Pension and Benefit Administration

• Best Practices

  Com­mu­ni­cat­ing Health-Care Ben­e­fits to Employ­ees and Retirees

  Gov­ern­ments should devel­op effec­tive com­mu­ni­ca­tion strate­gies that sup­port their health-care ben­e­fit goals.

• Best Practices

  Sus­tain­able Pen­sion Ben­e­fit Tiers

  Juris­dic­tions con­sid­er­ing new ben­e­fit tiers should exam­ine the fol­low­ing issues: A gov­ern­ments author­i­ty to revise its pen­sion ben­e­fits, the over­all goals it wants to accom­plish by doing so, and the effect of such changes on the work­force; and the finan­cial impacts result­ing from changes to pen­sion plan design, as well as the effects on employees.

• Best Practices

  Devel­op­ing a Pol­i­cy to Par­tic­i­pate in Secu­ri­ties Lit­i­ga­tion Class Actions

  Every Pub­lic Pen­sion Plan should devel­op and adopt a pol­i­cy set­ting forth pro­ce­dures for mon­i­tor­ing and par­tic­i­pat­ing in class action secu­ri­ties litigation. 

• Best Practices

  Devel­op­ing a Pol­i­cy for Retire­ment Plan Design Options

  State and local gov­ern­ments should have a pol­i­cy state­ment that will guide ongo­ing plan design decisions. 

• Best Practices

  OPEB Gov­er­nance and Administration

  Spon­sor­ing gov­ern­ments should estab­lish a clear, well-doc­u­ment­ed gov­er­nance struc­ture to guide gov­ern­ing bod­ies and plan administrators.

• Best Practices

  Gov­er­nance of Pub­lic Employ­ee Postre­tire­ment Ben­e­fits Systems

  A state or local gov­ern­ment or oth­er des­ig­nat­ed gov­ern­ing enti­ty should estab­lish rules of gov­er­nance for its postre­tire­ment ben­e­fit sys­tems that define the key ele­ments nec­es­sary for trustees and oth­er fidu­cia­ries to ful­fill their respon­si­bil­i­ties, in accor­dance with fidu­cia­ry standards.

• Best Practices

  Prepar­ing an Effec­tive Sum­ma­ry Plan Description

  All state and local gov­ern­ment pen­sion plans should pre­pare a sum­ma­ry plan descrip­tion (SPD) that accu­rate­ly and clear­ly describes the sig­nif­i­cant com­po­nents of the pen­sion plan for participants. 

• Best Practices

  Edu­cat­ing Employ­ees about the Ade­qua­cy of Retire­ment Benefits

  Gov­ern­ment employ­ers and plan admin­is­tra­tors should edu­cate employ­ees about retire­ment income and include the fol­low­ing con­sid­er­a­tions when prepar­ing the edu­ca­tion program.

• Best Practices

  Select­ing Third-Par­ty Invest­ment Pro­fes­sion­als for Pen­sion Fund Assets

  Gov­ern­ments should exer­cise appro­pri­ate due dili­gence in their selec­tion of invest­ment professionals. 

Advisories

• Advisories

  The Use of Ear­ly Retire­ment Incentives

  State and local gov­ern­ments should not use ERIs for a vari­ety of reasons. 

• Advisories

  Deferred Retire­ment Option Plans

  Gov­ern­ment defined ben­e­fit plans should not include deferred retire­ment option pro­grams for a vari­ety of reasons.

• Advisories

  In-Kind Asset Trans­fer to Defined Ben­e­fit Pen­sion Plans

  GFOA Advi­sories iden­ti­fy spe­cif­ic poli­cies and pro­ce­dures nec­es­sary to min­i­mize a government’s expo­sure to poten­tial loss in con­nec­tion with its finan­cial man­age­ment activ­i­ties. It is not to be inter­pret­ed as GFOA sanc­tion­ing the under­ly­ing activ­i­ty that gives rise to the exposure.

• Best Practices

  Asset Allo­ca­tion for Defined Ben­e­fit Plans

  State and local gov­ern­ment retire­ment sys­tems should estab­lish, with­in their over­all invest­ment pol­i­cy, an asset allo­ca­tion plan. 

• Best Practices

  Core Ele­ments of a Fund­ing Pol­i­cy for Gov­ern­men­tal Pen­sion and OPEB Plans

  GFOA rec­om­mends that gov­ern­ments adopt a fund­ing pol­i­cy that pro­vides rea­son­able assur­ance that the cost of those ben­e­fits will be fund­ed in an equi­table and sus­tain­able manner.

• Best Practices

  Design Ele­ments of Defined Ben­e­fit Retire­ment Plans

  Pen­sion admin­is­tra­tors and finance pro­fes­sion­als should include essen­tial ele­ments in defined ben­e­fit plan design. 

• Best Practices

  Enhanc­ing Reli­a­bil­i­ty of Actu­ar­i­al Val­u­a­tions for Pen­sion Plans

  Pen­sion plan fidu­cia­ries should take steps to obtain addi­tion­al infor­ma­tion that will enhance the reli­a­bil­i­ty of their actu­ar­i­al valuations. 

• Best Practices

  Hybrid Retire­ment Plan Design

  Gov­ern­ments that choose to pro­vide a hybrid retire­ment ben­e­fit plan should address key points relat­ed to plan design, fund­ing poli­cies, board gov­er­nance, plan con­ver­sion, and par­tic­i­pant education.

• Best Practices

  Invest­ment Fee Guide­lines for Exter­nal Man­age­ment of Defined Ben­e­fit Plans

  Defined ben­e­fit plans, espe­cial­ly those that use alter­na­tive invest­ment strate­gies, should adopt an invest­ment man­age­ment fee pol­i­cy that will allow them to nego­ti­ate com­pet­i­tive fees. 

• Best Practices

  Invest­ment Poli­cies for Defined Ben­e­fit Plans

  Defined ben­e­fit plans should estab­lish and adhere to a for­mal invest­ment pol­i­cy to reg­u­late and mon­i­tor the system’s invest­ment pro­gram. Such pol­i­cy should be viewed as a long-term gov­ern­ing document.

• Best Practices

  The Role of the Actu­ar­i­al Val­u­a­tion Report in Plan Funding

  GFOA rec­om­mends that gov­ern­ments care­ful­ly review and under­stand their actu­ar­i­al val­u­a­tion report and use the infor­ma­tion it con­tains to make pol­i­cy decisions.

• Best Practices

  Sus­tain­able Fund­ing Prac­tices for Defined Ben­e­fit Pen­sions and Oth­er Postem­ploy­ment Ben­e­fits (OPEB)

  Gov­ern­ments should ensure that the costs of DB pen­sions and OPEB are prop­er­ly mea­sured and report­ed. Gov­ern­ments that spon­sor or par­tic­i­pate in DB pen­sion plans, or that offer OPEB, should con­tribute the full amount of their actu­ar­i­al­ly deter­mined con­tri­bu­tion (ADC) each year.

Advisories

• Advisories

  Pen­sion Oblig­a­tion Bonds

  State and local gov­ern­ments should not issue POBs.

• Advisories

  Respon­si­ble Man­age­ment and Design Prac­tices for Defined Ben­e­fit Pen­sion Plans

  Under no cir­cum­stance should state and local gov­ern­ment plan spon­sors engage in pen­sion con­tri­bu­tion hol­i­days or make insuf­fi­cient contributions. 

asset allocation for defined contribution plans

• Best Practices

  Asset Allo­ca­tion for Defined Con­tri­bu­tion Plans

  Pub­lic employ­ers as plan spon­sors should work active­ly with the plan admin­is­tra­tors to pro­vide invest­ment options and edu­ca­tion to help employ­ees who par­tic­i­pate in defined con­tri­bu­tion plans attain their finan­cial goals in retirement.

• Best Practices

  Defined Con­tri­bu­tion Retire­ment Plan Design

  Retire­ment admin­is­tra­tors and finance pro­fes­sion­als should include appro­pri­ate design ele­ments should an employ­er choose to pro­vide a defined con­tri­bu­tion (DC) plan as the pri­ma­ry retire­ment vehicle. 

• Best Practices

  Hybrid Retire­ment Plan Design

  Gov­ern­ments that choose to pro­vide a hybrid retire­ment ben­e­fit plan should address key points relat­ed to plan design, fund­ing poli­cies, board gov­er­nance, plan con­ver­sion, and par­tic­i­pant education.

• Best Practices

  Mon­i­tor­ing and Dis­clo­sure of Fees for Defined Con­tri­bu­tion Plans

  Plan spon­sors should make sure that DC plan costs are rea­son­able and appro­pri­ate, com­pared with plans of sim­i­lar size, struc­ture, and ser­vice lev­els, and that they pro­vide plan par­tic­i­pants with mean­ing­ful and acces­si­ble infor­ma­tion about fees and expenses.

• Best Practices

  Par­tic­i­pant Edu­ca­tion Guid­ance for Defined Con­tri­bu­tion Plans

  Pub­lic plan spon­sors should make sure high-qual­i­ty invest­ment edu­ca­tion is pro­vid­ed to defined con­tri­bu­tion plan par­tic­i­pants who are allowed to direct their investments.

• Best Practices

  Defined Con­tri­bu­tion Plan Fidu­cia­ry Responsibility

  Spon­sor­ing enti­ties should pro­vide a clear and well-doc­u­ment­ed gov­er­nance struc­ture to guide plan administrators.

Advisories

• Advisories

  Bro­ker­age Win­dow Options for Defined Con­tri­bu­tion Plans

  State and local gov­ern­ments should exer­cise extreme cau­tion when con­sid­er­ing whether to offer a bro­ker­age win­dow option in con­junc­tion with a defined con­tri­bu­tion retire­ment plan. 

• Best Practices

  Estab­lish­ing and Admin­is­ter­ing an OPEB Trust

  Gov­ern­ments should cre­ate a qual­i­fied trust fund to pre­fund OPEB obligations. 

• Best Practices

  OPEB Gov­er­nance and Administration

  Spon­sor­ing gov­ern­ments should estab­lish a clear, well-doc­u­ment­ed gov­er­nance struc­ture to guide gov­ern­ing bod­ies and plan administrators.

• Best Practices

  Ensur­ing Oth­er Postem­ploy­ment Ben­e­fits (OPEB) Sustainability

  Gov­ern­ments should ensure OPEB sus­tain­abil­i­ty by eval­u­at­ing key items specif­i­cal­ly relat­ed to OPEB, includ­ing the struc­ture of ben­e­fits offered, the asso­ci­at­ed ben­e­fit cost-dri­vers, and clear com­mu­ni­ca­tion to stakeholders.

• Best Practices

  Sus­tain­able Fund­ing Prac­tices for Defined Ben­e­fit Pen­sions and Oth­er Postem­ploy­ment Ben­e­fits (OPEB)

  Gov­ern­ments should ensure that the costs of DB pen­sions and OPEB are prop­er­ly mea­sured and report­ed. Gov­ern­ments that spon­sor or par­tic­i­pate in DB pen­sion plans, or that offer OPEB, should con­tribute the full amount of their actu­ar­i­al­ly deter­mined con­tri­bu­tion (ADC) each year.

• Best Practices

  Core Ele­ments of a Fund­ing Pol­i­cy for Gov­ern­men­tal Pen­sion and OPEB Plans

  GFOA rec­om­mends that gov­ern­ments adopt a fund­ing pol­i­cy that pro­vides rea­son­able assur­ance that the cost of those ben­e­fits will be fund­ed in an equi­table and sus­tain­able manner.

Advisories

• Advisories

  Oth­er Postem­ploy­ment Ben­e­fits (OPEB) Bonds

  State and local gov­ern­ments should not issue OPEB bonds for a vari­ety of reasons. 

• Best Practices

  Com­mu­ni­cat­ing Health-Care Ben­e­fits to Employ­ees and Retirees

  Gov­ern­ments should devel­op effec­tive com­mu­ni­ca­tion strate­gies that sup­port their health-care ben­e­fit goals.

• Best Practices

  Com­ply­ing with the Afford­able Care Act

  State and local gov­ern­ment employ­ers that spon­sor group health plans should imple­ment a process for review­ing fed­er­al health-care ben­e­fit require­ments at least quar­ter­ly to ensure that they are aware of any new­ly issued or soon-to-be issued regulations.

• Best Practices

  Strate­gic Health-Care Plan Design

  Plan spon­sors should con­sid­er devel­op­ing and for­mal­ly adopt­ing a long-term, strate­gic plan that includes guid­ing prin­ci­ples and key objec­tives for man­ag­ing health-care costs and improv­ing par­tic­i­pant wellness.

• Best Practices

  Patient Pro­tec­tion and Afford­able Care Act Compliance

  State and local gov­ern­ment employ­ers that spon­sor group health plans should imple­ment a process for review­ing fed­er­al health-care ben­e­fit require­ments at least quar­ter­ly to ensure that they are aware of any new­ly issued or soon-to-be issued regulations.

• Best Practices

  Invest­ment Poli­cies for Tax-Deferred Retire­ment Sav­ings Plans

  Gov­ern­ing bod­ies of the tax deferred retire­ment sav­ings plans should estab­lish and adhere to a for­mal invest­ment pol­i­cy gov­ern­ing the selec­tion and mon­i­tor­ing of invest­ments made avail­able by the plan.

• Best Practices

  Invest­ment Poli­cies for Defined Ben­e­fit Plans

  Defined ben­e­fit plans should estab­lish and adhere to a for­mal invest­ment pol­i­cy to reg­u­late and mon­i­tor the system’s invest­ment pro­gram. Such pol­i­cy should be viewed as a long-term gov­ern­ing document.

• Best Practices

  Invest­ment Fee Guide­lines for Exter­nal Man­age­ment of Defined Ben­e­fit Plans

  Defined ben­e­fit plans, espe­cial­ly those that use alter­na­tive invest­ment strate­gies, should adopt an invest­ment man­age­ment fee pol­i­cy that will allow them to nego­ti­ate com­pet­i­tive fees. 

• Best Practices

  Select­ing Third-Par­ty Invest­ment Pro­fes­sion­als for Pen­sion Fund Assets

  Gov­ern­ments should exer­cise appro­pri­ate due dili­gence in their selec­tion of invest­ment professionals. 

Advisories

• Advisories

  Com­mis­sion Recap­ture Programs

  A pen­sion plan should first deter­mine whether a com­mis­sion recap­ture pro­gram will actu­al­ly pro­duce low­er costs overall. 

• Best Practices

  Procur­ing Actu­ar­i­al Services

  State and local gov­ern­ments should take the appro­pri­ate steps to obtain high-qual­i­ty actu­ar­i­al ser­vices for their pub­lic retire­ment plans. 

• Best Practices

  Actu­ar­i­al Audits

• Best Practices

  Dis­clo­sures of Pen­sion Fund­ing Oblig­a­tions in Offi­cial Statements

  Issuers should imple­ment appro­pri­ate pro­ce­dures when deter­min­ing the lev­el of infor­ma­tion that needs to be dis­closed about their pen­sion fund­ing oblig­a­tions rel­a­tive to their finan­cial position.