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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.
Adopted August 10, 2005
WHEREAS, public pension systems
collectively invest assets in excess of two trillion
dollars on behalf of nearly twenty million employees
and retirees of state and local governments; and
WHEREAS, such large pension systems invest
in nearly every major corporation and global
marketplace; and WHEREAS, the heightened
awareness about national security risks after
September 11, 2001 has furthered the need for
investors, particularly large investors, to ensure
they are not unwittingly supporting terrorist
activities or human rights violations through such
investments; and
WHEREAS, the U.S. federal government has
complex, multi-faceted policies relative to the
countries under sanction for sponsoring terrorism or
human rights violations, which utilize diplomatic
and economic means to encourage nations to act
responsibly and permit certain business
relationships in these designated countries that are
believed to further U.S. foreign policy goals; and
WHEREAS, the federal government's
intelligence, military, diplomatic and financial
regulatory communities are best positioned to
identify, monitor and report on foreign and domestic
companies that may be engaging in activities that
are in conflict with U.S. foreign policies and
humanitarian objectives, and to impose the
appropriate sanctions; and;
WHEREAS, an uncoordinated approach by the
investment community in attempting to influence
companies that conduct business in sanctioned
nations will result in inconsistent and ineffective
actions, and could potentially penalize companies
that are acting in the interests of U.S. policy in
foreign nations, thus penalizing shareholders and
U.S. domiciled employees of those companies;
NOW, THEREFORE, BE IT RESOLVED, that the
National Association of State Retirement
Administrators supports efforts by the U.S.
Departments of State, Treasury and Commerce, in
coordination with each other and the U.S. Securities
and Exchange Commission, to identify domestic and
international companies violating U.S. national
security and humanitarian policies, and provide
proper guidance to U.S. investors so that such
companies may be denied access to the U.S. capital
marketplace.
Amended Resolution 2003-02
Adopted August 10, 2005
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:
- 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.
- more 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.
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:
- 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.
- Every retirement system is different in design.
Thus, IRS activity in the area of phased retirement
should allow retirement systems to have such programs.
- 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.
- 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.
- Distribution of benefit should only be made after
an individual is eligible for a retirement benefit
or allowance.
- 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:
- 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.
- 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.
- 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.
- 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
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