Pension and Benefit Administration

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

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.

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

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

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

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.

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. 

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

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

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

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

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.

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

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.

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

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

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.

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.

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.

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

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.

State and local governments should not issue POBs.

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

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 income replacement goals in retirement.

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.

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.

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.

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

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

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.

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

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

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.

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.

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.

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

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

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.

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.

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.

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.

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.

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.

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

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

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

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.