Pension fund administration generally falls within
the purview of a system’s retirement board. Elected board members
come from all facets of life and the responsibilities may or may
not be foreign to the elected or appointed trustee.
Nonetheless, the requirement that a pension fund operate within the
cornerstones of efficient and effective administration is essential.
Accountability is paramount in the public sector.
The assets of the fund belong to the trust and by design are earmarked
by law for the plan participants and their beneficiaries. The genesis
of public scrutiny comes not from an inherent mistrust of the trustees,
who by the very nature of their name connote a superior duty of care.
Rather, the mistrust is often associated with the involvement of
government. There is often no distinction between the public’s
opinion of a trustee and that of a government official.
Particularly today as we are undergoing the most significant transformation
of government-from strong central government which people perceive
to lend itself to corruption, waste and inefficiency, to a government
of local control where accountability can be measured, and efficient
and effective management can be restored.
The resulting impact of the transformation of government
does not spare the trustee. Instead, the scrutiny has intensified,
particularly in light of recent debacles in the investment of governmental
funds by entities lacking in oversight and efficient administration.
Even though these failures are not in the pension domain, still the
perception persists that since trustees are overseeing funds representing
billions of dollars, they are grouped together and are guilty by
monetary association. Aggravating the situation are isolated instances
of trustee abuse which are exploited by the media resulting in the
public’s perception
that there is a need to regulate the administration of public pension
funds. The public perceives that there is a need to avoid what has
transpired in central government, to avoid mismanagement, waste and
inefficiency.
Trustees not only have to deal with accountability demanded by the
public at large, they must also be accountable to their peers, to their
participants and beneficiaries. This accountability not only extends
to their role of representation, but it involves a myriad of responsibilities
in order to effectuate the type of efficient administration expected
by the law and by the constituents of the fund. To avoid the perception
of misuse of influence the trustee must be willing to adopt rules and
regulations that inhibit that type of activity. Furthermore, trustees
must adopt policies and procedures that eliminate waste and embrace
the concepts of sound cost effective measures, both as to their administrative
staffs and as to their personal involvement as trustees. Among the
major areas of responsibilities that trustees must deal with are the
following: the establishment of investment objectives, policies and
guidelines to regulate the investment of the pension assets; the adoption
of accounting standards and controls; the adoption of sound actuarial
standards; the formation of procedures for internal reporting and control;
the duty of providing benefits in a responsible fashion that does not
cause an undue burden to the taxpaying community nor to the individual
member; and compliance with the overall duties of the office.
Trustees must have the flexibility to interface with other members
of the pension community whose actions can greatly impact the operation
of a fund, to wit, auditors, consultants, financial advisors, oversight
boards, and state and local government personnel and officials.
When government downsizes, effective management and administration presents
a significant challenge which must be met and which must be preserved
from erosion due to undue influence, fraud, waste or abuse.
