acts or omissions in connection therewith to the same extent as provided in the Trust and Investment Services Agreements with regard to those agreements and the Trustee's acts or omissions thereunder. The Trustee may defend any action in which the Trustee is named and any reasonable expense incurred in such defense shall be a charge against the Master Trust under the same terms and conditions as the Trust and Investment Services Agreements. (d) Conflicts of Interest and Investment/Divestment Opportunities. The Trustee has a potential conflict of interest between and among performance of its duties as Trustee of the Master Trust. its duties as trustee of the Participating Trusts, and its duties as the Board of Investments far the Retirement Fund. The Employers have expressly waived actual and potential conflicts, as provided in the Trust and Investment Services Agreements. Notwithstanding anything to the contrary, if such a connict of interest actually arises and cannot be eliminated, the Trustee may put the interests of the Retirement Fund above the interests of the Master Trust and any Participating Trust in performing its duties and obligations under this Declaration, and the Trustee has no obligation to pursue for the Master Trust any investment or divestment opportunity which the Trustee may pursue far the Retirement Fund. (e) Advice of Counsel. The Trustee may consult with and rely upon qualified legal counsel including without limitation LACERA in-house counsel, with respect to the meaning and construction of this Declaration, of any provision hereof, or concerning its powers or obligations, including but not limited to its fiduciary duties. hereunder. 6. ACCOUNTS AND REPORTS OF THE TRUSTEE (a) Records and Reports. The Trustee shall establish and maintain accurate records and accounts of all transactions and Master Trust Assets in accordance with all pertinent -6-

7 requirements, and shall make such records available to Participating Trusts and Employers (insofar as they relate to their respective Participating Trust Accounts) upon the same terms and conditions that apply to the Employers under the Trust and Investment Services Agreements. Thc Trustee shall further provide the Participating Trusts and Employers with accounting reports related to their respective Participating Trust Accounts, as reasonably requested by an Employer or Participating frust. (b) Financial Statements. The Trustee shall file annual financial statements with the Participating Trusts and Employers showing the financial condition of their respective Participating Trust Accounts at the close of the preceding fiscal year. The financial statements shall bc prepared in accordance with generally accepted accounting principles on the basis of pronouncements of the Government Accounting Standard Board or its successor organization, and filed \'\i'ith the Participating Trusts and Employers at the time the financial statements for the Retirement Fund are tiled. (c) Audits. The Trustee shall conduct a financial audit of the Master Trust upon the same terms and conditions that apply to the audit of each Participating 'rrust as described in the Trust and Investment Services Agreements. and shall report the results of such audit to the Participating Trusts and Employers (insofar as they relate to their respective Participating Trust Accounts). The costs for such an audit shall be considered a cost of Master Trust administration to the extent such costs would be considered a cost of a Participating Trust under the Trust and Investment Services Agreements. In addition to the audit performed by the accountant selected by the Trustee hereunder, an Employer (acting by majority vote of its board of supervisors or its cxecutive committee, as applicable. and, in the case of the Court, with the written consent of the County) may direct that an audit of its Participating Trust Account be performed by the County of Los Angeles auditor or his contractually retained certified public accountant (d) Compliance with Privacy Laws. Any records, reports or other information furnished under this Section 6 shall be furnished in accordance with and subject to any applicable privacy laws, including but not limited to Title n of the Health Insurance Portahility and Accountability Act of 1996, as may be amended from time to time, and the guidance promulgated thereunder. 7. REIMBURSEMENT OF EXPENSES (a) No Compensation Paid to Trustee. The Trustee shall serve without compensation beyond what is provided for in accordance with California Government Code sections 31521, and (b) Pavment of Expenses. The Trustee shall be entitled to payment or reimbursement of all of its reasonable and appropriate expenses incurred in administering or investing the Master Trust in accordance with this Declaration, and shall allocate such expenses among the Participating Trusts in its sole and absolute discretion, which expenses shall then be treated as expenses of the Participating Trusts. (c) Invoices. The Trustee shall periodically furnish invoices to the Participating Trusts, and provide a copy to the Employers, for Master Trust administration and investment -7-

8 services expenses, as reasonably determined by the Trustee in its sole and absolute discretion. The Trustee shall pay the invoiced expenses from Master Trust assets, as allocated to the Participating Trust Accounts in the Trustee's sole and absolute discretion. The Trustee shall maintain adequate records of expenses incurred in administering or investing the Master Trust, which records shall be subject to audit by an Employer upon written request. (d) Audit Settlement Clause. If, at any time during the term of this Declaration or at any time prior to the fourth anniversary of the termination of the Master Trust, authorized representatives of an Employer conducts an audit of the Trustee's expenses incurred in administering or investing the Master Trust, and if sllch audit reasonably tinds that appropriate, reasonable incurred expenses were less than the amount paid to the Trustee for its expenses, the Trustee shall, at such Employer's discretion, either (i) repay sllch excess amollnt to the Master Trust by cash payment (with such amount allocated to the appropriate Participating Trust Account), or (ii) provide a credit against any future payments due to the Trustee that would otherwise be allocated to the applicable Participating Trust Account. Conversely, if such audit finds that appropriate, reasonable incurred expenses were more than the amount paid to the Trustee for its expenses, the Trustee shall pay the difference to itself from the applicable Participating Trust Account. 8. ADDITIONAL PARTICIPATING TRUSTS By addendum to this Declaration, the Trustee shall have the right to add additional trusts to the Master Trust, provided that: (i) the income of any such additional trust is excluded from federal income tax under Section IIS( I) of the Internal Revenue Code of 1986, as amended from time to time (the "Code"); (ii) the Trustee is the trustee of any such additional trust; (iii) the Trust and Investment Services Agreements are amended to permit co-investing and comingling of the Participating Trusts with any such additional trust (other than the Retirement Fund); (iv) the addition of any such trust is consistent with the Trustee's authority under the Trust and Investment Services Agreements; and (v) to the extent required by the Trustee, any such additional trust is eligible to participate in a group trust under Revenue Rulings and 20 II-I (as amended by any successor ruling, regulation or similar pronouncement). Any sllch additional trust added to the Master Trust shall be treated as a "Participating Trust" for all purposes under this Declaration. 9. AMENDMENT. RESIGNA non OF TRUSTEE AND TERMINATION (a) Amendment. The Trustee shall have the right at any time to amend this Declaration. Notwithstanding anything to the contrary herein, in no event shall this Declaration be amended or modified in any manner that would either (i) allow the Master Trust Assets to be distributed, disbursed or otherwise administered for any purpose other than those purposes identified in Section 1(a) above, or (ii) create rights or impose duties or obligations inconsistent with the performance of the Trustee's rights and duties under the Trust and Investment Services Agreements. (b) Resignation. The Trustee may resign at any time from its responsibilities with respect to the Master Trust upon at least one hundred eighty (180) days written notice to the Participating Trusts and Employers. Upon sllch resignation, the Master Trust shall tenninate and -8-

9 any assets remaining In a Participating Trust Account shall revert solely to the Participating Trusts. (c) Termination. The Master Trust may be terminated by the Trustee pursuant to a written termination of this Declaration. Notwithstanding the foregoing, the Master Trust shall terminate automatically upon the satisfaction of all liabilities under the OPEB Programs. Any assets remaining in a Participating Trust Account upon termination of the Master Trust shall revert solely to the Participating Trust. provided that the Trustee may, in its sole and absolute discretion. hold back such reasonable amounts as it deems necessary for outstanding expenses and administrative costs. 10, MISCELLANEOUS (a) Limitations Imposed by Trust and Investment Services Agreements, In no event shall the terms of this Declaration, either expressly or by implication, be deemed to impose upon the Trustee any power. right or responsibility that the Trustee does not otherwise have under the Trust and Investment Services Agreements, nor shall it take a\-vay from an Employer any power, right or responsibility it has under such agreements. (b) Construction and Governing Law. The parties intend that the income of the Master Trust qualify for exemption Crom federal income tax under Section I 15( I) of the Code. T'his Declaration shall be construed and administered consistent with this intent, and shall otherwise be construed, administered and enforced according to applicable laws of the State of Cali fornia. This Declaration is also intended to be consistent with the Trust and Investment Services Agreements and shall be construed and administered consistent with this intent. In resolving any conflict among provisions of this Declaration and in resolving any other uncl'rtainty as to the meaning or intention of any provision of this Declaration, the interpretation that (i) causes the Master Trust to be exempt from federal income tax under Section 115( 1) of the Code. (ii) causes the Master Trust to comply with all applicable requirements of the Code and California law, and (iii) causes the Trust to be consistent with the Trust and Investment Services Agreements, shall prevail over any different interpretation. (c) Severability. If any provision of this Declaration is held by any court to be void, illegal, invalid, or unenforceable, in whole or in part, the remaining terms and provisions will not be affected thereby, and each of such remaining terms and provisions of this Declaration will be valid and enforceable to the fullest extent permitted by law. (d) Surviving Provisions. The provisions of this Declaration that expressly survive the termination of this Declaration, and other provisions which by their nature are intended to survive expiration of this Declaration, including but not limited to Sections 5(c) and (d), will survive the c'<piration of this Declaration. (e) Notices All notices, requests, demands or other communications required or desired to he given hereunder or under any law now or hereafter in effect shall be in writing. Such notices shall be provided in the manner described, and addressed to the party identified, in tht: applicable Trust and Investment Services Agreements. -9-

10 (f) Electronic Communications. Any direction required to be given in writing by this Declaration may be delivered electronically, provided that any such electronic direction shall comply with the digital signature requirements set forth in California Government Code section 16.5 (or any successor provision thereto) and the regulations issued thereunder. (g) Recitals Incorporated. The recitals set forth at the beginning of this document are incorporated in and made a part of this Declaration. IN WITNESS WHEREOF, the Trustee has executed this Declaration, or caused it to be duly e:-;ecuted. as of the day and year tirst written above. TRUSTEE BY~ Chief Executive Officer, LACERA -10-