1. Robert L. Clark, Lee A. Craig, and Jack W. Wilson, A History of the Public Sector Pensions in the United States (University of Pennsylvania Press, 2003), p. 25.
2. Ibid., p. 26.
3. Ibid.
4. Sara Elise Phang, Roman Military Service: Ideologies of Discipline in the Late Republic and Early Principate (Cambridge University Press, 2008), p. 163.
5. Clark et al., A History of the Public Sector Pensions in the United States, p. 31.
6. Ibid.
7. Ibid., p. 43.
8. Ibid., p. 52.
9. Ibid., p. 85.
10. Ibid., p. 63.
11. Ibid., p. 64.
12. Ibid., p. 52.
13. Ibid., p. 122.
14. Ibid., p. 123.
15. Ibid., p. 137.
16. Ibid.
17. Ibid., p. 138–139.
18. Jun Peng, State and Local Pension Fund Management (CRC Press, 2009), p. 6.
19. Ibid., p. 7.
20. Augustine E. Costello, Our Police Protectors, History of the New York Police from the Earliest Period to the Present Time (Gale, Making of Modern Law, 2010), reprint of 1885 original text, p. 489.
21. Ibid.
22. Ibid.
23. Ibid., p. 489–502.
24. Ibid., p. 495.
25. Ibid., p .489–502.
26. Ibid., p. 502.
27. Ibid., p. 489.
28. Ibid., p. 491.
29. Ibid., p. 493.
30. Ibid., p. 494.
31. Ibid.
32. Ibid.
33. Ibid.
34. Clark et al., A History of the Public Sector Pensions in the United States, p. 170.
35. Ibid.
36. Ibid., p. 175.
37. Ibid.
38. Ibid., p. 188.
39. Ibid.
40. Ibid.
41. Ibid., p. 177.
42. Ibid.
43. Ibid.
44. Ibid., p. 193.
45. Ibid., p. 189.
46. Ibid., p. 189,193.
47. Ibid., p. 200.
48. Ibid., p.189.
49. Olivia S. Mitchell, David McCarthy, Stanley C. Wisniewski, and Paul Zorn, “Development in State and Local Pension Plans,” in Pensions in the Public Sector, eds. Olivia S. Mitchell and Edwin C. Hustead (University of Pennsylvania Press, 2001), p. 12–15.
50. Von M. Hughes, “Understanding U.S. Public Pension Plan Delegation of Investment Decision-Making to Internal and External Investment Managers,” The Hedge Fund Law Report, vol. 7 (January 2014) (Part One of Three).
51. Olivia S. Mitchell and Edwin C. Hustead, eds., Pensions in the Public Sector (University of Pennsylvania Press, 2001), p. 12.
52. Peng, State and Local Pension Fund Management, p. 7.
53. Ibid.
54. Ibid., p. 8.
55. Ibid.
56. Ibid.
57. Ibid.
58. Mitchell et al., “Development in State and Local Pension Plans,” p. 13.
59. Ibid., p. 14.
60. Peng, State and Local Pension Fund Management, p. 8.
61. Mitchell et al., “Development in State and Local Pension Plans,” p. 15.
62. Ibid.
1. Willis Towers Watson, “Global Pension Assets Study 2017: Executive Summary.”
2. Organisation for Economic Co-operation and Development (OECD), “Pension Markets in Focus (2017).”
3. Ibid.
4. Ibid.
5. Ibid.
6. Willis Towers Watson, “Global Pension Assets Study 2017: Executive Summary.”
7. Ibid.
8. Ibid.
9. Ibid.
10. Ibid.
11. Ibid.
12. Ibid.
13. Ibid.
14. Ibid.
15. David N. Weil, “Population Aging.” National Bureau of Economic Research (March 2006).
16. Ibid.
17. U.S. Census Bureau, www.factfinder.census.gov.
18. Weil, “Population Aging.”
19. Ibid.
20. Ibid.
21. Max Roser, “Global Population Falling as Human Fertility Declines.” University of Oxford (July 11, 2016). This source was used for all past and projected fertility rates.
22. Peter A. Diamond, “Pensions for an Aging Population.” National Bureau of Economic Research (December 2005).
23. Sheetal K. Chand and Albert Jaeger, “Aging Populations and Public Pension Schemes.” International Monetary Fund (2002).
24. Robert Holzmann, “Global Pension Systems and Their Reform: Worldwide Drivers, Trends, and Challenges.” IZA Discussion Paper No. 6800 (August 2012).
25. Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the Taking Up and Pursuit of the Business of Insurance and Reinsurance (Solvency II).
26. Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-2-3 (July 21, 2010).
27. Ibid.
28. Financial Conduct Authority (FCA), “European Market Infrastructure Regulation (EMIR) – What You Need to Know” (2014).
29. Willis Towers Watson, “Global Pension Assets Study 2017: Executive Summary.”
30. OECD, “Pension Markets in Focus (2017).”
31. Investment Company Institute, “Retirement Assets Total $27.2 Trillion in Third Quarter 2017” (December 20, 2017).
32. ICI Federal Employees’ Retirement System Budget and Trust Fund Issues (August 2015).
33. U.S. Census Bureau.
34. Data provided by Jean-Pierre Aubry at the Center for Retirement Research at Boston College.
35. U.S. Census Bureau Annual Survey of Public Pensions (2016).
36. “States with the Most Government Employees: Totals and Per Capital Rates,” Governing: The State and Localities (online article 2018, www.governing.com).
37. Alicia H. Munnell and Mauricio Soto, “State and Local Pensions Are Different from Private Plans,” State and Local Pension Plans, No. 1, Center for Retirement Research at Boston College (November 2007).
38. Ibid.
39. Employee Benefit Research Institute (EBRI), “Databook on Employee Benefits” (October 2015).
40. Wilshire Consulting, “2017 Report on State Retirement Systems: Funding Levels and Assets Allocation” (June 26, 2017).
41. Jeffrey R. Brown, Robert Clark, and Joshua Rauch, “Economics of State and Local Public Pensions,” National Bureau of Economic Research (February 2011).
42. General Accounting Office, “State and Local Government Pension Plans: Economic Downturn Spurs Efforts to Address Cost and Sustainability” (March 2012) and Jean-Pierre Aubry, Caroline V. Crawford, and Alicia Munnell, “State and Local Pension Plan Funding Sputters in FY 2016,” State and Local Plans, No. 56, Center for Retirement Research at Boston College (July 2017).
43. Jean-Pierre Aubry, Caroline V. Crawford, and Alicia H. Munnell, “The Funded Status of Local Pensions Inches Closer to States,” State and Local Plans, No. 58, Center for Retirement Research at Boston College (January 2018).
44. Ibid.
45. Ibid.
46. U.S. Government Accountability Office (GAO), “Economic Downturn Spurs Efforts to Address Costs and Sustainability” (March 2, 2012).
47. Ibid.
48. Ibid.
49. Aubry et al., “The Funded Status of Local Pensions Inches Closer to States.”
50. Ibid.
51. Ibid.
52. Ibid.
53. Ibid.
54. Ibid.
55. Ibid.
56. Ibid.
57. EBRI Databook on Employee Benefits, “Chapter 5: Private- and Public-Sector Retirement Plan Trends” (October 2015).
58. Ibid.
59. Willis Towers Watson, “Global Pension Assets Study 2017: Executive Summary.”
60. Ibid.
61. John Broadbent, Michael Palumbo, and Elizabeth Woodman, “The Shift from Defined Benefit to Defined Contribution Pension Plans – Implications for Asset Allocation and Risk Management,” Global Financial System Working Group (December 2006).
1. Jun Peng, State and Local Pension Fund Management (CRC Press 2009), p. 51.
2. National Education Association, “Characteristics of Large Public Education Plans,” (January 2016), hereinafter the “NEA Study (2016).” The study involved 114 primary pension plans that provide education employees with retirement benefits, covering 19.5 million active and retired members and $2.8 trillion in retirement assets.
3. Peng, State and Local Pension Fund Management, p. 29.
4. Ibid., p. 30.
5. Public Plans Data. Center for Retirement Research at Boston College, Center for State and Local Government Excellence, and National Association of State Retirement Administrators, www.publicplansdata.org.
6. See NEA Study (2016).
7. Daniel Schmidt, “2015 Comparative Study of Major Public Employee Retirement Systems,” Wisconsin Legislative Council (December 2016), hereinafter the “Wisconsin Study (2015).” This study surveyed 87 public employee systems with over 18.6 million employees, retirees, and beneficiaries. The survey respondents were primarily public pensions serving general employees and teachers, not police, firefighters, or elected officials.
8. Ibid., p. 75.
9. Jean-Pierre Aubry, Joshua Hurwitz, Alicia H. Munnell, and Laura Quinby, “Impact of Long Vesting Periods on State and Local Workers,” State and Local Plans, No. 26, Center for Retirement Research at Boston College (November 2012).
10. Peng, State and Local Pension Fund Management, p. 35.
11. Ibid.
12. Ibid., p. 36.
13. Ibid.
14. See Wisconsin Study (2015).
15. Peng, State and Local Pension Fund Management, p. 30.
16. Ibid., p. 38.
17. Ibid., p. 39.
18. Ibid.
19. Edwin C. Hustead, “Determining the Cost of Public Pension Plans,” in Pensions in the Public Sector, ed. Olivia S. Mitchell and Edwin C. Hustead (University of Pennsylvania Press (2001), p. 236.
20. See Wisconsin Study (2015).
21. Ibid.
22. Peng, State and Local Pension Fund Management, p. 42.
23. See NEA Study (2016).
24. Hustead, “Determining the Cost of Public Pension Plans,” p. 237.
25. Peng, State and Local Pension Fund Management, p. 212.
26. Ibid.
27. Ibid. Peng cites a study from the American Association of Retired Persons (2003).
28. Ibid., p. 213.
29. Ibid.
30. Ibid.
31. Ibid., p .45.
32. Ibid.
33. Ibid.
34. Ibid., p. 46.
35. Ibid., p. 48.
36. Ibid., p. 50.
37. Ibid.
38. Ibid.
39. Ibid., p. 51.
40. Ibid., p. 53.
41. Aon Consulting, “2008 Replacement Ratio Study: A Measuring Tool for Retirement Planning,” hereinafter “Aon Study (2008).”
42. Ibid.
43. See NEA Study (2016).
44. Ibid.
45. Ibid.
46. Ibid.
47. Peng, State and Local Pension Fund Management, p. 53.
48. Ibid.
49. See Aon Study (2008).
50. Ibid.
51. Peng, State and Local Pension Fund Management, p. 55. This author’s conclusion of pension adequacy for the majority of public employees in the United States is based on an analysis of many assumptions and factors, including employees retiring at age 62 after 32 years of service with Social Security coverage.
52. See NEA Study (2016).
1. Jun Peng, State and Local Pension Management (CRC Press, 2009), p. 57.
2. Ibid.
3. Edwin C. Hustead, “Determining the Cost of Public Pensions,” in Pensions in the Public Sector, eds. Olivia S. Mitchell and Edwin C. Hustead (University of Pennsylvania Press, 2000), p. 219.
4. Peng, State and Local Pension Management, p. 58.
5. Ibid., pp. 227–228.
6. Ibid., p. 58.
7. Hustead, “Determining the Cost of Public Pensions,” p. 227.
8. Ibid., p. 229.
9. Ibid., p. 227.
10. Peng, State and Local Pension Management, p. 58.
11. Ibid., p. 59.
12. Hustead, “Determining the Cost of Public Pensions,” p. 220.
13. National Education Association, “Characteristics of Large Public Education Plans” (January 2016), hereinafter the “NEA Study (2016).”
14. Ibid.
15. Peng, State and Local Pension Management, p. 59.
16. Hustead, “Determining the Cost of Public Pensions,” p. 225.
17. Ibid.
18. See NEA Study (2016).
19. Ibid.
20. Hustead, “Determining the Cost of Public Pensions,” p. 224.
21. Ibid.
22. M.T.L Bizley, “The Effect on Pension Fund Contributions of a Change in the Rate of Interest,” Journal of the Institute of Actuaries Students’ Society, vol. 10 (1950), p. 47–51.
23. See Public Pension Data. Center for Research at Boston College, Center for State and Local Government Excellence, and National Association of State Retirement Administration, www.publicplansdata.org.
24. Daniel Schmidt, “2015 Comparative Study of Major Public Employee Retirement Systems,” Wisconsin Legislative Council (December 2016) (hereinafter “Wisconsin Study (2016)”).
25. Jeffrey N. Saret, Barbara Zahn, and Subhadeep Mitra “Street View,” Two Sigma (February 2017), p. 2.
26. Rebecca A. Sielman, “2017 Public Pension Funding Study.” Milliman, Inc. (October 2017), p. 4 (hereinafter “Milliman Study (2017)”).
27. Ibid.
28. Peng, State and Local Pension Management, p. 59.
29. Lisa Schelling, “U.S. Public Plan Discount Rate Comparison 2009-2014,” Society of Actuaries (September 2016).
30. Milliman Study (2017), p. 4.
31. Schelling, “U.S. Public Plan Discount Rate Comparison 2009-2014.”
32. Ibid.
33. Saret et al., “Street View,” p. 2.
34. James R. Copland and Steven Malanga, “Safeguarding Public-Pension Systems: A Governance Based Approach,” Manhattan Institute Report (March 2016), p. 10.
35. Alicia H. Munnell, State and Local Pensions: What Now? (Brookings Institute Press, 2012), p. 55.
36. Ibid., p. 56.
37. Ibid., p. 57.
38. Copland and Malanga, “Safeguarding Public-Pension Systems: A Governance Based Approach,” p. 8, 10(Comparing Figure 1 to Figure 6).
39. Munnell, State and Local Pensions: What Now?, p. 73.
40. Ibid., p. 73–74.
41. Peng, State and Local Pension Management, p. 60.
42. Munnell, State and Local Pensions: What Now?, p. 50.
43. Ibid.
44. Ibid.
45. Ibid.
46. National Conference on Public Employee Retirement Systems and Cobalt Community Research, “Public Retirement Systems Study” (December 2016) hereinafter the “NCPERS Study (2016).”
47. Conference of Consulting Actuaries Public Plans Community (CCA PPC), “Actuarial Funding Policies and Practices for Public Pension Plans” (October 2014).
48. Ibid.
49. Ibid.
50. Governmental Accounting Standards Board, “Facts About GASB” (2012–2014).
51. Ibid.
52. Ibid.
53. Ibid.1.
54. Peng, State and Local Pension Management, p. 61.
55. Munnell, State and Local Pensions: What Now?, p. 54.
56. For a detailed review of the actuarial cost methods, see Peng, State and Local Pension Management, Chapter 3.
57. Peng, State and Local Pension Management, p. 70.
58. Ibid., p. 53.
59. Munnell, State and Local Pensions: What Now?, p. 69.
60. Jean-Pierre Aubry, Joshua Hurwitz, Alicia H. Munnell, and Laura Quinby, “How Would GASB Proposals Affect State and Local Pension Reporting?” State and Local Plans, No. 23, Center for Retirement Research at Boston College (November 2011), p. 2.
61. Pension Protection Act of 2006, 120 Stat. 780 (2006).
62. Munnell et al., “How Would GASB Proposals Affect State and Local Pension Reporting?,” p. 3.
63. Ibid.
64. Munnell, State and Local Pensions: What Now?, p. 72.
65. Ibid.
66. Ibid., p. 73.
67. Munnell et al., “How Would GASB Proposals Affect State and Local Pension Reporting?,” p. 4.
68. Keith Brainard and Alex Brown, “Spotlight On: The Annual Required Contribution Experience of State Retirement Plans, FY 01 to FY 13,” National Association of State Retirement Administrators (March 2015).
69. The PFM Group, “GASB Pension Accounting Standards and NABL Pension Disclosure Guidelines,” PFM Client Update (July 2012).
70. Jean-Pierre Aubry, Caroline V. Crawford, and Alicia H. Munnell, “Funded Status of Local Pensions Inches Closer to States,” State and Local Plans Issue, No. 58, Center for Retirement Research at Boston College (January 2018), p. 5.
71. Munnell, State and Local Pensions: What Now?, p. 73.
72. Ibid.
73. Governmental Accounting Standards Board (2011a and 2011b).
74. Munnell, State and Local Pensions: What Now?, p. 73.
1. National Association of Government Defined Contribution Administrators, Inc. (NAGDCA), “Best Practices Guide to Administering Your Governmental Defined Contribution Plan: Plan Administration” (September 2013) (hereinafter “NAGDCA Plan Administration”).
2. Ibid.
3. Alicia H. Munnell, Jean-Pierre Aubry, and Mark Cafarelli, “Defined Contribution Plans in the Public Sector: An Update,” State and Local Pension Plans, No. 37, Center for Retirement Research at Boston College (April 2014), p. 6.
4. Ibid.
5. Ibid.
6. Ibid.
7. Ibid.
8. Ibid.
9. Jung Peng, State and Local Pension Fund Management (CRC Press, 2009), p. 192.
10. Alicia H. Munnell, State and Local Pensions: What Now? (The Brookings Institute Press, 2012), p. 192.
11. Ibid.
12. National Association of Government Defined Contribution Administrators, Inc., “Defined Contribution Plan Survey Report,” (July 2015) (hereinafter “NAGDCA Survey (2015)”). This report covered 84 government defined contribution plans, totaling over $161 billion in assets as of March 31, 2015.
13. See 26 U.S. Internal Revenue Code Sections 401, 403, and 457.
14. NAGDCA Plan Administration.
15. NAGDCA Survey (2015).
16. NAGDCA Plan Administration.
17. Section 457 plans are nonqualified deferred compensation plans established by state and local government and tax-exempt employers. Public employers can establish either eligible or ineligible plans, covered by 457(b) and 457(f), respectively, and are subject to the specific requirements and deferred limitations of Section 457 of the Internal Revenue Code of 1986. The discussion in the text will focus on eligible plans under 457(b).
18. Melissa Phipps, “What Is a 457(b) Plan?,” The Balance (October 31, 2018) https://www.thebalance.com/what-is-a-457-b-plan-2894165.
19. Ibid.
20. NAGDCA Survey (2015).
21. NAGDCA Plan Administration.
22. Ibid.
23. Kira Botkin, “401k vs. 403b – What Is the Difference in these Retirement Plans?” Money Crashers (www.moneycrashers.com).
24. NAGDCA Plan Administration.
25. Ibid.
26. Ibid.
27. Ibid.
28. National Association of Government Defined Contribution Administrators, Inc., “Best Practices Guide to Administering Your Governmental Defined Contribution Plan: Communications/Participants Education” (September 2013) (hereinafter “NAGDCA Communication/Education”).
29. Ibid.
30. National Association of Government Defined Contribution Administrators, Inc., “Best Practices Guide to Administering Your Governmental Defined Contribution Plan: Plan Design” (September 2013) (hereinafter “NAGDCA Plan Design”).
31. Ibid.
32. NAGDCA Plan Design.
33. Ibid.
34. Ibid.
35. Ibid.
36. Ibid.
37. Ibid.
38. “Topic Number: 413 – Rollovers from Retirement Plans,” www.irs.gov/taxtopics/tc413
39. NAGDCA Plan Design.
40. “Topic Number: 413 – Rollovers from Retirement Plans,” www.irs.gov/taxtopics/tc413
41. Ibid.
42. NAGDCA Plan Design.
43. Ibid.
44. Ibid.
45. NAGDCA Survey (2015).
46. Ibid.
47. Ibid.
48. Ibid.
49. Ibid., p. 171.
50. Ibid., p. 172.
51. Ibid.
52. Ibid., p. 171.
53. Ibid.
54. Ibid., p. 172.
55. Ibid., p. 175.
56. Ibid., p. 182.
57. Ibid., p. 190.
58. Ibid., p. 183.
59. Ibid.
60. Ibid.
61. Ibid.
62. Keith P. Ambachtsheer, The Future of Pension Management: Integrating Design, Governance, and Investing (John Wiley & Sons, 2016), p. 7.
63. Munnell, State and Local Pensions: What Now?, p. 184.
64. Ibid., p. 186.
65. Ibid., p. 186.
66. Ibid., p. 187.
67. Ibid., pp. 189–90.
68. Ibid., p. 190.
69. Ibid., p. 187.
70. Ibid.
71. Ibid., pp. 187–188.
72. Ibid.
73. Alicia H. Munnell, Jean-Pierre Aubry, and Caroline V. Crawford, “Investment Returns: DB v. DC,” Center for Retirement Research at Boston College, No. 15-21 (December 2015), p. 1.
74. Ibid.
75. Ibid.
76. Anna M. Rappaport and Andrew Peterson, “Risk Sharing Alternatives for Pension Plan Design: An Overview and Case Studies,” in Reimagining Pensions: The Next 40 Years, eds. Olivia S. Mitchell and Richard C. Shea (Oxford University Press, 2016), p. 99. This text was used as the source for all risk descriptions.
77. Munnell, State and Local Pensions, What Now? p. 186.
78. National Education Association, “Characteristics of Large Public Education Plans” (January 2016) (hereinafter the “NEA Study (2016).”)
79. Ibid.
80. Ibid.
81. The Pew Charitable Trusts, “Hybrid Public Pension Plans: A Primer,” Issues Brief (April 30, 2015).
82. Ibid.
83. Ibid.
84. Ibid.
85. TIAA-CREF, “The Hybrid DB/DC Plan Model: An Effective Approach for Government Pension Providers” (July 2012).
86. Ibid.
87. Ibid.
88. Ibid.
89. Ibid.
90. Peng, State and Local Pension Fund Management, p. 197.
91. The PEW Charitable Trusts, “Public Pension Cash Balance Plans: A Primer” (February 2014).
92. Munnell, State and Local Pensions, What Now? p. 204.
93. Ibid., p. 204.
94. Ibid., p. 207.
95. Richard C. Shea, Robert S. Newman, and Jonathan P. Goldberg, “The Portfolio Pension Plan: An Alternative Model for Retirement Security,” in Reimagining Pensions: The Next 40 Years, eds. Olivia S. Mitchell and Richard C. Shea (Oxford University Press, 2016), p. 177.
96. Ibid., p. 175.
97. Ambachtsheer, The Future of Pension Management, p. 33.
98. Ibid.
99. Ibid., p. 38.
100. Ibid., p. 60.
1. Nicholas Greifer, Pension Investing: Fundamentals and Best Practice (Government Finance Officers Association, 2002), p. 5.
2. Ibid.
3. Jeffrey V. Bailey, Jesse L. Phillips, Thomas M. Richards, A Primer for Investment Trustees (The Research Foundation of the CFA Institute, 2011), p. 23.
4. Jun Peng, State and Local Pension Fund Management (CRC Press, 2009), p. 120.
5. Bailey et al., A Primer for Investment Trustees, p. 24.
6. Ibid., p. 25.
7. GFOA Study (2002), p.5.
8. Bailey et al., A Primer for Investment Trustees, p. 23.
9. Ibid., p. 24.
10. Ibid.
11. Ibid.
12. Ibid.
13. Griefer, Pension Investing: Fundamentals and Best Practice, p. 6.
14. Ibid.
15. Ibid., p. 7.
16. Ibid.
17. Ibid.
18. Ibid.
19. Kees Koedijk and Alfred Slager, “Investment Beliefs: The Importance of Focus for an Institutional Investor” (Tilburg University, RSM Erasmus University Rotterdam, 2007), p. 5.
20. Ibid., p. 6.
21. Ibid., p. 21.
22. California Public Employees’ Retirement System, “CalPERS Beliefs: Our Views Guiding Us into the Future” (hereinafter “CalPERS Beliefs”).
23. Ohio Public Employees Retirement System, “Investment Objectives and Asset Allocation Policy, Defined Benefit Fund” (March 2018) (hereinafter “OPERS IPS”), p. 1.
24. State of Wisconsin Investment Board, “Wisconsin Retirement System Investment Policy” (adopted June 14, 2017) (hereinafter “SWIB IPS”), pp. 3–4.
25. CalPERS Beliefs, pp. 1–2.
26. Ibid., pp. 3–11.
27. Ibid., pp. 12–13.
28. The New York State Common Retirement Fund, “General Investment Policies” (August 1, 2017) (hereinafter “NYSCRF IPS”), p. 3.
29. State of Connecticut Retirement Plans & Trust Funds, “Investment Policy Statement” (adopted July 7, 2017) (hereinafter “CT IPS”).
30. State Universities Retirement System of Illinois, “Investment Policy” (adopted March 9, 2018) (hereinafter “SURS IPS”).
31. Public Employees Retirement System of Nevada, “Investment Objectives & Policies” (amended November 16, 2017) (hereinafter “NVPERS IPS”).
32. New York State Teachers Retirement System, “Investment Policy Manual” (October 2017) (hereinafter “NYSTRS IPM”).
33. SURS IPS, p. 5.
34. NVPERS IPS, p. 2.
35. NYSTRS IPM, p. 3; SURS IPS, p. 5.
36. California Public Employees’ Retirement System, “Total Fund Investment Policy,” (hereinafter “CalPERS IPS”).
37. See for example California State Teachers’ Retirement System, “Investment Policy Statement” (Pension 2 403(b) and 457(b)) (February 2015), p. Q-7.
38. See for example NVPERS IPS, p. 2.
39. Ibid.
40. NYSCRF IPS, p. 5.
41. Ibid., p. 4.
42. Ibid.
43. See California State Teachers’ Retirement System, “Investment Policy and Management Plan,” Investment Branch (November 2017) (hereinafter “CALSTRS IPS”), p. A-12, A-13.
44. Ibid.
45. NVPERS IPS, p. 5.
46. NYSCRF IPS, p .12.
47. Employee Retirement Income Security Act of 1974, Pub. L. 93-406, 88 Stat. 829, enacted September 2, 1974, codified, in part, at 29 U.S.C. ch.18.
48. Restatement (Third) of Trusts (2003) §78(1).
49. Ibid., §77(1).
1. Gary P. Brinson, L. Randolph Hood, and Gilbert L. Beebower, “Determinants of Portfolio Performance,” Financial Analysts Journal (July/August 1986), pp. 33–44. The study reviewed the performance of 91 corporate pension plans, over ten years and 40 fiscal quarters, with market capitalizations of the individual plans ranging from $100 million at the beginning of the study to over $3 billion by its end.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.
6. Ibid.
7. Ibid.
8. Gary P. Brinson, L. Randolph Hood, and Gilbert L. Beebower, “Determinants of Portfolio Performance II: An Update,” Financial Analysts Journal (May/June 1991), p. 44.
9. Ibid.
10. Nicholas Greifer, Pension Investing: Fundamentals and Best Practices (Government Finance Officers Association, 2002), p. 28.
11. Ibid., p. 29; see also Jun Peng, State and Local Pension Fund Management (CRC Press, 2009), p. 123.
12. George Pennacchi and Mahdi Rastad, “Portfolio Allocation for Pubic Pension Funds,” National Bureau of Economic Research (NBER), Working Paper 16456 (October 2010), p. 10.
13. Harry Markowitz, “Portfolio Selection,” The Journal of Finance, vol. 7, no. 1 (March 1952), pp. 77–91.
14. Frank J. Fabozzi and Harry M. Markowitz, eds., The Theory and Practice of Investment Management (2nd ed.)(Wiley Finance, 2011), p. 57.
15. Ibid., p. 89.
16. Ibid.
17. Krishnan Chandrasekhar, “The Investment Policy Process: A Perspective from the World Bank,” in Governance and Investments of Public Pension Assets: Practitioners’ Perspectives, eds. Sudhir Rajkumar and Mark C. Dorfman (World Bank Publications, 2010), p. 175.
18. Greifer, Pension Investing, p. 29.
19. Robert L. Clark, Lee A. Craig, and Jack W. Wilson, A History of Public Sector Pensions in the United States (University of Pennsylvania Press, 2003), p. 205.
20. Ibid.
21. Ibid.
22. Ibid.
23. Chandrasekhar, “Investment Policy Process,” p. 173.
24. Jon Hartley, “Why CalPERS Is Exiting the Hedge Fund Space,” Forbes.com (September 22, 2014).
25. Peng, State and Local Pension Fund Management, p. 123.
26. Chandrasekhar, “The Investment Policy Process,” p. 174.
27. Ibid., p. 174–175.
28. Greifer, Pension Investing, p. 20.
29. Jeffrey V. Bailey, Jesse L. Phillips, and Thomas M. Richards, A Primer for Investment Trustees (Research Foundation of the CFA Institute, 2011), p. 49.
30. Ibid.
31. Ibid., p. 51.
32. Bailey, et al., A Primer for Investment Trustees, p. 49.
33. William F. Sharpe, “Mutual Fund Performance,” Journal of Business 39, no. 1. Part 2 (January 1966), p. 119–138.
34. Greifer, Pension Investing, p. 22.
35. Ibid.
36. Bailey, et al., A Primer for Investment Trustees, p. 50.
37. Ibid.
38. Philippe Jorion, Value at Risk: The New Benchmark for Managing Financial Risk (3rd ed.) (McGraw-Hill, 2007), p. viii.
39. Ibid.
40. Ibid.
41. Greifer, Pension Investing, p. 24.
42. Ibid.
43. Ibid., p. 25.
44. Frank J. Fabozzi, Harry Markowitz, and Francis Gupta, “Portfolio Selection,” in The Theory & Practice of Investment Management, eds. Frank J. Fabozzi and Harry M. Markowitz (Wiley Finance, 2002), p. 27.
45. Greifer, Pension Investing, p. 25.
46. Ibid., p. 25.
47. Fabozzi et al., “Portfolio Selection,” p. 31.
48. Ibid.
49. One should note that the early adoption of the peer comparison method of asset allocation, the “traditional” method, does makes more sense when you think that Markowitz only published his seminal article in 1952, and optimization software, and the mathematical foundation behind it, has only been widely available in the last few decades, yet public pensions have been around in their modern form in the United States since 1857.
50. Chandrasekhar, “Investment Policy Process,” p. 175.
51. Fabozzi et al., “Portfolio Selection,” p. 32.
52. Ibid.
53. Ibid., p. 33.
54. Peng, State and Local Pension Fund Management, p. 124.
55. Greifer, Pension Investing, p. 29–30.
56. Ibid.
57. Chandrasekhar, “Investment Policy Process,” p. 175.
58. Ibid.
59. Greifer, Pension Investing, p. 29.
60. Michael Reskin, “Asset/Liability Management in the Public Sector,” in Pensions in the Public Sector, eds. Olivia S. Mitchell and Edwin Hustead (University of Pennsylvania Press, 2001), p. 195.
61. Anton van Nunen, Fiduciary Management: Blueprint for Pension Fund Excellence (Wiley Finance, 2008), p. 40.
62. Ibid.
63. Ibid., p. 40.
64. See for example AONHewitt, “Pension Risk Study Report for Michigan State Employers’ Retirement System” (October 2015).
65. Ibid.
66. “Michael Reskin, “Asset/Liability Management in the Public Sector,” p. 195.
1. Public Plan Data. Center for Retirement Research at Boston College, Center for State and Local Government Excellence, and National Association of Retirement Administrators, www.publicplansdata.org. http://crr.bc.edu/data/public-plans-database.
2. James Farrell and Daniel Shoag, “Asset Management in Public DB and non-DB Pension Plans,” prepared for the NBER Conference on Retirement Benefits for State and Local Employees: Designing Pension Plans for the Twenty-First Century, Journal of Pension Economics and Finance (2016), p.1.
3. Ibid., p. 10.
4. Ibid.
5. See Mercedes Aguirre and Brendan McFarland, “2016 Asset Allocations in Fortune 1000 Pension Plans,” Insider, vol. 28, no.1 (WillisTowersWatson, January 2018), pp. 1–8, for data on those Fortune 1000 DB plan sponsors that provide comprehensive asset allocation disclosure in their annual report; and Charles McGrath, “E&F Asset Allocation,” P&I Online (September 9, 2016), https://www.pionline.com/article/20160909/INTERACTIVE/160909860/ef-asset-allocation, for asset allocations of E&F investment funds over $2 billion.
6. Alexander D. Beath and Chris Flynn, “Asset Allocation and Fund Performance of Defined Benefit Pension Funds in the United States (1998-2014)” (CEM Benchmarking, Inc., June 2016). The CEM Benchmarking analysis aggregates approximately 104 asset classes into a much smaller set of five primary asset class equities, fixed income, real assets, hedge funds/TAA, and private equity. The equities asset class is broken down into three subasset classes: large-cap U.S stock, small-cap U.S. stock, and non-U.S. stock. Large-cap U.S. stock includes large-cap equities appearing in the S&P. Small-cap U.S. stock includes the Russell 2000 small-cap and mid-cap equities. Non-U.S. stock is composed of non-U.S. equities such as EAFE and emerging markets equities. The fixed-income asset class is broken down into four subasset classes: broad U.S. fixed income, long-duration U.S. bonds, other U.S. fixed-income securities, and non-U.S. fixed income. Broad U.S. fixed income is investment-grade U.S. corporate bonds. Long-duration U.S. bonds are composed of strategies dedicated to long-duration bonds. The other U.S. fixed-income category includes TIPs, high-yield bonds, mortgages, and cash. Non-U.S. fixed income includes non-U.S. bonds. Real assets are broken down into three subasset classes: listed equity REITs, private real estate, and other real assets. Listed equity REITs are publicly traded real estate securities. Private real estate includes direct real estate holdings and real estate limited partnerships. The other real assets category includes commodities, infrastructure, and natural resources. Hedge funds/TAA includes hedge funds and tactical asset allocation teams. Private equity includes venture capital as well as diversified private equity.
7. Jean-Pierre Aubry, Anqi Chen, and Alicia H. Munnell, “A First Look at Alternative Investments and Public Pensions,” State and Local Pension Plans, No. 55, Center for Retirement Research at Boston College (July 2017), p. 4.
8. Ibid.
9. Julia K. Bonafide, Steven J. Foresti, and Russell J. Walker, “2015 Report on State Retirement Systems: Founding Levels and Asset Allocation,” Wilshire Consulting (February 25, 2015).
10. Michael Peskin, “Asset/Liability Management in the Public Sector,” in Pensions in the Public Sector, eds. Olivia S. Mitchell and Edwin C. Hustead (University of Pennsylvania Press, 2001), p. 205.
11. Ibid.
12. Ibid.
13. Ibid., p. 208.
14. Ibid.
15. Ibid., p. 213.
16. Ibid.
17. Ibid.
18. Deborah J. Lucas and Stephen P. Zeldes, “How Should Public Pensions Invest?” (American Economic Association, 2009), p. 11.
19. OECD, “Survey of Large Pension Funds and Public Pension Reserve Funds, 2016” (2018), (www.oecd.org/finance/survey-large-pension-funds.html), hereinafter “OECD Survey (2018).”
20. Ibid.
21. Peskin, “Asset/Liability Management in the Public Sector,” pp. 203–205.
22. Ibid.
23. Ibid.
24. OECD Survey (2018).
25. Ibid.
26. Aubry et al., “A First Look at Alternative Investments and Public Pensions,” p. 4.
27. Huixin Bi and Trenton Herriford, “Examining the Recent Shift in State and Local Pension Plans to Alternative Investments,” The Macro Bulletin (September 27, 2017).
28. Siona Listokin, Julia Pfaff, Karelle Samuda, and Janine R. Wedel, “U.S. Public Pension Funds and Alternative Investments, Uneven Investment Policies, Uneven Results,” Preliminary Draft White Paper prepared for INET Grant.
29. Aubry et al., “A First Look at Alternative Investments and Public Pensions,” p. 4.
30. The Pew Charitable Trust, “State Public Pension Funds Increase Use of Complex Investment” (April 2017), p. 16, hereinafter “Pew Study (2017).”
31. The Pew Charitable Trusts and the Laura and John Arnold Foundation, “State Public Pension Investment Shifts Over the Past 30 Years” (June 2014), hereinafter “Pew Study (2014).”
32. Siona Listokin, Julia Pfaff, Karelle Samuda, and Janine R. Wedel, “U.S. Public Pension Funds and Alternative Investments: Uneven Investment Policies, Uneven Result,” Institute for New Economic Thinking Policy, Policy Paper (January 2015), pp. 1–2.
33. Greenwich Roundtable, Education Committee, “Best Practices in Alternatives Investing: Managing Complexity” (2001), pp. 6–8.
34. Ibid.
35. American Investment Council, “Public Pension Study” (May 2018).
36. Ibid.
37. Ibid.
38. Ibid. Assets invested in private equity from the American Investment Council and allocation size based on 2016 fiscal year-end figures.
39. Pew Study (2017), p. 17.
40. Ibid.
41. Ibid.
42. Chris Bergen, “Trends in Public Pension Investment in Private Equity,” Nixon Peabody Private Equity Blog (May 30, 2017).
43. Ibid.
44. Ibid.
45. Peter Olds, “The Influence of Trends in the Global Pension Industry on Alternative Product Design,” Financier Worldwide Magazine (December 2015), p. 1.
46. Ibid.
47. Preqin Hedge Fund Online, “New York City Employees’ Retirement System Departs Hedge Funds: U.S. Public Pensions Fund Update” (2016), hereinafter “Preqin Hedge Fund Online Update (2016)”.
48. Ibid.
49. Ibid.
50. John Gittelsohn, “CalPERS Bets on Hedging Strategies After Selling Hedge Funds,” Bloomberg Law (online) (August 13, 2018).
51. Preqin Hedge Fund Online Update (2016).
52. JPMorgan’s Capital Advisory Group, “2018 Institutional Investor Survey.”
53. Ibid.
54. OECD Survey (2018), p. 25.
55. Public pensions have diversified their hedge fund exposure by investing in emerging managers—small, young managers that research has proven perform better than larger, more established managers during the first few years of their existence. See R. K. Aggrawal and Philippe Jorion, “The Performance of Emerging Hedge Fund and Managers,” Journal of Financial Economics vol. 96, no. 2 (2010).
56. Charles Wood, “Pensions Investing in Real Estate” (September 2016), http://docs.preqin.com/newsletters/re/Preqin-RESL-September-16-Pension-Funds-Investing-in-Real-Estate.pdf.
57. Ibid.
58. Ibid.
59. OECD Survey (2018).
60. Ibid.
61. Ibid.
62. Principles for Responsible Investing, http://www.unpri.org.
63. Ibid.
64. Ibid.
65. Alicia H. Munnell and Anqi Chen, “New Developments in Social Investing by Public Pension,” State and Local Pension Plans, No. 53, Center for Retirement Research at Boston College (November 2016), p. 1.
66. Ibid., p. 2.
67. Ibid.
68. CFA Institute, “Environmental, Social and Governance (ESG) Survey” (June 2015), p. 5, hereinafter “CFA ESG Survey”.
69. Meaghan Kilroy, “More Institutional Investors Putting Money into ESG,” Pension & Investments (September 3, 2018).
70. Mercer Consulting, “Responsible Investment’s Second Decade: Summary Report of the State of ESG Integration, Policy and Reporting” (2011), p. 5.
71. CFA ESG Survey, p. 6.
72. Principles for Responsible Investing, http://www.unpri.org.
73. Mercer Consulting, “Responsible Investment’s Second Decade.”
74. Munnell and Chen, “New Developments in Social Investing by Public Pension, p. 4.”
75. Pew Study (2014).
76. Ibid.
77. Donald J. Bond and Yimeng Yin, “Appropriateness of Risk-Taking by Public Pensions,” The Nelson A. Rockefeller Institute of Government (February 2017).
78. Krishnan Chandrasekhar, “The Investment Policy Process: A Perspective from the World Bank,” in Governance and Investment of Public Pension Assets: Practitioners’ Perspectives, eds. Sadhir Rajkumar and Mark C. Dorfman (The World Bank, 2011), pp. 171–172.
1. 2001–2015 returns taken from Alexander D. Beath, “Asset Allocation and Fund Performance of Defined Benefit Pension Funds in the United States, 1998–2014,” CEM Benchmarking, Inc. (June 2016) and the most recent 2016–2017 performance data taken from the Public Plans Data. Center for Retirement Research at Boston College, Center for State and Local Government Excellence, and National Association of Retirement Administrators. (www.publicpensiondata.org), hereinafter “Public Pension Database.” Also see Jean-Pierre Aubry, Anqi Chen, Alicia H. Munnell, and Kevin Wandrei, “What Explains Differences in Public Pension Return Since 2001,” State and Local Pension Plans, No. 60, Center for Retirement Research at Boston College (July 2018), p. 2.
2. See Public Pension Database.
3. See Daniel Schmidt, “2015 Comparative Study of Major Public Employee Retirement Systems,” Wisconsin Legislative Council (December 2016).
4. National Education Association, “Characteristics of Large Public Education Plans” (January 2016).
5. Jeffrey N. Saret, Barbara Zahn, and Subhadeep Mitra, “Street View,” Two Sigma (February 2017), p. 2.
6. Aubry et al., “What Explains the Difference,” p. 2.
7. Ibid.
8. Ibid.
9. Ibid.
10. Ibid.
11. Ibid.
12. Ibid.
13. Ibid.
14. Beath, “Asset Allocation and Fund Performance.” The underperformance was relative to the average defined benefit (DB) public pension in the United States, which included both public and private plans.
15. Ibid.
16. Ibid., p. 37.
17. Ibid.
18. Aubry et al., “What Explains the Difference,” p. 7.
19. Ibid.
20. Ibid.
21. Beath, “Asset Allocation and Fund Performance,” p. 4.
22. Ibid.
23. Ibid., p. 3.
24. Ibid.
25. See for example, Wilshire Consulting, “Benchmarking Overview Presented to Los Angeles City Employees’ Retirement System” (February 14, 2017), p. 5.
26. Ibid.
27. Ibid.
28. Ibid.
29. Ibid.
30. Ibid.
31. Ibid.
32. FTSE Russell, “Indexes and Benchmarks Made Clear,” Insight (May 2017), p. 3.
33. Wilshire “Benchmarking Overview,” p. 5.
34. “Indexes and Benchmarks Made Clear,” Insight, FTSE Russell (May 2017), p. 3.
35. Wilshire Consulting, “Benchmarking Overview,” p. 5.
36. Ibid.
37. Ibid.
38. Ibid.
39. Aaron M. Cunningham and Peter Charney, “Benchmark Trends Among Large Public Defined Benefit Pension Plans,” P & I online (October 4, 2013).
40. Cunningham and Charney, “Benchmark Trends,” p. 1.
41. Ibid.
42. Jean-Pierre Aubry and Caroline V. Crawford, “How Do Fees Affect Plans’ Ability to Beat Their Benchmarks?,” State and Local Pension Plans, No. 61, Center for Retirement Research at College (August 2018), p. 2.
43. Ibid.
44. Ibid.
45. Ibid.
46. Ibid.
47. Ibid.
48. Ibid.
49. Ibid.
50. Ibid.
51. Ibid., pp. 1–2.
52. Ibid., p. 2.
53. Ibid.
54. Ibid.
55. Ibid.
56. Ibid.
57. Ibid.
58. Ibid.
59. Ibid.
60. Ibid.
61. Ibid., p. 3.
62. Ibid.
63. Ibid.
64. Ibid.
65. Ibid.
66. Ibid.
67. Ibid.
68. Ibid.
69. Ibid.
70. Ibid., p. 5.
1. National Association of State Retirement Administrators (NASRA), NASRA Issue Brief: Employee Contributions to Public Pension Plans (September 2017), p. 1.
2. Keith Brainard and Alex Brown, “Spotlight on the Annual Required Contribution Experience of State Retirement Plans, FY01 to FY13,” National Association of State Retirement Administrators (March 2015), p. 1.
3. Ibid., p. 9.
4. Ibid.
5. Ibid., p. 8.
6. Parry Young, “Public Pensions and State and Local Budgets,” in The Future of Public Pension Retirement Systems, eds. Olivia S. Mitchell and Gary Anderson (Oxford University Press, 2009), p. 75.
7. Brainard and Brown, “Spotlight on the Annual Required Contribution,” p. 1.
8. M. Barton Waring, “Between Scylla and Charybdis: Improving the Cost Effectiveness of Public Pension Retirement Systems,” in The Future of Public Pension Retirement Systems, eds. Olivia S. Mitchell and Gary Anderson (Oxford University Press, 2009), p. 66.
9. Ibid.
10. Ibid., p. 68.
11. Ibid.
12. “Statement No. 25 of the Governmental Accounting Standards Board: Financial Reporting for Defined Benefit Pension Plans and Note Disclosure for Defined Contribution Plans” and “Statement No. 26 of the Governmental Accounting Standards Board: Financial Reporting for Postemployment Healthcare Plans Administered by Defined Benefit Pension Plans,” Governmental Accounting Standards Board Spotlight (November 1994), www.gasb.org.
13. Brainard and Brown, “Spotlight on the Annual Required Contribution,” p. 1.
14. Brainard and Brown, “Spotlight on the Annual Required Contribution,” pp. 1–2.
15. Ibid., p. 1.
16. Ibid., p. 2.
17. Ibid.
18. “Statement No. 67 of the Governmental Accounting Standards Board: Financial Reporting for Pension Plans – An Amendment of GASB Statement No. 25” and “Statement No. 68 of the Governmental Accounting Standards Board: Accounting and Financial Reporting for Pensions – An Amendment of GASB Statement No. 27,” Governmental Accounting Standards Board (June 2012), www.gasb.org.
19. Alicia H. Munnell and Jean-Pierre Aubry, “The Funding of State and Local Pensions: 2015-2020,” State and Local Pension Plans, No. 50, Center for Retirement Research at Boston College (June 2016) p. 5.
20. Ibid.
21. Ibid.
22. Ibid.
23. Brainard and Brown, “Spotlight on the Annual Required Contribution,” p. 3.
24. Ibid.
25. Ibid., p. 4.
26. Ibid.
27. Ibid.
28. Ibid.
29. Munnell and Aubry, “The Funding of State and Local Pensions,” p. 4.
30. Jean-Pierre Aubry, Alex Golub-Sass, Kelly Haverstick, and Alicia H. Munnell, “Why Don’t Some States and Their Localities Pay Their Required Pension Contributions?,” State and Local Pension Plans, No. 7, Center for Retirement Research at Boston College, (May 2008), p. 2.
31. Ibid.
32. Brainard and Brown, “Spotlight on the Annual Required Contribution,” p. 9.
33. Ibid.
34. Don Boyd and Yimeng Yin, “Investment Risk and Its Potential Consequences for Teacher Retirement Systems and School Districts,” RAND Education (June 2018).
35. Ibid., p. 37.
36. Ibid.
37. Keith Brainard, “Trends in Public Pension Funding,” National Association of State Retirement Administrators (NASRA) (August 24, 2015).
38. Brainard and Brown, “Spotlight on the Annual Required Contribution,” p. 1.
39. Ibid.
40. Munnell and Aubry, “The Funding of State and Local Pensions.”
41. Ibid.
42. Ibid.
43. Brainard and Brown, “Spotlight on the Annual Required Contribution,” p. 1.
44. Munnell et al., “Why Don’t Some States and Their Localities Pay Their,” p. 5.
45. Brainard and Brown, “Spotlight on the Annual Required Contribution,” p. 3.
46. Munnell et al., “Why Don’t Some States and Their Localities Pay,” p. 3.
47. Ibid.
48. Jun Peng, State and Local Pension Fund Management (CRC Press, 2008), pp. 173–176.
49. Brainard and Brown, “Spotlight on the Annual Required Contribution,” p. 2.
50. Peng, State and Local Pension Fund Management, p. 173.
51. Ibid.
52. Young, “Public Pensions and State and Local Budgets,” p. 82.
53. Ibid.
54. Ibid., p. 174.
55. Ibid., p. 82.
56. Ibid.
57. Ibid.
58. Peng, State and Local Pension Fund Management, p. 175.
59. Ibid.
60. Ibid., p. 176.
61. Young, “Public Pensions and State and Local Budgets,” p. 80.
62. Ibid., p. 81.
63. Ibid.
64. Ibid., p. 82.
65. Brainard and Brown, “Spotlight on the Annual Required Contribution,” p. 7.
66. Ibid., p. 8.
67. Ibid.
68. Boyd and Yin, “Investment Risk and Its Potential Consequences,” p. 51.
69. Employee Benefit Research Institute, “Public Pension Plan Asset Allocations,” Notes, vol. 30, no. 4, p. 4.
70. Ibid.
71. Andrew Biggs, “The Public Pension Quadrilemma: The Intersection of Investment Risk and Contribution Risk,” The American Enterprise Institute (October 2014).
72. Ibid.
73. Government Finance Officers Association, “Core Elements of a Pension Funding Policy (CORBA)(2013).”
74. Ibid.
75. Ibid.
76. Ibid.
77. Ibid.
78. Brainard and Brown, “Spotlight on the Annual Required Contribution,” p. 6.
79. Ibid.
80. Ibid.
81. Ibid.
82. Boyd and Yin, “Investment Risk and Its Potential Consequences,” pp. 34–35.
83. Ibid.
84. Lisa Schilling and Patrick Wiese, “U.S. Public Pension Plan Contribution Indices 2006-2014,” Society of Actuaries (June 2017).
85. Ibid., p. 6.
86. Ibid.
87. National Association of State Retirement Administrators, “NASRA Issue Brief: Employee Contributions to Public Pension Plans” (September 2017), p. 1.
88. Ibid.
89. Ibid.
90. Ibid.
91. Ibid.
92. Ibid.
93. Ibid.
94. Ibid.
95. Ibid.
96. Ibid.
97. Ibid.
98. Ibid.
99. Ibid.
100. Roderick B. Crane, Michael Heller, and Paul J. Yakoboski, “Defined Contribution Pension Plans in the Public Sector: A Benchmark Analysis,” in The Future of Public Pension Retirement Systems, eds. Olivia S. Mitchell and Gary Anderson (Oxford University Press, 2009), p. 209.
101. Ibid.
102. Ibid., p. 210.
103. Ibid.
104. Ibid.
105. Ibid., p. 216.
106. Ibid.
1. Jun Peng, State and Local Pension Fund Management (CRC Press, 2009), p. 104.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid., p. 105.
6. Ibid.
7. ibid.
8. Ibid.
9. Ibid., p. 107.
10. Ibid., p. 108.
11. Peng, State and Local Pension Fund Management, p. 108.
12. Randy Miller and Rick Funston, “Public Pension Governance that Works,” Funston Advisory Services LLC (March 2014).
13. Ibid., p. 2.
14. Ibid.
15. Ibid.
16. Hazel Bradford, “North Carolina Considers End to Sole Trustee Role,” Pension and Investments (January 20, 2014).
17. Gary Findlay, “The Pursuit of Excellence in Pension Fund Management,” MOSERS Operations Outlook (March 2005), p. 4.
18. Peng, State and Local Pension Fund Management, p. 92.
19. “Clapman Report 2.0: Model Governance Provisions to Support Pension Fund Best Practice Principles,” The Stanford Institutional Investors’ Forum Committee on Fund Governance (2013).
20. “Serving as a Fund Trustee: Effective Governance for Public Pension Funds,” Robbins Geller Rudman & Dowd, LLP (May 16, 2016).
21. Ibid.
22. Nicholas Greifer, Pension Investing: Fundamentals and Best Practices (Government Finance Officers Association, 2002), p. 41.
23. Ibid., p. 42.
24. Ibid., p. 41.
25. Ibid., pp. 42-43.
26. Ibid., p. 42.
28. The Freedom of Information Act, 5 U.S.C. Section 552, as amended by Public Law No. 104-231, 110 Stat. 3048.
29. Peng, State and Local Pension Fund Management, p. 93.
30. Ibid.
31. David Hess and Gregorio Impavida, “Governance of Public Pension Funds: Lessons from Corporate Governance and International Evidence” (World Bank, 2003).
32. Olivia S. Mitchell, David McCarthy, Stanley C. Wisniewski, and Paul Zorn, “Developments in State and Local Pension Plans,” in Pensions in the Public Sector, eds. Olivia S. Mitchell and Edwin C. Hustead (University of Pennsylvania Press, 2001), p. 33.
33. See ibid. See also “Characteristics of Large Public Education Plans,” National Education Association (November 2012), citing a review of 108 retirement plans, including the largest plans covering employees of public educators, where the median board size is 9 members and the average is 9.5, p. 7.
34. David Hess, “Protecting and Politicizing Public Pension Fund Assets: Empirical Evidence on the Effects of Governance Structures and Practices,” UC Davis Law Review, No. 39, p. 187, 196 (2005).
35. Ibid.
36. Peng, State and Local Pension Fund Management, p. 93.
37. Chapman Report 2.0, p. 13.
38. Ibid.
39. Ibid.
40. Ibid., p. 14.
41. Ibid.
42. Ibid., quoting John Por and Tom Ianucci, “Good Pension Governance: An Advocate’s Guide for Improvement,” The NAPPA Report. Vol 13, No. 5, February 2001.
43. Ibid.
44. Ibid.
45. Hess and Impavida, “Governance of Public Pension Funds.”
46. Hess and Impavida, “Governance of Public Pension Funds.”
47. Author’s own analysis based on publicly available public pension data and information collected September 2018.
48. “NY State Pension Pushes for Corporate Board Diversity,” U.S. News & World Report, March 21, 2018 (online); Hazel Bradford, “SEC Should Increase Board Diversity Disclosure — Public Pension Funds,” Pension & Investments Online (March 31, 2015) (California, North Carolina, Ohio, Illinois, New York, and Connecticut, representing $1.12 trillion in investment assets, on SEC officials to update existing rules by requiring companies to create a chart or matrix of each nominee’s gender, race, ethnicity, skills, experiences, and attributes. Citing more robust disclosure regimes in Australia, Canada, Singapore, and the European Parliament, the group said that greater disclosure can prevent “groupthink.”)
49. “Missing Pieces Report: The 2016 Board Diversity Census of Women and Minorities on Fortune 500 Boards,” The Alliance for Board Diversity and Deliotte (2016).
50. Ibid.
51. Ibid.
52. Original research based on the author’s review of publicly available information from public pension websites.
53. Holy Bible (King James Version), Matthew 7:3.
54. “Serving as a Fund Trustee: Effective Governance for Public Pension Funds,” Robbins Geller Rudman & Dowd, LLP (May 16, 2016).
55. Rich Todd and Wendy Dominguez, “The Good and Bad of Investment Committees and Boards,” Pension & Investments Online (October 17, 2012).
56. Ibid.
57. “What Is a SWF?” The Sovereign Wealth Fund Institute (https://www.swfinstitute.org/sovereign-wealth-fund).
58. “10 Largest Sovereign Wealth Funds in North America,” Trusted Insight (https://www.thetrustedinsight.com/investment-news/top-10-sovereign-wealth-funds-in-north-america-20160523068/).
59. Ibid.
60. Paul Rose, “North American Dream: The Rise of U.S. and Canadian Sovereign Wealth,” Public Law and Legal Theory Working Paper Series, Center for Interdisciplinary Law and Policy Studies at the Moritz College of Law (May 6, 2014).
61. Ibid.
62. Ibid.
63. Ibid.
64. Ibid.
65. Ibid.
66. Ibid.
67. Ibid.
68. Ibid.
69. Ibid.
71. https://dpi.wi.gov/sfs/aid/categorical/common-school-fund.
72. https://tea.texas.gov/psf.
1. Keith P. Ambachtsheer and D. Don Ezra, Pension Fund Excellence: Creating Value for Stockholders (John Wiley & Sons, 1998), discussing Fortune and Folly: The Wealth and Power of Institutional Investing by William M. O’Barr, John M. Conley, with economic analysis by Carolyn Kay Brancato (Business One Irwin, 1992).
2. Olivia S. Mitchell and Ping Lung Hsin, “Public Pension Governance and Performance,” Working Paper No. 4632, National Bureau of Economic Research (NBER) Working Paper Series (January 1994).
3. Ibid., p. 14.
4. Ibid., p. 17.
5. Tongxuan Yang and Olivia S. Mitchell, “Public Pension Governance, Funding and Performance: A Longitudinal Appraisal,” Pension Research Council (2004), p. 18.
6. Ibid.
7. See Joel Harper, “Public Pension Sector Governance in the United States: Up to the Task,” Rotman International Journal of Pension Management, vol. 1, issue 1 (Fall 2008), which found a not statistically significant effect of board composition and public pension performance.
8. Alexander Dyek, Paulo Manoel, Adair Morse, and Lukasz Pomorski, “Agency in Public Pension Performance,” American Economic Association(2015); see also Aleksander Andonov, Yael V. Hochberg, and Joshua D. Rauh, “Political Representation and Governance: Evidence from the Investment Decisions of Public Pensions” The Journal of Finance, vol. 73, no. 5 (June 19, 2018), evaluating public pension governance and the private equity allocations.
9. Roberta Romano, “Public Pension Fund Activism in Corporate Governance Reconsidered,” Columbia Law Review, vol. 93, no. 4 (May 1993).
10. David Hess, “Protecting and Politicizing Public Pension Fund Assets: Empirical Evidence on the Effects of Governance Structures and Practice,” UC Davis Law Review, vol. 39, no. 1 (2005), p. 215.
11. Ibid.
12. Ibid.
13. Dyek et al., “Agency in Public Pension Performance.”
14. Ibid.
15. Ibid.
16. Ibid.
17. Michael Useem and Olivia S. Mitchell, “Holders of the Purse Strings: Governance and Performance of Public Retirement Systems,” Pension Research Council (March 2000), p. 9.
18. Hess, “Protecting and Politicizing Public Pension Fund Assets,” p. 216.
19. Ambachtsheer and Ezra, Pension Fund Excellence.
20. Ibid., p. 15
21. Ibid.
22. Ibid.
23. Ibid., p. 16.
24. Ibid.
25. Romano, “Public Pension Fund Activism in Corporate Governance Reconsidered.”
26. Useem and Mitchell, “Holders of the Purse Strings,” p. 9
27. Michael Useem and David Hess, “Governance and Investments of Public Pensions,” in Pensions in the Public Sector, eds. Olivia S. Mitchell and Edwin C. Hustead (University of Pennsylvania Press, 2001), pp. 143–144.
28. Ibid.
29. Ibid.
30. Harper, “Public Pension Sector Governance in the United States.”
31. Ibid.
32. Useem and Hess, “Governance and Investments of Public Pensions,” pp. 143–144.
33. Ibid.
34. Ibid.
35. Ibid.
36. Ibid.
37. Mitchell and Hsin, “Public Pension Governance and Performance,” p. 15.
38. Ibid.
39. Ibid., p. 21.
40. Dyek et al., “Agency in Public Pension Performance,” p. 18.
41. Ibid.
42. Joel T. Harper, “Board of Trustee Composition and Investment Performance of US Public Pensions,” Rotman International Center for Pension Management (ICPM): ICPM Sponsored Research (February 2018), p. 18.
43. Ibid., p. 21; see also Harper, “Public Pension Sector Governance in the United States,” p. 27; Chris Groves, “Public Retirement Systems: An Examination of Governance Characteristics and Their Impact on the Funded Ratio,” Martin School of Public Policy and Administration. (2014), p. 17.
44. Harper, “Public Pension Sector Governance in the United States,” p. 27.
45. Ibid.
46. Groves, “Public Retirement Systems,” p. 17.
47. Ibid.
48. Ibid.
49. Ibid.
50. Mitchell, “Public Pension Governance, Funding and Performance,” p. 16.
51. Alexandar Andonov, Rob Bauer, and Martijn Cremers, “Pension Fund Asset Allocation & Liability Discount Rates” The Review of Financial Studies, vol. 30, (August 2007), pp. 2555-2595.(February 2017), p. 32.
52. Ibid.
53. Ibid., p. 31.
54. Ibid., p. 33.
55. Ibid.
56. Ibid.
57. Keith Ambachtsheer and John McLaughlin, “How Effective Is Pension Fund Governance Today and Do Pension Funds Invest for the Long-Term?,” KPA Advisory Services (January 2015).
58. Ibid., p. 5
59. Ibid.
60. Ibid.
61. Ibid.
62. Ibid.
63. Jody Macintosh and Tom Scheibelhut, “How Large Pension Funds Organize Themselves: Findings from a Unique 19-Fund Survey,” Rotman International Journal of Pension Management, vol. 5, issue 1 (Spring 2012).
66. Peter Clapman, “Best Practice Principles,” Stanford Institutional Investor Forum Committee on Fund Governance (May 31, 2007) (https://www.aztreasury.gov/wp-content/uploads/2012/12/Stanford-Institutional-Investors-Forum.pdf).
1. Employee Retirement Income Security Act of 1974, Pub. L. 93-406, 88 Stat. 829, enacted September 2, 1974, codified in part at 29 U.S.C. ch. 18 (“ERISA”).
2. Ibid.
3. Jun Peng, State and Local Pension Fund Management (CRC Press, 2008). p. 88.
4. Ibid.
5. Ibid.
6. Karen Steffen, “State and Local Pension Plans,” in Pensions in the Public Sector, eds. Olivia S. Mitchell and Edwin C. Hustead, (University of Pennsylvania Press, 2001), p. 53.
7. Peng, State and Local Pension Fund Management, p. 88.
8. Ibid.
9. ERISA, §1102, 1103.
10. ERISA, §1104.
11. Ibid.
12. Ibid.
13. Avini Avisheh, “The Origins of the Modern English Trust,” Tulane Law Review, 70 Tul. L. Rev. 1139 (March 1996).
14. 26 Mass. (9 Pick) 446 (1830).
15. Restatement (Third) of Trusts (2003).
16. Ibid., §77(1).
17. Ibid., §77(2).
18. Comment on §77 Subsections (1) and (2).
19. Ibid.
20. Ibid.
21. Ibid.
22. Ibid.
23. Ibid.
24. Ibid.
25. Ibid., §77 General Comment.
26. U.S. v. Mason Tenders Dist. Counsel of Greater N.Y., 909 F. Supp. 882 (S.D.N.Y. 1995).
27. Marshall v. Glass/Metal Assoc. & Glaziers & Glassworkers Pension Plan, 507 F. Supp. 378 (D. Haw. 1980).
28. White v. Martin, 286 F. Supp. 2d. 1029 (D. Minn, 2003).
29. Scardelletti v. Bobo, 897 F. Supp. 913 (D. Md. 1995).
30. Whitfield v. Cohen, 682 F. Supp. 188 (S.D.N.Y 1988).
31. Restatement (Third) of Trusts (2003), §78.
32. Ibid., §78(1).
33. Ibid., §78(2) and General Comment (a).
34. Ibid.
35. Ibid.
36. Ibid.
37. Ibid.
38. Lowen v. Tower Asset Management, 829 F.2d 263 1209 (2d Cir. 1987).
39. In Re Trust Created by Inman v. Tremaine, 269 Neb. 376, 693 N.W.2d 514 (2005).
40. Donovan v. Bryans, 566 F. Supp. 1258 (E.D. Pa. 1983).
41. Restatement (Third) of Trusts (2003), §79(1).
42. Ibid., §79 Comment on Subsection 1.
43. Ibid., §79(1)(b).
44. Ibid.
45. Ibid., §79(2) Comment on Subsection (2).
46. Ibid., §79(2).
47. Deak v. Masters, Mates & Pilots Pension Plan, 821 F.2d 572 (11th Cir. 1987).
48. Mahoney v. Bd. of Trs, 973 F.2d 968 (1st Cir. 1992).
49. Ibid.
50. Restatement (Second) of Trusts (1959).
51. Ibid.
52. Restatement (Third) of Trusts (2003), §80(1).
53. Ibid.
54. Ibid., §80(2).
55. Ibid.
56. Ibid., §80 General Comment.
57. Ibid.
58. Ibid., §80(2).
59. Krug v. Krug, 838 S.W.2d 197 (Tenn. App. 1992).
60. Harley v. Minnesota Mining & Mfg. Co., 42 F. Supp. 2d 898 (D. Minn. 1999).
61. Ibid.
62. Arakelian v. National Western Life Insurance Co., 755 F. Supp. 1080 (D.D.C. 1990).
63. Whitfield v. Cohen, 682 F. Supp. 188 (S.D.N.Y. 1988).
64. Restatement (Third) of Trusts (2003), §81(1).
65. Ibid., §81 Comment on Subsection (1).
66. Ibid.
67. Ibid.
68. Ibid.
69. Ibid., §81(2).
70. Ibid., §81 Comment on Subsection (2).
71. Ball v. Mills, 376 So.2d 1174 (Fla. App. 1979).
72. Free v. Briody, 732 F.2d 1331 (7th Cir. 1984).
73. Ibid.
74. Restatement (Third) of Trusts (2003), §82(1)(a)-(c).
75. Ibid., §82 General Comment.
76. Ibid., §82(2).
77. Ibid., §83.
78. Ibid., §83 Comment.
79. Ibid.
80. Ibid.
81. Eddy v. Colonial Life Ins. Co., 919 F.2d 747 (D.C. Cir. 1990).
82. Bin v. Exxon Co., 2000 WL 1126387 (9th Cir. 2000).
83. Restatement (Third) of Trusts (2003), §84.
84. Ibid.
85. Ibid., §84 Comment.
86. Rodrigues v. Herman, 121 F.3d 1352 (9th Cir. 1997).
87. In Re Will of Crabtree, 865 N.E. 2d 1119 (2003).
88. Ibid.
89. Restatement (Third) of Trusts (2003), §70 General Comment.
90. Ibid., §70(a).
91. ERISA, 29 U.S.C. §1109.
92. Ibid.
93. ERISA, 29 U.S.C. §1110.
94. Ibid.
1. Jun Peng, State and Local Pension Fund Management (CRC Press, 2009), p. 96.
2. Ibid., pp. 97–98.
3. Ibid., see also Nicholas Greifer, Pension Investing: Fundamentals and Best Practices (Government Finance Officers Association, 2002), p. 34.
4. Greifer, Pension Investing, p. 34.
5. Ibid.
6. Ibid.
7. Ibid.
8. Ibid., p. 35.
9. Olivia S. Mitchell, David McCarthy, Stanley C. Wisniewski, and Paul Zorn, “Developments in State and Local Pension Plans,” in Pensions in the Public Sector, eds. Olivia S. Mitchell and Edwin C. Hustead (University of Pennsylvania Press, 2001), pp. 34–35.
10. Ibid.
11. Ibid.
12. Ibid.
13. Ibid.
14. Ibid.
15. Ibid.
16. Jody Macintosh and Tom Sheibelhut, “How Large Pension Funds Organize Themselves: Findings from a Unique 19-Fund Survey,” Rotman International Journal of Pension Fund Management, vol. 5, issue 1 (Spring 2012), p. 34.
17. Ibid., p. 35.
18. Ibid.
19. Ibid.
20. Ibid.
21. Ibid.
22. Ibid., p. 36.
23. Ibid.
24. Ibid.
25. Greifer, Pension Investing, p. 36.
26. Ibid., p. 36.
27. Ibid.
28. Jeffrey V. Bailey, Jesse L. Phillips, Thomas M. Richards, A Primer for Investment Trustees (The Research Foundation of the CFA Institute, 2011), p. 14.
29. Ibid.
30. Greifer, Pension Investing, p. 35.
31. Ibid.
32. Ibid.
33. Jolanta Wysocka, “Evaluating Internal and External Management of Assets: New Trends Among Pension Funds,” in Governance and Investment of Public Pension Assets, eds. Sudhir Rajkumar and Mark C. Dorfman (The World Bank, 2011), p. 259.
34. Ibid.
35. Ibid., p. 260.
36. “Global Pension Funds: Best Practices in Pension Funds Investment Process,” PwC Market Research Centre (2016).
37. Ibid., p. 15.
38. Wysocka, “Evaluating Internal and External Management of Assets,” p. 258.
39. Ibid., p. 262.
40. Macintosh and Sheibelhut, “How Large Pension Funds Organize Themselves,” p. 37.
41. Gordon L. Clark and Ashby H. B. Monk, “Principles and Policies for In-House Asset Management,” Global Projects Center (2012), p. 4.
42. Wysocka, “Evaluating Internal and External Management of Assets,” p. 258.
43. Clark and Monk, “Principles and Policies for In-House Asset Management,” p. 4.
44. Ibid.
45. Wysocka, “Evaluating Internal and External Management of Assets,” p. 258.
46. Ibid., p. 262.
47. Randy Diamond, “More Institutions Are Using Managers as Strategic Partners.” Pension & Investments Online (June 25, 2012).
48. Clark and Monk, “Principles and Policies for In-House Asset Management,” p. 4.
49. Wysocka, “Evaluating Internal and External Management of Assets,” p. 258.
50. Ibid.
51. Ibid.
52. See Wysocka, “Evaluating Internal and External Management of Assets,” p. 258; “Global Pension Funds,” p. 15.
53. Wysocka, “Evaluating Internal and External Management of Assets,” p. 258.
54. Macintosh and Sheibelhut, “How Large Pension Funds Organize Themselves,” p. 38.
55. Keith P. Ambachtsheer, The Future of Pension Management: Integrating Design, Governance, and Investing (John Wiley & Sons, 2016).
56. Ibid., p. 110.
57. Ibid., p. 111.
58. “Public Pension Systems: Operational Risks of Defined Benefit and Related Plans and Controls to Mitigate These Risks,” Association of Public Pension Fund Administrators (APPFA) (July 2003), p. 7.
59. Keith Ambachtsheer, “How Should Pension Funds Pay Their Own People,” Rotman International Journal of Pension Management (Spring 2011); see also Keith Ambachtsheer, “Three Grades of Pension Fund Governance Quality: Bad, Better, and Best,” (Working Paper July 4, 2007).
60. Macintosh and Sheibelhut, “How Large Pension Funds Organize Themselves,” p. 38.
61. Ibid.
62. Ibid.
63. Ambachtsheer, The Future of Pension Management, p. 113.
64. Ibid.
65. Ibid., p. 114.
66. Ibid., p. 117.
67. Ibid.
68. Ibid., p. 118.
69. Ibid., p. 117.
70. Ibid., p. 118.
71. Bailey et al., A Primer for Investment Trustees, p. 15.
72. Ibid.
73. Ibid.
74. Greifer, Pension Investing, p. 36.
75. Ibid.
76. Ibid., p. 37.
77. Ibid.
78. “Best Governance Practices in Delegation and Consultant Selection for Long-Term Funds,” Greenwich Roundtable (2016), p. 14.
79. Ibid.
80. Ibid.
81. Greifer, Pension Investing, p. 11.
82. “Best Governance Practices in Delegation and Consultant Selection,” p. 7.
83. “The Rise of the Outsourced Chief Investment Officer,” The One Brief (http://theonebrief.com/outsourced-chief-investment-officer).
84. “Best Governance Practices in Delegation and Consultant Selection,” p. 7.
85. Ibid., p. 10.
86. Ibid.
87. Ibid.
88. “The Rise of the Outsourced Chief Investment Officer,” The One Brief (http://theonebrief.com/outsourced-chief-investment-officer).
89. Ibid.
90. James Comtois, “Consulting Firms Answer Asset Owner Call for Accountability,” Pension & Investments (November 30, 2015).
91. “Best Governance Practices in Delegation and Consultant Selection,” p. 14, quoting Ray Gustin of Drake Capital Advisors, LLC, who is also a Greenwich Roundtable Trustee and Education Committee member.
92. Ibid., p. 8.
93. Ibid.
94. Ibid.
95. Ibid., p. 10.
96. Ibid.
97. Scott D. Stewart, Manager Selection (The Research Foundation of the CFA Institute, 2013), p. 3.
98. Ibid., p. 4.
99. Ibid., p. 5.
100. Ibid., p. 6.
101. Ibid., p. 87.
102. Ibid.
103. Jeffrey Heisler, Christopher R. Knittel, John J. Neumann, and Scott D. Stewart “Why Do Institutional Plan Sponsors Hire and Fire Their Investment Managers?” Journal of Business and Economic Studies, vol. 13, no. 1 (Spring), pp. 88–115.
104. Ibid.
105. S. Karim and Scott D. Stewart, “Summary of Survey of Decision Making by Public and Corporate Pension Professionals” (Boston University, unpublished), discussed in Stewart, Manager Selection, p. 89.
106. F. Douglas Foster and Geoffrey J. Warren, “Why Might Investors Choose Active Management?” Journal of Behavioral Finance, vol. 16 (2015), pp. 20–39.
107. Karim and Stewart, “Summary of Survey of Decision Making by Public and Corporate Pension Professionals.”
108. Foster and Warren, “Why Might Investors Choose Active Management?”
109. Stewart, Manager Selection, p. 91.
110. Amit Goyal and Sunit Wahal, “The Selection and Termination of Investment Management Firms by Plan Sponsors,” Journal of Finance, vol. 63, no. 4 (August 2008), pp. 1805–1847.
111. Ibid.
112. Ibid.
113. Ibid.
114. Scott D. Stewart, Jeffrey Heisler, Christopher Knittel, and John Neumann, “Absence of Value: An Analysis of Investment Allocation Decisions by Institutional Plan Sponsors,” Financial Analysts Journal, vol. 65, no. 6 (November 2009), pp. 34–51.
115. Stewart, Manager Selection, p. 93.
1. Restatement (Third) of Trusts (2003) §90.
2. Ibid., Reporter’s Note §77.
3. Ibid., §90(b).
4. Ibid., § 90 cmt. e(1).
5. Richard L. Revesz, “How the ALI Empowered Fiduciaries to Have Better Investment Strategies,” Director’s Letter, The ALI Reporter (Fall 2017).
6. Ibid.
7. John H. Langbein, “Reversing the Non-Delegation Rule of Trust-Investment Law,” 59 Mo. L. Rev. 105, 116 (1994).
8. Restatement (Second) of Trusts §171 (1959).
9. Restatement (Third) of Trusts (2003), Reporter’s Note, §80 (1992).
10. Ibid.
11. Langbein, “Reversing the Nondelegation Rule,” p. 110 (italics added for emphasis).
12. Ibid.
13. Ibid.
14. Restatement (Third) of Trusts (2003) §80(1).
15. Ibid., §80(2).
16. Langbein, “Reversing the Nondelegation Rule,” p. 105.
17. Restatement (Third) of Trusts (2003) §80, Comment on Subsection (2)(e).
18. Langbein, “Reversing the Nondelegation Rule,” p. 1.
19. Langbein, “Reversing the Nondelegation Rule,” p. 106, highlighting his focus on delegation to external managers: “Practice under the non-delegation rule has been to [repudiate] the rule. Nevertheless, the new delegation rule may affect future patterns of trusteeship. By making it easier for trustees to externalize the investment function” (emphasis added). See Ibid.
20. Gary Findlay, “The Pursuit of Excellence in Pension Fund Management,” MOSERS Operations Outlook (March 2005). The Restatement (Third) was adopted by the authoritative American Law Institute in 1990 and was tracked by the Uniform Prudent Investor Act (proposed in 1994).
21. Restatement (Third) of Trusts (2003) §80, Comment on Subsection (1).
22. Ibid.
23. Ibid., §80(1).
24. Ibid., §77(3).
25. James Hawley, Keith Johnson, and Ed Waitzer, “Reclaiming Fiduciary Balance,” Rotman International Journal of Pension Management, vol. 4 (Fall 2011), p. 6.
26. Restatement (Third) of Trusts (2003) §80, Comment on Subsection (1)(d)(1).
27. Findlay, “The Pursuit of Excellence,” p. 3.
28. Restatement (Third) of Trusts (2003) §80, Comment on Subsection (1)(d)(2).
29. Ibid.
30. Keith P. Ambachtsheer, Pension Revolution: A Solution to the Pensions Crisis (Wiley Finance, 2011), p. 139.
31. Restatement (Third) of Trusts (2003) §80, Comment on Subsection (1)(d)(2).
32. Ibid., §80, Comment on Subsection (2)(g); see also Roberts v. Roberts, 260 Va. 660, 536 S.E.2d 714 (Va. 2000) (“The clear and unambiguous language of the statute states that fiduciaries are entitled to employ agents and to [do] so without liability for any neglect, omission, misconduct, or default of any such agent or professional representative provided he was selected and retained with reasonable care.”).
33. Restatement (Third) of Trusts (2003) §80, Comment on Subsection (1)(c).
34. Ibid., §80, Comment on Subsection (2).
35. Ibid. (emphasis added).
36. Ibid., §80, Comments on Reporter’s Notes f-f(3).
37. 42 F. Supp. 2d, 898, 908 (D. Minn. 1999)
38. Keith P. Ambachtsheer, “The Ideal Pension-Delivery Organization: Theory and Practice,” in Frontiers in Pension Finance (Edward Elgar Publishing, 2008), p. 218.
39. “P&I Largest Retirement Plans: 2018,” U.S. Plan Sponsors/ Top 1000, Pension & Investments Online (www.researchcenter.pionline.com).
40. Gregg A. Runburg, “Table: The World’s Largest Money Managers” Pensions & Investments (October 31, 2016).
41. John A. MacNaughton, “Principles and Practices of Governance,” (2001 Presentation to Canada Pension Plan Investment Board).
42. Ambachtsheer, Pension Revolution, p. xxix.
43. Keith Ambachtsheer, “The Three Grades of Pension Fund Governance Quality: Bad, Better, and Best,” Rotman International Center for Pension Management (January 2007), p. 5.
44. Keith L Johnson and Frank Jan de Graaf, “Modernizing Pension Fund Legal Standards for the Twenty-First Century,” Rotman International Journal of Pension Management, vol. 2 (Spring 2009), p. 45.
45. Ibid.
46. Christine Williamson, “Insourcing Trend Growing Among Big Institutional Investors,” Pension & Investments (May 13, 2013).
1. “Civil Service Retirement and Disability Fund Annual Report, Fiscal Year Ended September 30, 2017,” U.S. Office of Personnel Management (February 2018), hereinafter “CSRDF Annual Report (2017)”.
2. Kristy N. Kamarck, “Military Retirement: Background and Recent Developments,” Congressional Research Service Report (September 13, 2018).
3. https://www.opm.gov/retirement-services/csrs-information/.
4. Ibid.
5. Katelin P. Isaacs, “Federal Employees’ Retirement System: Benefits and Financing,” in The Federal Employees’ Retirement System, ed. Aloisio Bassanelli (Nova Science Publishers, 2012), p. 4.
6. Ibid.
7. Ibid.
8. https://www.opm.gov/retirement-services/fers-information/.
9. Ibid.
10. Isaacs, “Federal Employees’ Retirement System,” p. 5.
11. CSRDF Annual Report (2017), Actuarial Section.
12. Ibid. Separate provisions have been enacted for the funding of the Postal Service obligations under CSRS. The Postal Service is responsible for the cost of all CSRS benefits attributable to post-1971 civilian service for its employees and annuitants. Postal Service contributions for CSRS employees were cancelled starting September 30, 2006. Postal Service CSRS employees continue to contribute 7.0% of pay.
13. Ibid.
14. Ibid., Notes to Financial Statements Note 1.4.A.
15. Ibid.
16. Isaacs, “Federal Employees’ Retirement System,” p. 1.
17. CSRDF Annual Report (2017), Actuarial Section.
18. https://www.opm.gov/blogs/Retire/2013/5/13/FERS-Revised-Annuity-Employee-FERS-RAE/.
19. CSRDF Annual Report (2017), Actuarial Section.
20. CSRDF Annual Report (2017), Notes to Financial Statements Note 1.4.B.
21. “Report: Securing Annuities for Federal Employees Act of 2012,” submitted by Mr. Issa from the Committee on Oversight and Government Reform, February 9, 2012, p. 6.
22. Ibid.
23. CSRDF Annual Report (2017), Notes to Financial Statements, Note 4B.
24. Isaacs, “Federal Employees’ Retirement System,” pp. 17–18.
25. Ibid., p. 18.
26. Ibid.
27. 5 U.S.C. 8348(a)(1)(B) and 5 U.S.C. 8348(b).
28. CSRDF Annual Report (2017), Actuarial Section.
29. Author’s calculations based on data from CSRDF Annual Report (2017).
30. Ibid.
31. Author’s calculations based on data from CSRDF Annual Report (2013, 2015, and 2017).
32. Ibid.
33. Ibid.
34. CSRDF Annual Report (2017).
35. Author’s calculations based on data from CSRDF Annual Report (2017).
36. Ibid.
37. CSRDF Annual Report (2017), Actuarial Section.
38. Isaacs, “Federal Employees’ Retirement System,” p. 2.
39. Ibid., p. 19.
40. Ibid.
41. Ibid., p. 20.
42. Ibid.
43. CSRDF Annual Report (2017), Notes to Financial Statements, Note 1.4.B.
44. Ibid.
45. Ibid.
46. Ibid.
47. Ibid.
48. In addition, the federal retirement system offers ancillary benefits and services including (but not limited to) age-based withdrawal, hardship withdrawal, and participant loans that will not be discussed in this chapter. This chapter is meant to provide a general overview of the federal retirement system, not a comprehensive treatment. The “Chapter Notes” section (or these endnotes) can guide the reader to sources with more detail on the federal retirement system than offered in this text.
49. “Report: Securing Annuities for Federal Employees Act of 2012,” p. 7.
50. Ibid.
51. Ibid.
52. Ibid.
53. Isaacs, “Federal Employees’ Retirement System,” p. 28.
54. Ibid.
55. Ibid.
56. Ibid.
57. Ibid.
58. Ibid.
59. Ibid., Notes to Financial Statements, Note 1.4.C.
60. Ibid.
61. Ibid.
62. Katelin P. Isaacs, “Disability Retirement for Federal Employees,” in The Federal Employees’ Retirement System, ed. Aloisio Bassanelli (Nova Science Publishers, 2012), p. 101.
63. Ibid.
64. Ibid.
65. CSRDF Annual Report (2017), Notes to Financial Statements, Note 1.4.D.
66. Ibid.
67. Ibid.
68. Ibid.
69. “Annual Report of the Thrift Savings Plan Required by Section 105 of the TSP Enhancement Act of 2009,” Federal Retirement Thrift Investment Board (June 30, 2017).
70. Thrift Saving Fund Financial Statement (December 31, 2016 and 2015), Notes to Financial Statements.
71. Isaacs, “Federal Employees’ Retirement System,” p. 9.
72. Ibid.
73. Ibid.
74. Ibid.
75. Ibid.
76. Ibid., p. 29.
77. Ibid.
78. Isaacs, “Federal Employees’ Retirement System,” p. 47.
79. Ibid.
80. Ibid.
81. Ibid.
82. Ibid., p. 46.
83. 5 U.S.C. Section 8472(d).
84. Ibid.
85. Thrift Savings Fund Financial Statement (December 31, 2016 and 2015), Notes to Financial Statements.
86. Ibid.
87. Ibid.
88. https://www.tsp.gov/InvestmentFunds/FundsOverview.com.
89. Performance calculations relative to benchmark based on index data from Bloomberg.
90. Ibid.
91. Ibid.
92. Ibid.
93. “Valuation of the Military Retirement System,” Department of Defense Office of the Actuary (June 2018), p. 38.
94. “Military Retirement Fund Audited Financial Report, Fiscal Year 2017,” Management’s Discussion and Analysis, Department of Defense (November 6, 2017).
95. Ibid.
96. Public Law 98-94 (currently Chapter 74 of Title 10, U.S.C.).
97. “Valuation of the Military Retirement System,” p. 10.
98. Ibid., p. 20.
99. Ibid.
100. “Military Retirement Fund Audited Financial Report, Fiscal Year 2017,” p. 1.
101. Ibid.
102. Ibid.
103. Ibid.
104. Ibid.
105. Ibid.
106. Ibid, pp. 13–14.
107. Ibid., p. 16.
108. Ibid., p. 2.
109. Ibid.
110. Ibid.
111. Kamarck, “Military Retirement: Background and Recent Developments,” p. 4.
112. Ibid.
113. Ibid.
114. Ibid., p. 5.
115. Ibid., p. 7.
116. Ibid., p. 6.
117. Ibid., p. 8.
118. Ibid., p. 6.
119. Ibid., p. 8.
120. Ibid., p. 10.
121. Ibid., p. 12.