Article IV

"Efficient and effective administration and investment management is basic to IMRF. Misuse of influence, fraud, waste or abuse is unacceptable conduct."

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.

Rules and Interpretations

Rule 4.01 Notice and Hearing. Notice and opportunity to be heard are core components necessary to be provided to participants when benefits may be deprived by the action of a board of trustees.

Three factors should exist in administrative proceedings impacting benefits of IMRF members:

1. Pre-termination notice,
2. An opportunity to respond in writing prior to the termination, and,
3. A post-termination evidentiary hearing.