IMRF Ethics Code

for IMRF Members, IMRF Employers, Public Officials, Media and General Public


IMRF is administered by a Board of Trustees comprised of representatives of sponsoring employers, participants and annuitants. The members of the Board of Trustees and IMRF staff hold the highest positions of trust because they are stewards of retirement assets. They are also persons who by their mere position are required to exercise diligence and prudence. Their duties require attention to fiduciary standards. Those fiduciary standards extend to consultants and financial advisors who serve in the administration of the goals and objectives of IMRF.

Mission Statement

(40 ILCS 5/7-102)

It is the mission of this Fund to efficiently and impartially develop, implement and administer programs that provide income protection to members and their beneficiaries on behalf of participating employers in a prudent manner. (Adopted January 28, 1997)

Guiding Principles

  1. Service to the beneficiaries of IMRF is the primary function of the Board of Trustees and IMRF staff.
  2. The Board of Trustees and IMRF staff is ultimately responsible to the beneficiaries of IMRF.
  3. In those situations where the law is not clear, the best interests of IMRF beneficiaries must be served.
  4. Efficient and effective administration and investment management is basic to IMRF.
  5. Safeguarding the trust of fund participants is paramount.
  6. Service to IMRF participants demands fulfilling fiduciary responsibilities.
  7. Timely and energetic execution of fiduciary responsibilities is to be pursued at all times by the IMRF Trustees and staff.

Article I

"Service to the participants of IMRF is the primary function of the Board of Trustees and IMRF staff."

The Board of Trustees and IMRF staff have the obligation not only to safeguard the funds on which the plan participants’ security depends, but also to promote their rights, and to ensure the necessary services are provided for all plan participants and their beneficiaries.

This premise is embodied in the exclusive benefit rule of fiduciary law and the plan participants and beneficiaries are the constituencies to whom trustees and staff are accountable. Adherence to the fiduciary service obligation of trustees is critical to our society in which accumulation and public commitment of resources is essential. Without the commitment to the fiduciary mandate that trustees may be relied upon to put their participants ahead of themselves, participants and employers would not be willing to commit funds to them for management. Such reticence would lead to a relatively inefficient allocation of resources, with resulting detriments to society as a whole. Consequently, the commitment by trustees to the service ideal is critical to society.

Rules and Interpretations

Rule 1.01 Trustees, and staff must serve with the highest degree of loyalty to IMRF, the plan participants and the present and future beneficiaries

It is clear that the duty of loyalty should extend beyond a prohibition of self-dealing. Even if a trustee or staff member has no personal stake in a transaction, the duty of loyalty should bar him or her from acting in the interest of third parties at the expense of participants.

Rule 1.02 General Welfare

The purpose of a retirement system is to establish a fund so that employees who serve a given number of years may then have an income during retirement, with the resulting beneficial effects upon the employee and the family, the institution they serve, and upon the social and economic welfare of society.

If retirement beneficiaries are divided into separate classes that bear some reasonable relationship to the objective sought to be accomplished, then trustees and staff should avoid individual discrimination by treating all persons within the same class the same way.

Rule 1.03 Entitlement

Property interests are created by existing rules or understandings that stem from an independent source such as state law. These types of beneficiary entitlements should be vigorously defended by IMRF.

Balancing the real needs versus the perceived needs of plan participants and beneficiaries is crucial to the function of trustees and staff. The mere request for a favorable ruling by either party does not, in and of itself, justify the act nor does it accord it higher credibility than claims made by others. Decisions must not be made in isolation. They must be weighed against the overwhelming body of applicable law in order that the intent, the legality of the request and the motivation can be determined. Trustees and staff must have the intestinal fortitude to stand up to the claimant and challenge those actions not based on the law.

Article II

The Board of Trustees and IMRF staff are ultimately responsible to the participants of IMRF

Participants rely on and expect trustees and staff to act with integrity, objectivity, and due care. Integrity is an element of character. Integrity will not accommodate deceit or subordination of principle. Integrity is measured in terms of what is right and just. Integrity requires a trustee to observe the principles of objectivity, independence and prudence. Objectivity is a state of mind, a quality that lends value to a trustee’s services. It is a distinguishing factor in the profession of public pension administration.

The principle of objectivity imposes the obligation to be impartial and intellectually honest. Independence precludes relationships that may appear to impair a trustee’s objectivity in rendering fiduciary services. Subordination of judgment is to be avoided.

The maintenance of objectivity and independence requires a continuing assessment of fiduciary responsibility.

Possession of these attributes by trustees and staff will allow them to serve the uncompromising interest of participants of public pension funds in a responsible manner.

Rules and Interpretations

Rule 2.01 Trustees and staff must remove personal bias and function with total objectivity

Trustees and staff are bound to the principle of fairness for, by their work, the balance of a member’s dedicated career is molded to the obligation of the employer to provide security in retirement.

Trustees and staff as decision makers must be persons of conscience and intellectual discipline who shall objectively and fairly judge matters that affect participants of IMRF.

Trustees or staff can be shown to be biased if he or she does not have the ability to set aside personal feelings in deciding a matter involving a participant of IMRF.

The prejudice of a single trustee will taint the action of an entire board. To avoid this result the trustee should recuse him or herself from the matter at hand.

Rule 2.02 Arbitrary and capricious interpretations of IMRF statutes must be prevented by an exercise of independent judgment supported by substantial evidence.

The interpretation of the Illinois Pension Code made by trustees or staff should neither be irrational nor unreasonable.

Article III

In those situations where the law is not clear, the best interests of IMRF participants must be served. Conscience is critical. Good ends never justify immoral means.

Increasingly, we as a society look at the law to define right and wrong, moral and immoral; the notion that law sets the floor rather than the ceiling receives little credibility. By the same token, the tendency to focus on the law leads to a withering of interest and concern for the ethical. The implicit assumption increasingly becomes that, if government has not forbidden it, it must be acceptable. This results in increased dependence on legal process to define the limits, and the game becomes one of avoidance and loophole closing. The result is fundamental change in the mores of society.

Trustees and staff must decide, consciously and deliberately, what role ethical considerations will play in the decision making they are required to undertake. What is legal and what is ethical are not synonymous. If we tend to resort as trustees and staff to legality as our birth line, then ethics will wane and the legal technician will flower. If we take this route we are not being ethical.

We avoid responsibility we should not avoid. Perhaps we would not be judged to be immoral but certainly we would be amoral or lacking moral fiber.

Maintaining the trust of those we serve requires more than adherence to minimal legal standards.

Rules and Interpretations

Rule 3.01 Trustees and staff must call upon the cornerstones of fair play in evaluating every decision made as a trustee or staff member. When the law is unclear, the decision must rest with the analysis of the evidence viewed against the backdrop of one’s conscience.

A fiduciary relationship exists where there has been some special confidence reposed in one who in equity and good conscience is bound to act in good faith and in regard to the one reposing confidence.

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.

Article V

Safeguarding the trust of fund beneficiaries is paramount. Conflicts of interest, bribes, gifts, or favors which subordinate IMRF Trustees or staff to private gains are unacceptable.

One can never catalogue all the conduits by which trustees or staff may be induced to manage participant’s assets in ways that benefit the trustee, staff member or a third party rather than the participants. The variations on this theme are endless. However, defining how trustees and staff should act in such situations requires no novel interpretation. Rather, it requires recognition of the fact that trustees and staff cannot act in accordance with the morals of the market place but must instead meet the higher standards of loyalty, integrity and prudence.

Under the duty of loyalty, trustees and staff are required to act in the best interest of another. Fullness of disclosure, honesty of intentions, the payment of an adequate price, the lack of damages and in no cases ethical excuses. Honest but imprudent trustees and staff can dissipate the assets of a fund at the same speed as dishonest trustees and staff.

The relation between trustees or staff and participants is particularly intimate. The participant is obliged to place great confidence in the trustee and staff. The trustee and staff have a high degree of control over the affairs of the participant. The relationship should be treated as one requiring the highest of moral and ethical commitment.

Rules and Interpretations

Rule 5.01 Trustees and staff must safeguard assets for the current and future generations of participants

The trustees and staff have an obligation to manage IMRF funds so as to enable IMRF to meet its obligations not only to retirees, but also to those scheduled to retire in the future, (members whose pension and annuity rights will be earned over the years of active service).

To exhaust assets of an actuarially underfunded pension system on a single class of participants violates a fiduciary obligation.

Rule 5.02 Safeguarding Assets

Trustees and staff are charged with statutory and common law duties to exercise fiduciary responsibilities over assets of the fund.

Trustees and staff should only distribute assets from IMRF for the benefit of the participants.

Rule 5.03 Conflict of Interest

As fiduciaries, the trustees and staff must discharge all their duties solely in the interest of the participants and beneficiaries for the exclusive purpose of (1) providing benefits to participants and their beneficiaries; and (2) defraying reasonable expenses of administering IMRF. Trustees and staff must act honestly and with undivided loyalty to the trust and must serve the interest of all beneficiaries excluding self interest.

Trustees and staff must not deal with the IMRF assets for their individual benefit.

Rule 5.04 Statements of Economic Interests

Trustees must file annual statements of economic interests with the DuPage County Clerk, following the requirements of Article 4A of the Illinois Governmental Ethics Act.

Article VI

Service to IMRF participants demands a special sensitivity to the qualities of justice, courage, honesty, equity, competence and compassion.

Forms of conduct permissible for those acting at arms length should be forbidden to trustees and staff bound by fiduciary ties. A trustee or staff member is held to something stricter than the morals of the market place. Not honesty alone but fine, exacting observance of honesty is the standard of behavior. Undivided loyalty without disintegrating erosion of particular exceptions to the interests of participants is what is required.

Good faith requires that personal biases be cast aside and the objectivity regarding plan participants and their beneficiaries be uppermost in the conduct of the trustee and staff. Good faith requires that the trustees and staff have understanding, experience, and the ability to appreciate the nature of the decisions that are required. Trustees and staff are required to exercise care, skill and diligence.

Recognizing that others may lack the political courage and willingness to make tough decisions and avoid making pension assets vulnerable, public pension trustees and staff must be ever vigilant to protect against erosion of public pension fund assets. They must insist on funding levels, from whatever source, that guarantee the employer’s promise of security and efficient administration of investments and adequate funding levels.

Rules and Interpretations

Rule 6.01 Trustees and staff must protect the retirement fund by complying with every provision of the trust document as created by the Illinois Pension Code.

Trustees and staff shall protect IMRF. In carrying out this mandate, trustees and staff are held to the highest standards of fiduciary conduct.

A practical application of a protection duty requires that trustees and staff meet the responsibility to maintain the terms of the trust as spelled out in the statute.

Article VII

Timely and energetic execution of fiduciary responsibilities is to be pursued at all times by the IMRF Trustees and staff

The quest for excellence is the essence of due care. Due care requires trustees and staff to discharge fiduciary responsibilities with competence and diligence. Competence is derived from a synthesis of education and experience. It begins with a mastery of a common body of knowledge which is required of all trustees and staff.

Accordingly, trustees and staff have the duty to educate themselves on a continuing basis on all aspects of fund operation, in order to be in compliance with the prudent person/expert standard to which they are called, and to be involved in those functions which require action in the operation of fund business.

Rules and Interpretations

Rule 7.01 Trustees and staff should act in a prudent manner which includes:

  1. Employing proper methods to investigate, evaluate and structure the investment;
  2. Acting in a manner as would others who have a capacity and familiarity with such matters; and
  3. Exercising independence when making investment decisions.

Rule 7.02 Trustees and staff have an obligation to learn, comprehend and remain abreast of all component aspects relating to the discharge of their duties through attendance and participation in classes, workshops, forums, seminars and conferences which afford the trustees and staff the opportunity to become familiar with the necessary expertise to exercise independent enlightened judgment on matters regarding IMRF business.

Trustees must obtain, at a minimum, at least 8 hours of ethics and fiduciary training annually. This training may be on topics of ethics, finance, investments, actuarial and accounting principles, and other issues of pension fund administration.

Rule 7.03 When a trustee or staff member does not possess the education, experience, or skill required to make a decision concerning any operation of the plan, he or she, due to the applied prudent standards of fiduciary trust law, has an affirmative duty and an obligation to seek independent counsel in making the decision.

The failure to seek outside counsel is imprudent when, under the circumstances then prevailing, a prudent trustee or staff member acting in like capacity and familiar with such matters would seek such counsel.

A trustee or staff member unfamiliar with an unusual or difficult investment is charged with making an independent inquiry into the merits of the particular investment rather than relying solely upon the advice of others.

Standards of Conduct and Conflict of Interest

IMRF Trustees and staff shall not:

Interpretation of Policy

Determination of Substantial Interest

An individual has a substantial interest in a business entity if he or she or his or her spouse:

  1. Has a controlling interest in the business;
  2. Owns more than 10 percent of the voting interest in the business entity;
  3. Owns more than $25,000 of the fair market value of the business entity;
  4. Has a direct or indirect participating interest by shares, stock, or otherwise, regardless of whether voting rights are included, in more than 10 percent of the profits, proceeds, or capital gains of the business entity;
  5. Is a member of the board of directors or other governing board of the business entity;
  6. Serves as an elected officer of the business entity; or,
  7. Is an employee of the business entity.

Introduction to Policy on Business and Educational Functions

The Board of Trustees acknowledges it is responsible for the administration and operation of a specialized business involving great sums of money for the exclusive benefit of the plan participants and beneficiaries of the trust (Fund), and are responsible for defraying reasonable expenses which arise from the performance of duties and responsibilities under applicable trust law and universal tenets of fiduciary responsibility.

In the context of running the business of retirement systems and satisfying on an ongoing basis the requirements embodied in the mandated standard of prudent/expert person rules of law, one major conduit by which this is accomplished is through travel.

One cannot, individually or collectively, adequately discharge fiduciary duties in a cloistered state. Trustees cannot rely solely on others to execute their fiduciary functions. While authority can be delegated, fiduciary responsibility rests solely on the shoulders of the trustees.

The Board of Trustees strongly encourages attendance and participation in business and educational functions which will further the performance of duties and responsibilities under applicable trust law. At a minimum, the trustees are required to attend at least eight hours of ethics and fiduciary training per year. Trustees shall annually certify to the Board compliance with this training requirement.

Examples of Categories and Definitions

  1. Business Operations
    1. Business Meetings
      • Gatherings for discussions or negotiations on potential investments.
      • Formal litigation procedures.
      • Internal retreats of Board with or without advisors or consultants.
      • Instructional gatherings to develop business acumen.
    2. Due Diligence
      • Personal investigatory appearances by board members to the actual site(s) of a prospective venture, which could include the operational office of a prospective new advisor, consultant or business venture.
      • This function should be repeated with existing relationships particularly when a material change has occurred, such as a change in personnel.
    3. Site Inspections
      • Primarily reserved for real estate investments in order to "kick the tires", meet the tenants and the property management teams, check out the condition of the building(s) and other data relating to any proforma items of the investment.
    Educational Operations
    1. Conferences
      • Usually week long events of an annual nature dealing with a multitude of topics and current trends and developments in the pension industry.
      • One of the best forums within which to interact with peers from other jurisdictions (networking).
    2. Workshops and Symposiums
      • Events of two to three days of sessions involving discussions surrounding a single theme- or a specific topic or subject matter.
  2. Trustee Ethics and Fiduciary Training

    Trustees are required to attend at least 8 hours of ethics and fiduciary training annually. Each trustee is expected to maintain adequate documentation of such training, received in increments of no less than one-half hour of actual instruction.

    Training may be conducted during Board and Board Committee meetings and Board Roundtables, provided the topic is clearly delineated as trustee ethics and fiduciary training.

    Training may be undertaken at independent conferences, seminars and symposiums.

    Trustee ethics and fiduciary training includes presentations by staff or consultants or training at outside seminars and conferences on topics of:

    1. IMRF ethics and travel policies and best practices in the industry;
    2. Fiduciary duties;
    3. Investment issues including asset allocation, training on potential investment vehicles, investment procedures, and best practices;
    4. Illinois pension Code;
    5. Actuarial issues, including presentations concerning the annual actuarial report, gain/loss analysis, and triennial experience analysis;
    6. Medical matters to assist in hearing disability claims;
    7. New trustee orientation; and
    8. Other issues of pension fund administration, as determined by the Board.

    Not included are presentations covering:

    1. IMRF processes and procedures;
    2. Board agenda items unless specifically delineated as a training program.