Local retiree benefit trusts may invest in rated corporate debt

Eligible retiree benefit trusts may buy bonds and other debt issued by U.S. corporations. This permission covers trusts that pay local government employers’ costs for retired employees’ benefits. It does not cover other local government money. At least two of S&P Global Ratings, Moody’s Investors Service, and Fitch Ratings must rate the debt as investment grade. The lowest rating assigned by any of those agencies controls whether the debt meets the requirement. The law took effect on May 19, 2026, when the governor approved it.

Local governments must track these trust investments separately and respond carefully when their credit ratings fall below investment grade. These rules cover corporate debt investments held under the permission for retiree benefit trusts. These assets cannot be mixed with other local government funds for purposes of this investment permission. A downgrade by any of the three named rating agencies triggers the duty to respond. The governing body must act consistently with its duty to protect the trust’s interests. The duty to respond begins when an investment is downgraded below investment grade; action must follow within a reasonable time.