Governance

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 on tax qualification of the trust and investment of assets. 

• Industry standards, such as those set forth for accounting, financial reporting, and actuarial valuations

• The system's policies and procedures and strategic plan

Board Roles

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.

Board Structure

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.

Number of Trustees on Public Retirement System Boards

Most public retirement system boards include participant representatives, most often trustees who are 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 as public school teachers or firefighters. Elected members predominantly are active and retired members of the system, elected by their fellow participant group members.