Public retirement systems and the benefits they administer are established in statute and their assets held in trust. For state-sponsored retirement systems, governance typically involves the governor, legislature, retirement system board of trustees, and staff to whom the board has delegated administrative responsibility. Types and degrees of responsibility and authority vary among boards, depending mostly on differences in state laws.
Generally, public retirement boards are responsible for oversight of the system's administration, including ensuring compliance with:
State laws and regulations
Applicable federal requirements, such as those pertaining to tax qualification of the trust and investment of assets.
The system's own policies and procedures and strategic plan
Pension board trustees are fiduciaries, and as such, are responsible for acting solely in the interest of plan participants. Board responsibilities also include appointment and oversight of a chief executive officer and sometimes other top executive positions; appointment or approval of consultants; approval of a budget; oversight or approval of payment of benefits; hearing appeals regarding disputes for issues within the board’s purview; and ensuring that systems are in place to report and monitor retirement system activities and processes.
Other responsibilities held by some boards include oversight of fund investments, setting of actuarial assumptions, approving contribution rates, approving benefit levels and eligibility criteria, and proposing or recommending statutory revisions.
A majority of state-sponsored public retirement systems have responsibility for oversight of investing pension fund assets; approximately 30 percent of state-sponsored retirement systems do not have such responsibility. In such cases, that responsibility is granted either to a sole trustee (as in Connecticut, Michigan, New York, and North Carolina), or to a separate entity, such as the Massachusetts Pension Reserves Investment Management Board, the Minnesota State Board of Investment, and the Oregon Investment Council.
The median public retirement system board size is nine. The composition of public retirement system boards varies widely in terms of constituent groups that are represented; whether members are appointed, elected, or serve ex-officio; and what knowledge and experience, if any, are required.
Most public retirement system boards include participant representatives, most often trustees who are active (working) employees and members of the retirement system. Many boards also have one or more retiree representatives and one more ex-officio members. These tend to be state treasurers, budget officers, superintendents of public education, etc., or designees of such officials.
Most boards also have trustees who are both elected and appointed. Governors appoint most trustees who are appointed; legislatures or legislative leaders make some appointments, as do representatives of certain participant groups, such public school teachers or firefighters. Elected members predominantly are active and retired members of the system, elected by their fellow participant group members.
GFOA Best Practices, Government Finance Officers Association
Fiduciary Duty Guidance, Keith Johnson, Susan Gary, and Cynthia Williams, Harvard Law School Forum on Corporate Governance and Financial Regulation
How Can Trustees Learn to Trust? Achieving the right balance in decision-making between the board and executive management, Funston Advisory Services, March 2015
Public Pension Governance That Works, Funston Advisory Services, March 2014
Report on a public pension oversight body, EnnisKnupp and New Mexico Legislative Council Service, January 2010
Best Governance Practices for Public Retirement Systems, National Conference of Public Employee Retirement Systems, May 2019
Governance of Public Employee Post-Retirement Benefits Systems, Government Finance Officers Association