Best Practice Policies for Trustees and Pension Systems - AFSCME

What does the proposed policy do?The proposed policy sets forth a recommendedlist of responsibilities and corecompetencies that are common to all boardmembers of a public retirement system.What is the source of the policy language?The proposed policy builds upon existingpolicies in place at the California StateTeachers Retirement System (CalSTRS) andthe San Diego City Employees’ RetirementSystem (SDCERS). 3 Additional referencepoints include the California Public Employees’Retirement System (CalPERS) Board ofAdministration Code of Ethics, as well as theClapman Report.2. BOARD MEMBER EDUCATIONThe Clapman Report recommends that:“Trustees, on a regular basis, should obtaineducation that provides and improves corecompetencies, and that assists them inremaining current with regard to their evolvingobligations as fiduciaries.” 4 The challengesto fulfillment of this recommendationare twofold. Firstly, education programsmust be identified or developed that addressone or more of the above competencies.Secondly, there must be an evaluation of thetrustee’s own needs, given his or her knowledge,experience, the nature of issues facingthe board and board responsibilities (i.e.,committee membership, committee chair,board chair or vice chair).There is no lack of educational opportunitiesavailable to public pension fund trustees,and trustees as a rule are diligent aboutattending them. However, while trustees“devote considerable time and effort to3. In the aftermath of the many problems facingSDCERS in the early part of this decade, the systemhas implemented a number of significant governancereforms and is gaining recognition as an exemplar ofbest practices in many areas.4. Clapman Report at 10.education, primarily by attending a varietyof conferences that are geared to publicfunds and that focus on investments,” suchprograms as a rule “neither encourage trusteesto develop the broad vision they need toset policy, nor do they provide the practicalgrounding a board needs to oversee a fund’soperations.” 5 Also, in our view, many programsdo not maximize “in the seat” education.They may rely heavily on for-profitcommercial sponsorships. Programs alsomay tilt the balance toward recreation andentertainment.What does the proposed policy do?The proposed education policy sets fortha comprehensive approach to educatingpension fund trustees so they candischarge their duties with the requisiteknowledge, skills and abilities. It identifiesa new board member orientation processdesigned to get trustees quickly “upto speed,” as well as a mentoring processfor those new board members who desirea mentor. It sets forth a general curriculumfor trustees in their first and secondyears of service as well as ongoing educationthereafter, including fiduciary andconflicts of interest training. Finally, itincludes a self-assessment tool to enabletrustees to identify their own areas of educationalneed so they can work effectivelywith system staff to obtain such training.What is the source of the policy language?The education policies of several publicretirement systems were reviewed and usedin developing the recommended policy language,including those of CalSTRS, SDCERS,the Colorado Public Employees’ RetirementAssociation (CoPERA), the Los AngelesFire and Police Pension Plan (LAFPP) and5. Good Pension Governance: An Advocate’s Guide forImprovement, John Por and Tom Ianucci, The NAPPAReport (Volume 13, Number 5, February 2001).6American Federation of State, County and Municipal Employees, AFL-CIO