What Are Other Funds Doing?”

I often hear this question at trustee board meetings. More often than not, it arises from a decision on funding or investment policy.  When asked, it is expected that “the professionals” (i.e.  attorney, actuary or consultant) will pull from a trove of information and divine “the answer”  The fact is, funding policy (dictated by the fund’s sponsor) and investment policy (as determined by the fund’s board) can be as varied as fingerprints. 

In fiduciary training sessions, we always start with the premise that a fiduciary’s principal role is that of “decision maker.” Actuaries, consultants and managers provide information, part factual, part opinion.  Counsel provides a legal framework, either statutory or under a developed body of case law.  The fiduciary then evaluates these facts within the framework to reach his or her decision.  When done correctly, the board demonstrates what is commonly referred to as “procedural prudence” i.e. reaching a decision after adherence to an established procedure designed to evaluate appropriate information within an established legal framework.  

Information is a tool.  Correct, objective information is an indispensible tool.  This Summary of the Census Bureau’s Annual Survey of Public-Employee Retirement Systems: State-Administered Pensions released January, 2012 provides some answers our inital question.  It is the 2010 report of 222 state government pension systems with defined benefit plans. As noted in the Summary, for the purpose of Census Bureau statistics, the term “state government” refers not only to the executive, legislative, and judicial branches of a given state, but it also includes agencies, institutions, commissions, and public authorities that operate separately or somewhat autonomously from the central state government, but where the state government maintains administrative or fiscal control over their activities, as defined by the Census Bureau.  The Census Bureau collects this data by law under Title 13, U.S. Code, Sections 161 and 182.  While the practices of other funds are not dispositive to the prudence of a given decision, the information in this report can be a useful resource to the fiduciary decision-maker.