For what purpose does GFOA recommend creating a qualified trust fund?

GFOA recommends creating a qualified trust fund primarily for the purpose of prefunding Other Post-Employment Benefits (OPEB) obligations. This approach allows public sector employers to set aside funds in a dedicated account, which can then be invested to generate returns over the long term. By prefunding these benefits, employers can help manage and mitigate the financial burden associated with OPEB liabilities, ensuring that they have the necessary resources available when employees retire.

Prefunding through a qualified trust fund not only aids in planning and budgeting but also enhances the sustainability of OPEB programs. This is particularly crucial given the increasing costs associated with health care and other post-employment benefits. By contributing to a trust fund, governments can also signal to current and potential employees that they are committed to honoring these benefits, which can improve recruitment and retention efforts.

The other choices, while important aspects of public finance and benefits management, do not encapsulate the primary aim of a qualified trust fund as recommended by GFOA. Managing pension funds and increasing employee health benefits can be addressed through different frameworks and tools. Ensuring compliance with federal regulations is certainly an aspect of public sector finance, but it is not the primary objective of establishing a qualified trust fund. Thus, prefunding