RESOLUTION 2007-01 - Governance and Regulation of Public Employee Pension Plans

WHEREAS, State and local government employee pension plans hold over three trillion dollars in trust, prudently investing assets for the exclusive benefit of nearly 20 million employees, retirees and their beneficiaries; and

WHEREAS, the benefits established under public sector defined benefit plans are adopted by and ultimately subject to the oversight of popularly-elected governmental bodies, the public, and independent boards of trustees; and

WHEREAS, there have been efforts over the years to impose ill-fitting Federal requirements on State and local government pension systems that duplicate, conflict or preempt State and local pension laws, as well as consideration of proposals to restrict their investment options or tax their plan contributions, assets or investment gains; and

WHEREAS, during these times, Congress has continued to ultimately recognize the broad coverage, retirement savings opportunities and meaningful benefits provided to the public sector workforce, and, unlike private pension plans that are preempted from State statutes and solely regulated by Federal law, public pension plans are subject to vast State and/or local regulation, and have comprehensive laws, set in statute through an open legislative process, which provide for rigorous regulation of their retirement plans and strong protections for plan participants and assets; and

WHEREAS, public pension plans are funded on an actuarial basis typically through annual tax-deferred contributions made by both the employer and employee, are audited routinely and have comprehensive reporting and disclosure requirements; and

WHEREAS, public employee retirement plans are backed by the full faith and credit of their sponsoring governmental jurisdictions, which are permanent institutions that have a strong moral, contractual, and in some cases constitutional commitment to their pension liabilities, which assure State and local employees and retirees will receive the pension benefits to which they are entitled; and

WHEREAS, such benefit protections and long-term sustainability virtually eliminate the possibility of involuntary asset liquidation in the public sector, and are unequaled in other sectors of the U.S. workforce where future benefit levels and accruals are not guaranteed and plan sponsors may go out of business, be acquired, or file for bankruptcy.

NOW, THEREFORE BE IT RESOLVED, that the National Association of State Retirement Administrators supports a Federal legislative and regulatory environment that recognizes and encourages the unique designs and protections inherent in State and local government retirement systems; and

BE IT FURTHER RESOLVED, that the National Association of State Retirement Administrators strongly opposes efforts to impose additional Federal regulations on State and local government employee pension plans, restrictions on their plan design flexibility or investment options, or taxation on contributions or earnings; and

BE IT FURTHER RESOLVED, that the National Association of State Retirement Administrators believes State and local government employee retirement systems require distinctive reporting, disclosure and accounting models and an independent standard-setting body representative of and focused specifically on the unique needs of the public sector and its stakeholders.

Amended Resolutions 2002-04 and 1996-04.
Adopted August 8, 2007

RESOLUTION 2007-02 - Retiree Health Care

WHEREAS, the cost of medical care is increasing at a rate that threatens its affordability for retirees and the ability of employers to assist in funding retiree group health care coverage; and

WHEREAS, the higher costs being assumed by both employers and retirees are necessitating plan design and/or premium changes to protect the long-term viability of employer-based retiree health care plans; and

WHEREAS, accessibility to affordable health care is critical to the quality of life for everyone, especially retirees who are on a fixed income and in the most expensive age bracket to insure; and

WHEREAS, the nearly seven million retired public employees who receive pension benefits from public retirement systems are spending a larger percentage of their budget on health care; and

WHEREAS, many public retirement systems have assumed responsibility for providing their retired members with group health care coverage and for funding all or part of the health care expenses of their retired members; and

WHEREAS, States have demonstrated creativity and innovation in their efforts to make health care available for retirees, yet the ability of the states to affect the accessibility and affordability of health care is becoming increasingly limited; and

WHEREAS, the Governmental Accounting Standards Board has adopted accounting changes requiring governmental employers to recognize both the cost of current retirees and the cost of future retirees, which may exacerbate state law constraints on spending and further jeopardize these essential benefits for millions of governmental employees and retirees; and

WHEREAS, policy options may be considered by the federal government to address access to and affordability of health care for retired workers;

NOW, THEREFORE, BE IT RESOLVED, that the National Association of State Retirement Administrators (NASRA) supports federal consideration of proposals to assist retirees in paying for increased health care costs by allowing them to exclude premiums and/or medical expenses from their taxable retirement income; and

BE IT FURTHER RESOLVED, that NASRA supports the continued exchange of information between State retirement plans and other State or local governmental agencies responsible for administering and funding retiree health programs in order to share best practices and successful strategies for cost containment; and

BE IT FURTHER RESOLVED, that NASRA recognizes that many of the current federal and State proposals under consideration may represent only temporary solutions, and that a national debate must be initiated to discuss the long-term structure of the health care system and Medicare program in the United States.

Amended Resolutions 2003-03
Adopted August 8, 2007

RESOLUTION 2007-03 - Public Employee Retirement System Accounting Standards & Actuarial Methodologies

WHEREAS, public sector defined benefit plans have proven to be an effective and efficient means to i) deliver stable income replacement in retirement; ii) attract and retain high quality employees to deliver vital public services; iii) provide ancillary casualty benefits related to disability and death before retirement; iv) manage fund assets to provide an optimum balance of growth potential and risk in investments, v) lower expenses through economies of scale, and vi) provide a source of long-term patient capital; and

WHEREAS, critics of public sector defined benefit plans have cited the potential conflict between the long-term nature of pension liabilities and the shorter time horizon of political decision-making, often making the case by distorting the true financial condition of public pensions in general, mistakenly extrapolating a handful of public pension problems onto the entire public pension community, and advancing arguments that reflect an incomplete understanding of public pension issues; and

WHEREAS, solutions are available to address these concerns (without necessitating measures with negative consequences for all stakeholders) through the adoption of explicit and transparent financial disciplines in benefit, funding and investment policies; and

WHEREAS, this disciplined model must account for the specific nature and needs of governmental jurisdictions and their stakeholders, requiring distinctive reporting, disclosure and accounting models, a perspective well articulated in a 2006 Government Accounting Standards Board white paper, Why Governmental Accounting and Financial Reporting Is-And Should Be-Different; and

WHEREAS, government sponsors of retirement systems have infinite time horizons with fundamentally different revenue streams and sustainability than other sectors of the economy; and

WHEREAS, the full faith and credit of the sponsoring government, as well as strong moral, contractual, and in some cases constitutional guarantees in practice virtually rule out any incidence of plan termination in the public sector; and

WHEREAS, these benefit protections and long-term sustainability stand in stark contrast to other sectors of the U.S. workforce where future benefit levels and accruals are not guaranteed and plan sponsors may easily terminate their pension plans, or else go out of business, be acquired, or file for bankruptcy; and

WHEREAS, sound actuarial methodologies and accounting standards have evolved over the years with the objective of providing information regarding the financial position and condition of public pension plans and the governments that sponsor these plans; and

WHEREAS, the utility of such information is directly proportionate to the extent to which it reflects a realistic outcome under ranges of varying circumstances; and

WHEREAS, modeling applicable to terminable plans is completely inappropriate in the public sector, where the perpetual existence of the plan sponsor and the commitment to plan sponsorship enables government-sponsored pension plans to promise and fund benefits and manage and invest assets with a long term focus; and

WHEREAS, support for reporting termination liabilities of public retirement plans may appeal to those not conversant with the mechanics, governance and funding structure of State and local government pension systems, as well as those who stand to benefit financially from additional fees that will be generated as a result of the work involved; and

WHEREAS, the cost of such calculations and the risk of misinterpretation far outweighs any value they may have to those who are attempting to grasp the impact of the financial condition and financial position of the retirement system on the plan sponsor;

NOW, THEREFORE, BE IT RESOLVED, that the National Association of State Retirement Administrators believes the reported liability of a public pension fund must reflect:

• the presumed infinite life of public employee retirement plans and governmental plan sponsors,
• the guarantee of public pension benefits under State constitutional, statutory, contractual and/or case laws, and
• the observable past and reasonable future return expectations for capital markets and common public fund portfolio construction; and

BE IT FURTHER RESOLVED, that the National Association of State Retirement Administrators believes the government financial reporting model should not be altered simply to appeal to the misguided perception of the need for public sector/private sector symmetry; and

BE IT FINALLY RESOLVED, that the organization(s) responsible for setting public sector accounting standards should be independent; representative of state and local governments; and focused on the accounting needs of the public sector and its stakeholders.

Adopted on October 15, 2007

RESOLUTION 2006-01 - Public Pension Coordinating Council (PPCC)

WHEREAS, the benefits established under public sector defined benefit plans are adopted by and ultimately subject to the oversight of popularly-elected governmental bodies, the public, and independent boards of trustees; and

WHEREAS, as a result, state and local government retirement systems are subject to state constitutional, statutory and case law and must comply with a vast landscape of requirements at the state and local level; and

WHEREAS, the federal government has attempted to impose ill-fitting federal requirements on state and local pension plans that duplicate, conflict, or preempt state and local pension laws; and

WHEREAS, following collective efforts, federal policymakers and regulators have come to recognize the level of state and local government oversight and regulation, and the broad coverage, retirement savings opportunities and meaningful benefits provided to the public sector workforce, and have made refinements to federal laws that take into account the unique policy issues affecting public plans; and

WHEREAS, press reports on troubled retirement systems continue to erode these efforts and will create issues affecting all public plans regardless of size and type; and,

WHEREAS, the issues will affect the membership of each of the organizations in the PPCC - National Association of State Retirement Administrators (NASRA), National Council on Teacher Retirement (NCTR) and National Conference on Public Employee Retirement Systems (NCPERS), and,

WHEREAS, constant and open communication among the associations is beneficial to the membership of all, and,

WHEREAS, the Public Funds Survey (NASRA & NCTR) and the PPCC Public Pension Standards are programs coordinated by PPCC that have considerable value in gathering accurate and timely data on public pension plans and encouraging member systems to achieve nationally recognized standards of administration, funding and plan design, and,

WHEREAS, the best means for the public pension community to impact our destiny is to join forces with other national associations,

NOW, THEREFORE, BE IT RESOLVED that the National Association of State Retirement Administrators supports the Public Pension Coordinating Council's (PPCC) activities in providing survey and standards programs as well as a forum for open discussion and coordination among member associations.

Amended Resolution 1996-03
Adopted August 9, 2006

RESOLUTION 2006-02 - Investor Protections

WHEREAS, the future viability of the U.S. economy is, in large measure, dependent on (i) investor confidence in corporate structures and leadership, (ii) the reliability of underlying financial information regarding corporate operations, and (iii) transparency in communications between investors, boards of directors, and management; and,

WHEREAS, in keeping with their fiduciary responsibilities, it is incumbent on all public sector and private sector institutional investors to be proactive in the pursuit of reforms designed to provide additional safeguards for investors and dramatically reduce the potential for corporate malfeasance and resulting financial disasters; and,

WHEREAS, reforms made in the aftermath of recent corporate scandals and bankruptcies have led to improvements in board independence, transparency and shareholder communications, providing increased corporate integrity, investor confidence in corporate structures and the validity of external audits, and in turn increased value to the shareholders who invest in these enterprises; and,

WHEREAS, it is incumbent on Congress, federal regulatory agencies, and self-regulatory organizations to ensure reforms bolster the economy while protecting the interests of corporate investors, as overly punitive measures and litigious environments will impair sustained economic growth, a goal shared both by businesses and those who invest in them.

NOW, THEREFORE, BE IT RESOLVED, that the National Association of State Retirement Administrators (NASRA) supports continued efforts to insure a corporate universe characterized by:

• improved auditor independence standards.
• improved auditor and accounting industry oversight.
• enhanced disclosure of potential conflicts-of-interest between members of corporate boards, the CEO, and other executives.
• listing standards that strengthen board independence and composition.
• effective enforcement actions that include holding individuals accountable for their actions and not just corporations' insurance policies.
• improved financial disclosure rules that require accurate and understandable financial reports, including the expensing of stock options, as these are a compensation cost and should be disclosed.
• a more effective SEC, with the authority and financial resources to better execute necessary enforcement measures to preserve and improve shareholder rights, access to information, and investor confidence in the financial marketplace.

AND, BE IT FURTHER RESOLVED, that the National Association of State Retirement Administrators believes there is a need and a willingness for businesses and those who invest in them to work together and with legislative, regulatory and self-regulatory bodies to explore ways to ensure reforms achieve the shared goal of continued economic prosperity and strengthened investor confidence.

Amended Resolution 2004-01
Adopted August 9, 2006

RESOLUTION 2006-03 - Disclosure of Soft Dollar Activities

WHEREAS, soft dollar practices have historically resulted in substantial amounts of financial activity going undisclosed to and by plan sponsors; and,

WHEREAS, the accounting standard-setting bodies and governmental agencies have chosen to essentially ignore this area, resulting in the absence of authoritative guidance regarding the type of information to collect and how and to whom such information should be reported; and,

WHEREAS, the clarity and transparency of disclosure of all money management and brokerage arrangements is essential to the responsibilities of plan fiduciaries; and

WHEREAS, plan sponsors and trustees have the power to assert their authority in these matters through their contractual arrangements with the money management, brokerage, and consulting community; and

WHEREAS, the Council of Institutional Investors has developed recommended practices for the collection and distribution of information by trustees to more fully disclose the cost of doing business, and to facilitate assessments of whether or not all assets (which include their soft dollars) are being properly managed and whether or not there are conflicts of interest between their money managers and asset consultants;

NOW, THEREFORE BE IT RESOLVED, that the National Association of State Retirement Administrators endorses the Council of Institutional Investors' Suggested Disclosures for Trustees to Request of Money Managers, Suggested Disclosures for Trustees to Request of Investment Consultants, and Suggested Disclosures by Trustees to All Interested Parties; and,

BE IT FURTHER RESOLVED, that the National Association of State Retirement Administrators encourages state retirement system plan fiduciaries to consider these recommendations in adopting or revising their own disclosure guidelines, with the aim of furthering the confidence public plan participants have in the financial workings of the state retirement systems on which they rely for an important part of their future financial security; and

BE IT FURTHER RESOLVED, that the National Association of State Retirement Administrators believes it will be virtually impossible to achieve complete soft dollar transparency in the absence of more comprehensive accounting and regulatory standards for securities transactions, and encourages the accounting standard-setting bodies and federal governmental agencies to issue authoritative guidance in this area.

Amended Resolution 1999-04
Adopted August 9, 2006

RESOLUTION 2006-04 - Supplemental Plans for State and Local Government Employees

WHEREAS, there is continued emphasis on increasing retirement savings nationwide, and state and local governments have been responsible partners in achieving this goal by covering the vast majority of state and local workers in public employee retirement systems that provide sound, secure benefits in retirement; and,

WHEREAS, many governmental entities sponsor a supplemental defined contribution plan in addition to the general retirement plan to allow participants to defer some portion of their salary in anticipation of retirement needs, and some states provide limited matching contributions to encourage supplemental plan participation; and,

WHEREAS, tax favored savings arrangements available to employees of state and local government are valuable in both increasing the attractiveness of public service as a career and encouraging public employees to play a proactive role in providing for their own future financial security; and,

WHEREAS, federal legislation has been enacted over the last decade to simplify participation in, and the administration of, these supplemental arrangements, much of which recognized that arrangements sponsored by governmental entities are unique from those sponsored by other entities; and

WHEREAS, efforts to simplify rules while keeping these unique characteristics under consideration are encouraged, such as: i) providing for similar tax treatment of employer contributions to governmental 401(k), 401(a), 403(b), and 457 plans by excluding such employer contributions from the Social Security and Medicare covered wage definition and the maximum amount that may be deferred under the plan for the taxable year for all such plans; and ii) allowing "Roth" features to be incorporated in all such salary reduction arrangements.

NOW, THEREFORE, BE IT RESOLVED that the National Association of State Retirement Administrators encourages federal policy makers and regulators to continue to recognize the distinctive characteristics of state and local governments and their supplemental retirement arrangements and keep these in mind when promulgating regulations or further legislative changes to these plans; and

BE IT FURTHER RESOLVED that the National Association of State Retirement Administrators supports legislation that encourages state and local governments to create and maintain supplemental retirement plans; and

BE IT FURTHER RESOLVED that the National Association of State Retirement Administrators does not support a one-size-fits-all approach to legislation that mandates the replacement of existing plans that may best meet the needs of individual governmental entities and their employees, nor legislation intended to supplant rather than supplement current retirement arrangements and could result in additional cost and complexity for State and local governments as well as plan participants.

Amended Resolutions 2003-07, 2002-03, 1999-05 and 1996-05
Adopted August 9, 2006

RESOLUTION 2005-01 - Ethics Standards and Disclosures Required of Service Providers

WHEREAS, public pension funds in the United States play a vital role in ensuring the financial security of millions of public servants; and

WHEREAS, it is critical that public pension systems have the confidence of their members, beneficiaries, taxpayers and sponsoring entities in the integrity of decisions affecting the assets and financial health of the system; and

WHEREAS, information continues to surface regarding abusive business practices, including fraud, collusion and conflicts of interest with regard to various firms that provide services to public employee retirement systems and others; and

WHEREAS, such information reinforces the need for public employee retirement system sponsors and trustees to understand the relationships, if any, that exist among their systems’ various professional and advisory service providers, to be aware of any conflicts of interest, real or perceived, and to assess whether or not these service providers’ interests are aligned with the interests of the retirement system; and

WHEREAS, public employee retirement system plan sponsors and trustees have the responsibility and power to hold such service providers to the same degree of loyalty and ethics as plan fiduciaries, and to require accurate, clear and transparent disclosures through their contractual arrangements to ensure these fiduciary responsibilities are being upheld;

NOW, THEREFORE, BE IT RESOLVED, that the National Association of State Retirement Administrators encourages state retirement systems to exercise their due diligence and adopt or revise disclosure requirements and ethics policies to demand professional and advisory service providers meet fiduciary standards for retirement systems that include:

• Loyalty: such service providers should be held to the highest degree of ethical standards, making all decisions on behalf of the system in the best interest of system.
• Open and Honest Decision Making: such service providers should be required to make decisions in a fair, honest and open manner, sharing information with interested parties to enhance the quality of the system’s decision making process.
• Compatible Relationships with Others: such service providers should be required to carefully review the trust and conflict of interest laws applicable to the system to ensure that relationships with other parties are not incompatible with their duties to the system.
• Full Disclosure of Interests: such service providers should be required to divulge pertinent business activities, relationships and alliances including, among other things i) all services the firm, its principals, or any affiliate provide that generate revenue, ii) if the firm is owned in whole or in part by other firms or organizations, or if the firm owns other firms or organizations, that sell services to public pension systems, and iii) if the firm, its principals, or any affiliate has any strategic alliances with firms that sell services to public pension systems.

RESOLUTION 2004-01 - Investor Protections

WHEREAS, the aftermath of recent corporate scandals and bankruptcies has substantially eroded the confidence individual and institutional investors have in our corporate structures and the validity of external audits; and,

WHEREAS, such a justified lack of confidence will further adversely impact our financial markets – already suffering from the plethora of negative events; and,

WHEREAS, the future viability of the U.S. economy is, in large measure, dependent on (i) investor confidence in corporate structures and leadership, (ii) the reliability of underlying financial information regarding corporate operations, and (iii) transparency in communications between investors, boards of directors, and management; and,

WHEREAS, in keeping with their fiduciary responsibilities, it is incumbent on all public sector and private sector institutional investors to be proactive in the pursuit of reforms designed to provide additional safeguards for investors and dramatically reduce the potential for corporate malfeasance and resulting financial disasters; and,

WHEREAS, it is incumbent on Congress, federal regulatory agencies, and self-regulatory organizations to respond quickly and in concert, and not override each other’s unique capabilities, to bolster the economy while protecting the interests of corporate investors.

NOW, THEREFORE, BE IT RESOLVED, that the National Association of State Retirement Administrators (NASRA) is formally on record in support of efforts to insure a corporate universe characterized by:

1. improved auditor independence standards.
2. improved auditor and accounting industry oversight.
3. enhanced disclosure of potential conflicts-of-interest between members of corporate boards, the CEO, and other executives.
4. listing standards that strengthen board independence and composition.
5. more effective enforcement actions that include holding individuals accountable for their actions and not just corporations’ insurance policies.
6. improved financial disclosure rules that require accurate and understandable financial reports, including the expensing of stock options, as these are a compensation cost and should be disclosed.
7. a more effective SEC, with the authority and financial resources to better execute necessary enforcement measures to preserve and improve shareholder rights, access to information, and investor confidence in the financial marketplace.

Amended Resolution 2002-01
Adopted August 11, 2004

RESOLUTION 2004-02 - Mutual Fund Reform

WHEREAS, there is continued emphasis on increasing retirement savings nationwide, and state and local governments have been responsible partners in achieving this goal with ninety-eight percent of their workers participating in public employee retirement systems; and,

WHEREAS, efforts to increase retirement savings and ensure self-sufficiency in retirement not only benefit employees, retirees and their beneficiaries, but also our national, state and local economies; and

WHEREAS, many governmental entities sponsor deferred compensation or defined contribution savings programs—such as a Section 457 deferred compensation plan, a Section 403(b) tax sheltered annuity, or a Section 401(a) or 401(k) plan—in addition to the primary benefit plan, to allow participants to defer some portion of their salary and invest these savings to enhance their retirement security; and,

WHEREAS, for these self-directed programs to be successful, participants must have trust in the financial markets and knowledge that they have equal access to those markets; and

WHEREAS, evidence has surfaced regarding fraud in mutual funds, including abusive trading practices, violations of SEC rules, and conflicts of interest, which has eroded investor confidence in a major section of the U.S. financial marketplace and requires additional measures be taken to prevent such practices;

NOW, THEREFORE, BE IT RESOLVED, that the National Association of State Retirement Administrators urges federal regulators and policymakers to reform the governance of mutual funds by:

• Requiring the highest level of fiduciary responsibilities of asset managers to all the fund participants, including (i) unwavering duty of loyalty to all participants of the fund, to the exclusion of interest of all other parties, (ii) discharging their fund duties solely in the interest of the fund participants, and (iii) discharging their duties with the highest degree of care, skill, diligence and prudence, without benefiting any group or individual participant over another; and
• Requiring, among other things, full disclosure of fees, expenses and commissions;
• Demanding complete independence of fund fiduciaries and directors from any divided loyalty to the fund company and the participants in the fund.

Adopted August 11, 2004

RESOLUTION 2003-01 - Phased Retirement

WHEREAS, phased retirement is an area of great interest to public retirement systems, their sponsoring State and local governments, plan participants, and boards of trustees; and

WHEREAS, State and local governments must meet the challenge of phased retirement earlier than the private sector, because their workforce tends to be several years older than the private workforce and their wages are typically lower than in private industry; and

WHEREAS, greater flexibility than is presently available is needed to allow plan sponsors to offer a mix of retirement payments and salary payments in the emerging phased retirement environment; and

WHEREAS, individual States are best positioned to look at the cost implications, the human resource needs, and the cultural expectations of the phased retirements programs for their workforce; and

WHEREAS, any guidance should be permissive, such that systems and their State Legislatures will have the right to develop plan provisions that are the most appropriate for their participants;

NOW, THEREFORE, BE IT RESOLVED, that the National Association of State Retirement Administrators supports the following six principles with regard to proposed changes in Federal phased retirement policy:

1. Good retirement planning for some individuals means avoiding an abrupt termination of work and, instead gradually transitioning into a retirement that meets their social and economic needs. These programs are called "phased retirement" or "transitional retirement." They are pre-retirement work arrangements that permit an individual to move from his/her career position to a position of reduced hours, lower compensation, or reduced physical or mental stress. These do not include programs that allow a retiree to return to work.
2. Every retirement system is different in design. Thus, IRS activity in the area of phased retirement should allow retirement systems to have such programs.
3. Any IRS activity in the area of phased retirement must recognize that retirement systems have different funding methods and varying levels of funding. Accordingly, the IRS should not adopt any policy that would require retirement systems to assume additional funding obligations.
4. The IRS should clarify that the definition of such terms as normal retirement age, early retirement age, minimum retirement age, and final or highest average compensation (or whatever terms are used in a particular jurisdiction) should be whatever appears in the applicable state or local laws, regulations, case law, and policies governing the retirement system. Such clarification would serve to recognize that state and local governments have different ways of defining these terms.
5. Distribution of benefit should only be made after an individual is eligible for a retirement benefit or allowance.
6. Any phased retirement program should allow state and local governments to protect the value of a participant's retirement benefit during a "bridge job." A "bridge job" is a position that offers reduced hours, lower compensation, or reduced physical or mental stress than career employment and covers the period between career employment and full-time retirement. It is also called a transitional job.

Adopted August 6, 2003

RESOLUTION 2003-05 - Public Pension Systems - Operational Risks of Defined Benefit and Related Plans and Controls to Mitigate those Risks

WHEREAS, much of the emphasis in pension funds is on investment risks, the administrative and benefits (non-investment) side of pension systems face an extraordinary number of risks as well; and

WHEREAS, some inherent administrative risks do not change much over time, while other risks and the mitigating controls for all risks are often affected by the constant changes in technology and the environment in which Systems operate; and

WHEREAS, identifying operational risks that public pension funds face and some of the controls that may be put in place to mitigate these risks could provide a point of reference or a guide to system administrators and other pension fund staff in addressing risks and practices and procedures to address those risks; and

WHEREAS, representatives of the Association of Public Pension Fund Auditors (APPFA) have developed a document titled, "Public Pension Systems -- Operational Risks of Defined Benefit and Related Plans and Controls to Mitigate those Risks," that identifies key administrative risks associated public pension systems and common practices to address, manage, and, to the extent possible, control those risks, with the understanding that the document is not intended to be an exhaustive checklist of all administrative risks that public pension systems may potentially encounter or a comprehensive checklist of all the procedures a public pension system should incorporate to address the identified risks; and

WHEREAS, APPFA is officially on record as being in support of the risk management concepts identified in "Public Pension Systems -- Operational Risks of Defined Benefit and Related Plans and Controls to Mitigate those Risks;"

NOW THEREFORE BE IT RESOLVED, that the National Association of State Retirement Administrators endorses "Public Pension Systems -- Operational Risks of Defined Benefit and Related Plans and Controls to Mitigate those Risks;" and

BE IT FURTHER RESOLVED, that the National Association of State Retirement Administrators encourages state retirement system plan fiduciaries to consider these practices in adopting or revising their own operational risk guidelines, to address, manage, and, to the extent possible, control those risks, with the aim of furthering the confidence public plan participants have in the financial workings of the state retirement systems on which they rely for an important part of their future financial security.

Adopted August 6, 2003

RESOLUTION 2003-06 - Annual Contribution and Benefit Limits

WHEREAS, the federal limits on pension benefits and contributions that were enacted to cap the federal revenue loss associated with the employer's tax-deductible contributions to the employer's pension fund address an aspect inapplicable to tax-exempt state and local governments; and,

WHEREAS, the imposition and tightening of these limits on retirement plans in recent years have had an adverse effect on the administration of plans, the improvement of benefits, and on the ability of individuals to effectively contribute toward their retirement savings; and

WHEREAS, the limits on maximum annual benefits, maximum annual dollar contributions, and the amount of compensation that may be taken into account in determining benefits were significantly lowered in the late 1980s and early 1990s and have only recently been moderately restored; and

WHEREAS, allowable benefits are further curtailed by actuarial reductions in the limit for non-public safety employees retiring before age 62, despite the years of service under the plan and the commensurate benefits to which they are entitled;

NOW, THEREFORE, BE IT RESOLVED that the National Association of State Retirement Administrators supports federal legislation that would simplify the administration of and stimulate increased savings in retirement plans by:

• Restoring and indexing for inflation the increased annual dollar limits on benefits for defined benefit plans, contributions under defined contribution plans, and the amount of compensation that may be taken into account under qualified retirement plans;
• Modifying or eliminating the actuarial lowering of the benefit limitations for non-public safety employees;

Amended Resolution 2001-01
Adopted August 6, 2003

RESOLUTION 2003-08 - Support for Defined Benefit Plans

WHEREAS, efforts are underway to strongly influence some state and local governments to offer new or current employees alternative defined contribution retirement plans in lieu of the current state and local government employee retirement system; and,

WHEREAS, parties behind such efforts are often in a position to gain financially from the alternative retirement arrangement, and often forward incomplete and/or biased information to policy makers and employees to further their cause; and,

WHEREAS, state and local government employees traditionally participate in defined benefit plans that provide a guaranteed pension benefit based on years of service and compensation and,

WHEREAS, most state and local government employees already have the option to participate in a supplementary defined contribution plan, such as a Section 457 deferred compensation plan, a Section 403(b) tax sheltered plan, or a Section 401(k) plan, in addition to their defined benefit plan; and,

WHEREAS, many state and local government employers have determined that a defined benefit program is the best means to attract and retain high quality employees by providing stable income replacement in retirement for long-term workers; and,

WHEREAS, many state and local government employers have found defined benefit programs to be the best means for providing ancillary casualty benefits related to disability and death before retirement; and,

WHEREAS, many state and local governments have ascertained that the pooling of pension fund assets in defined benefit programs will provide an optimum mix of growth potential and risk in investments, while providing lower administrative expenses than will typically be the case in counterpart defined contribution plans; and,

WHEREAS, there is already considerable portability within state retirement plans and state and local governments are continuing to expand the features and options within defined benefit programs, including changes to address the issue of short service employees and to enhance portability in order to best accommodate the make-up of their workforce;

NOW THEREFORE BE IT RESOLVED, that the National Association of State Retirement Administrators supports the prevailing system of retirement benefits in the public sector, namely, a defined benefit program to provide a guaranteed benefit and a voluntary defined contribution plan to serve as a means for employees to supplement their retirement savings;

AND, BE IT FURTHER RESOLVED, that the National Association of State Retirement Administrators supports progressive changes within this prevailing system of retirement benefits in the public sector, either within the defined benefit plan or through supplementary plans, that accommodate a changing workforce and better provide many of the features advanced by defined contribution advocates.

Amended Resolution 1998-02
Adopted August 6, 2003

RESOLUTION 2002-05 - Age Discrimination in Employment Act

WHEREAS, the 3rd U.S. Circuit Court of Appeals has held that the Age Discrimination in Employment Act (ADEA) applies to retirees and their benefits, not just employees and their compensation packages; and

WHEREAS, the 3rd Circuit further found that the ADEA permitted lawsuits against employers who offered lesser benefits to retirees eligible for Medicare than for younger retirees who are not Medicare-eligible, such as those offering extended health care coverage in the form of a Medicare bridge (coverage until Medicare eligibility); and

WHEREAS, the U.S. Equal Employment Opportunity Commission (EEOC), which had pursued suits enforcing the ADEA against employers who provided lesser health care benefits to Medicare-eligible retirees than to their younger retirees, recently reversed its policy in this area; and

WHEREAS, despite the EEOC’s decision not to pursue suits in this area, retirees may continue to file suits on their own, as there is still no consensus that Medicare can be accepted as a sufficient “safe harbor” for employers offering early retiree packages; and

WHEREAS, the EEOC continues to state its intent to vigorously pursue other types of age discrimination claims involving retirees, such as cash-based early retirement incentives that are reduced or eliminated with advancing age and disability plans that include imputed benefits based on normal retirement age; and

NOW, THEREFORE, BE IT RESOLVED, that the National Association of State Retirement Administrators supports federal legislative and/or regulatory solutions that are being explored to clarify that extended health care coverage in the form of a Medicare bridge, or voluntary early retirement incentives, or disability plans with benefit limitations based on normal retirement age, offered in conjunction with a defined benefit plan, are not in violation of the ADEA.

Adopted August 7, 2002

RESOLUTION 2001-03 - Benefit Plan Use of Social Security Numbers

WHEREAS, public retirement systems are responsible for the administration of retirement benefits, and in many cases health care and deferred compensation arrangements, for millions of public employees, retirees, and their beneficiaries; and

WHEREAS, many public retirement systems not only cover the employees within state agencies, but also provide benefits to employees of local jurisdictions and districts as well; and

WHEREAS, these pension systems currently use Social Security Numbers (SSNs) in numerous facets of their operations, many of which are required by State and Federal laws and which are aimed at preventing error, fraud and abuse; and

WHEREAS, public retirement systems share national concerns regarding "identity theft" and other fraudulent activity surrounding the misuse of SSNs and have undertaken numerous measures to protect the privacy of plan participants; and

WHEREAS, federal efforts are currently underway to address identity theft and other fraudulent activity often resulting from the illegal use of SSNs, and

WHEREAS, certain federal proposals could potentially undermine state privacy protections, as well as cause administrative disruptions and financial liabilities on state and local governments and their agencies, including state retirement systems;

NOW, THEREFORE, BE IT RESOLVED, that the members National Association of State Retirement Administrators supports the spirit and intent of current federal efforts to enhance measures already taken by State agencies to protect the privacy of plan participants by using the Social Security Numbers for official identification purposes only, but urges federal policy makers and regulators to be mindful of the administrative disruptions and financial liabilities that federal measures to limit the use of the SSN may impose, the state privacy protections that may be undermined, and to seek to limit only those government uses that may directly lead to fraud and abuse.

Adopted August 8, 2001

RESOLUTION 2000-01 - Public Pension Systems: Statements of Key Investment Risks and Common Practices to Address those Risks

WHEREAS, public pension systems face an increasing number of risks in undertaking necessary investment activities; and,

WHEREAS, controlling or eliminating these risks has become a topic of great interest as well-publicized errors by investment funds have captured public and professional attention; and,

WHEREAS, in response, a number of organizations have discussed or promulgated risk principles, guidelines, standards, and other directives for various professional organizations, but very few have been specifically oriented to the public pension fund community, or have approached the issue from the perspective of the basic disciplines and purposes of public pension funds; and,

WHEREAS, the public pension community has expressed a desire for general guidance in identifying key investment risks and common practices and procedures used to address those risks; and,

WHEREAS, a number of public pension system chief investment officers and representatives of the Association of Public Pension Fund Auditors (APPFA) have developed a document titled, “Public Pension Systems – Statements of Key Investment Risks and Common Practices to Address those Risks,” that identifies key investment risks associated with public pension funds and common practices to address, manage, and to the extent possible, control those risks, with the understanding that the document is not intended to be an exhaustive checklist of all risks that public pension systems may potentially encounter or a comprehensive checklist of all the procedures a public pension system should incorporate to address the identified risks; and,

WHEREAS, APPFA and several public pension system chief investment officers are officially on record as being in support of the risk management concepts identified in “Public Pension Systems – Statements of Key Investment Risks and Common Practices to Address those Risks;”

NOW THEREFORE BE IT RESOLVED, that the National Association of State Retirement Administrators endorses “Public Pension Systems – Statements of Key Investment Risks and Common Practices to Address those Risks;” and,

BE IT FURTHER RESOLVED, that the National Association of State Retirement Administrators encourages state retirement system plan fiduciaries to consider these practices in adopting or revising their own investment risks guidelines, with the aim of furthering the confidence public plan participants have in the financial workings of the state retirement systems on which they rely for an important part of their future financial security.

Adopted August 9, 2000

RESOLUTION 1999-04 - DISCLOSURE OF SOFT DOLLAR ACTIVITIES

WHEREAS, soft dollar practices have historically resulted in substantial amounts of financial activity going undisclosed to and by plan sponsors; and,

WHEREAS, the accounting standard-setting bodies and governmental agencies have chosen to essentially ignore this area, resulting in the absence of authoritative guidance regarding the type of information to collect and how and to whom such information should be reported; and,

WHEREAS, the clarity and transparency of disclosure of all money management and brokerage arrangements is essential to the responsibilities of plan fiduciaries; and

WHEREAS, plan sponsors and trustees have the power to assert their authority in these matters through their contractual arrangements with the money management, brokerage, and consulting community; and

WHEREAS, the Council of Institutional Investors has developed recommended practices for the collection and distribution of information by trustees to more fully disclose the cost of doing business, and to facilitate assessments of whether or not all assets (which include their soft dollars) are being properly managed and whether or not there are conflicts of interest between their money managers and asset consultants;

NOW, THEREFORE BE IT RESOLVED, that the National Association of State Retirement Administrators endorses the Council of Institutional Investors’ Suggested Disclosures for Trustees to Request of Money Managers, Suggested Disclosures for Trustees to Request of Investment Consultants, and Suggested Disclosures by Trustees to All Interested Parties; and,

BE IT FURTHER RESOLVED, that the National Association of State Retirement Administrators encourages state retirement system plan fiduciaries to consider these recommendations in adopting or revising their own disclosure guidelines, with the aim of furthering the confidence public plan participants have in the financial workings of the state retirement systems on which they rely for an important part of their future financial security.

Adopted August 11, 1999

RESOLUTION 1999-06 - Code of Ethics

WHEREAS, public pension funds in the United States play a vital role in ensuring the financial security of millions of public servants; and

WHEREAS, the full confidence of public pension system members and beneficiaries in the integrity of decisions affecting their retirement assets and administration of the system is vital to the accomplishment of these systems’ missions; and

WHEREAS, those who are entrusted with the investment and management of public pension assets are vested with the highest legal and moral responsibilities.

NOW, THEREFORE, BE IT RESOLVED that the National Association of State Retirement Administrators encourages its plan members to adopt a Code of Ethics, including the following standards:

1. Exclusive Loyalty: Public fund fiduciaries should abide by the highest ethical Standards, making all decisions in the best interest of system participants, placing those interests above all other interests.
2. Decision Making: Public fund fiduciaries should make decisions in a fair, honest and open manner, sharing information with fellow fiduciaries and all interested parties to enhance the quality of the system’s decision making process.
3. Personal Conduct: Every public system’s fiduciaries, including those who are under contract to provide services to the system, should take all reasonable steps necessary to ensure a full and accurate understanding of the trust, conflict of interest, financial disclosure and other ethics related laws applicable to the system. When giving or accepting gifts, fiduciaries should be aware of both the legality and appearance of influence that such gifts may create. When seeking or approving administrative expenses for the system, fiduciaries should balance the benefit of the expenditure against any perception of personal benefit to the fiduciary.
4. Relationships with Others: Every public system’s fiduciaries should carefully review the trust and conflict of interest laws applicable to the system to ensure that the fiduciary’s relationships with other parties are not incompatible with the duties to the system

Adopted August 11, 1999

RESOLUTION 1998-01 - States' Rights and Unfunded Mandates

WHEREAS, the United States Constitution assigns certain responsibilities to the federal government and reserves the balance to the States; and,

WHEREAS, federal intervention into or preemption of the legitimate role of State authorities would be a drastic departure from the principles of federalism and would be an encroachment on State sovereignty; and,

WHEREAS, new challenges to federalism continue to surface in both the congressional and executive branches of the federal government that either impose unfunded mandates or preempt traditional State and local authority;

NOW, THEREFORE BE IT RESOLVED that the National Association of State Retirement Administrators supports efforts to work with the national government as partners in our federal system, but opposes federal intervention in areas that rightfully belong to the States, efforts of the federal government to unduly limit States’ autonomy, efforts to usurp State governments’ and their political subdivisions’ authority to perform their responsibilities and meet the needs of their citizens, and the imposition of costly or unwarranted federal mandates on States and their political subdivisions.

Adopted August 12, 1998

RESOLUTION 1998-03 - Social Security Resolution

WHEREAS, the United States Constitution assigns certain responsibilities to the federal government and reserves the balance to the States; and,

WHEREAS, beginning in the 1930’s when Social Security was established, public employees were excluded from participation; and,

WHEREAS, beginning in the 1950’s, state and local government pension plans were given the option to elect Social Security coverage; and,

WHEREAS, many state and local government pension have elected to complement their own pension programs through coverage under Social Security; and,

WHEREAS, other public pension plans decided not to participate in Social Security but rather provide their own independent programs of retirement benefits; and

WHEREAS, mandatory coverage of newly hired state and local government employees will seriously disrupt the financial standing of these systems, to include reduction in benefits or increased contributions; and

WHEREAS, there is no evidence to support that mandatory coverage of newly hired public employees will solve the funding problems of the Social Security system; and

WHEREAS, there are serious constitutional and administrative problems with mandatory coverage;

NOW, THEREFORE, BE IT RESOLVED that the National Association of State Retirement Administrators supports the affiliation of public pension plans with Social Security on a voluntary basis; however, opposes mandatory coverage of public employees under Social Security.

Adopted August 12, 1998

RESOLUTION 1996-01 - Federal Taxation of Public Employee Retirement Systems

WHEREAS, public employee retirement systems are designed to provide state and local government employees with a secure savings for retirement, most frequently through a defined benefit plan, and these retirement systems now provide a significant part of the capital necessary for continuous economic growth in the U.S., and,

WHEREAS, federal taxes on earnings and contributions of retirement systems are being deferred rather than exempted as the employee will pay taxes on these amounts during retirement, and,

WHEREAS, taxation of the earnings, transactions, and contributions to public employee retirement systems is counter productive to the national interests of increasing retirement savings and, further, could result in double taxation as the employees of state and local governments pay taxes on their pension benefit payments after their years of public service, and,

WHEREAS, many public employee retirement systems are legally prohibited from reducing pension benefits and, therefore, the state or local government would need to increase contributions to the plan if any amount were diverted such as to pay federal taxes.

NOW, THEREFORE, BE IT RESOLVED that the National Association of State Retirement Administrators continues to oppose the taxation of public employee retirement system earnings, transactions, and contributions.

Adopted August 7, 1996

RESOLUTION 1996-02 - Adequate Funding of Public Employee Retirement Systems

WHEREAS, public employee retirement plans are designed to provide state and local government employees with a secure savings for retirement, most frequently through a defined benefit plan, and it is a fundamental objective of public employee retirement systems to establish and receive contributions which will remain approximately level as a percent of payroll over time, and.

WHEREAS, the importance of adequate funding of public employee retirement systems is recognized as a goal for the pension system to pay future benefits, for the sponsoring governmental entity to minimize future liabilities, and for the Congress to encourage additional savings nationwide, and,

WHEREAS, the funds invested in public employee retirement systems are trust funds dedicated to pay future pension benefits.

NOW, THEREFORE RE, BE IT RESOLVED that the National Association of State Retirement Administrators opposes any effort by a state or local government to divert pension fund dollars to relieve budget shortfalls in other areas of state and local government.

AND, BE IT FURTHER RESOLVED that the National Association of State Retirement Administrators urges the enactment of legislation providing that pension funds be used only for the exclusive benefit of the plan members, retirees and beneficiaries.

Adopted August 7, 1996

RESOLUTION 1996-06 - Retirement System Fiduciary Investment Standards

WHEREAS, state and local public employee retirement systems manage assets to provide retirement income to millions of workers and retirees and those participants rely on the trustees and other fiduciaries to invest these assets for the exclusive benefit of the plan members, retirees. and beneficiaries, and,

WHEREAS, the vast majority of public employee retirement systems follow a prudent investment standard or state statutes, and,

WHEREAS, employers generally bear the cost of investment under-performance in a defined benefit plan. the most popular type of plan in the public sector. and.

WHEREAS, several proposals that have come before Congress have stipulated acceptance of below market rates of return for defined benefit plans, which would violate fiduciary duties, compromise the plans' risk-return standards, and produce less than competitive rates of return.

NOW, THEREFORE, BE IT RESOLVED that the National Association of State Retirement Administrators supports strong fiduciary standards set in law by state and local governments and supports investment strategies for which the paramount goal is the financial security of pension fund assets.

AND, BE IT FURTHER RESOLVED that the National Association of State Retirement Administrators opposes any attempt, either implicitly or explicitly, to direct or influence state and local government retirement systems to make investments that circumvent the trustees' fiduciary responsibility.

Adopted August 7, 1996