840 CMR — PERAC Regulations

840 CMR 1.00 establishes the core fiduciary duties of retirement board members, requiring them to act solely in the interest of members and beneficiaries for the exclusive purpose of providing benefits and defraying reasonable administrative expenses. Board members must exercise the care, skill, prudence, and diligence of a prudent person familiar with such matters, diversify investments to minimize risk, and comply with Massachusetts General Laws and PERAC regulations. Breaches of fiduciary duty—including knowing participation in a co-fiduciary's breach or failure to remedy a known breach—can result in personal liability for losses to the system. The regulation also bars anyone convicted of certain crimes or found to have violated fiduciary or ethics laws from serving in any capacity for a retirement board.

840 CMR 2.00 establishes the rules governing travel and travel-related expenditures by retirement board members and staff. All travel expenses must be related to the authorized purpose, cost-effective, and approved in advance by the board through a recorded vote in open session. Board members must submit itemized receipts for all expenses within 60 days, and reimbursement is limited to the person who actually incurred the expense. The regulation covers transportation, lodging, meals, and other incidental costs, and requires boards to seek government or business rates when making travel arrangements.

840 CMR 3.00 incorporates federal Internal Revenue Code qualification requirements into Massachusetts public retirement systems, ensuring they maintain their status as governmental qualified plans under IRC § 401. The regulation addresses requirements including the exclusive benefit rule (IRC § 401(a)(1),(2)), forfeiture restrictions, required minimum distributions (IRC § 401(a)(9)), annual compensation limits (IRC § 401(a)(17)), and rollover provisions. These provisions became effective January 1, 1989, and apply to all Chapter 32 retirement systems regardless of other Massachusetts law, including the compensation cap of $200,000 (adjusted for cost-of-living) for members who joined on or after January 1, 2002, and 64% of that cap for members joining after January 1, 2011.

840 CMR 4.00 establishes the standard methods of accounting that all retirement boards must follow, ensuring uniform financial reporting across all Massachusetts public retirement systems. Boards must maintain PERAC-prescribed ledger accounts, enter transactions daily, run monthly trial balances and general ledgers, and submit monthly financial reports to PERAC. The regulation defines core accounting terms and requires boards to send annual statements by May 1 each year (with extensions available upon written request). Boards that fail to file timely reports may have their investment exemptions revoked after 14 days' written notice.

840 CMR 5.00 establishes the records and reports that retirement boards must maintain and submit to PERAC. Boards must file quarterly reports identifying any changes in board membership or staff, and an annual report by May 1 each year using PERAC's prescribed form. Each retirement system must also furnish the actuary with appropriation data by October 15 annually, and must notify PERAC 30 days before automating any board functions. Extensions to the annual filing deadline may be granted upon a written request submitted before May 1, at PERAC's discretion.

840 CMR 6.00 establishes uniform standards for how retirement boards maintain and disclose records, with particular attention to protecting personal data. Boards must designate a Custodian of records responsible for maintaining custody, protecting records from unauthorized access, and determining whether requested records are public. Member names, addresses, and type of retirement are generally public records, but medical files and other sensitive personal information are protected. The regulation balances the public's right to know against individual privacy rights, and establishes procedures for members and their representatives to access their own retirement files.

840 CMR 7.00 governs elections of elected board members for most Massachusetts retirement systems, excluding the State Employees', Teachers', county, and regional retirement systems which have their own statutory election rules. Boards must provide notice of elections at least 90 days in advance, make nomination papers available to all active and retired members, and require candidates to collect at least 20 qualifying signatures. If only one candidate is nominated the board may declare that candidate elected without a formal election. Elections may be conducted by mail or at a polling place, and the regulation includes detailed requirements for absentee ballots, tabulation, and certification of results.

840 CMR 9.00 requires all retirement board decisions granting retirement applications to be approved by PERAC before being communicated to members or beneficiaries. Disability retirement decisions must be submitted to PERAC for approval within 30 days, while all other retirement decisions require approval within 90 days. The regulation specifies the documentation that must accompany each type of retirement decision—superannuation, disability, accidental death, and veteran's benefits. Boards may use PERAC-approved automated benefit calculation systems, which are deemed pre-approved and do not require individual submission to PERAC for each calculation.

840 CMR 10.00 is the comprehensive standard rule governing all disability retirement proceedings before Massachusetts retirement boards, effective for proceedings commenced after January 1, 2016. It covers ordinary and accidental disability retirement applications, proceedings for restoration to active service, modification of disability retirement allowances, medical panel examinations, re-examination and rehabilitation of disability retirees, and annual earnings reporting under M.G.L. c. 32, § 91A. The regulation establishes procedural rights for applicants including representation by counsel, the right to submit evidence, and appeal procedures. Medical panels play a central role, conducting independent examinations and issuing certificates that boards must follow unless specific grounds for departure exist.

840 CMR 12.00 governs the rules for public employees who continue working after age 65, setting out which occupations require mandatory retirement at that age and which do not. Certain positions—including uniformed firefighters, uniformed police officers, members of the department of fisheries and wildlife, correctional officers, and certain airport personnel—are subject to mandatory retirement at age 65 unless the personnel administrator determines by regulation that age is not a bona fide occupational qualification. Retirement boards that determine a member is in a mandatory-retirement occupation must notify the member at least 120 days before the required retirement date.

840 CMR 13.00 implements the expanded tax-deferred rollover opportunities created by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), allowing public employees to purchase creditable service using assets held in other tax-deferred retirement plans. Retirement boards may accept Eligible Rollover Distributions paid directly to the system (Direct Rollovers) from qualifying plans including IRAs, qualified plans under IRC § 401(a), eligible 457(b) plans, and annuity contracts under IRC § 403(b). The regulation defines key terms including Direct Rollover, Eligible Retirement Plan, and Eligible Rollover Distribution, and clarifies the types of distributions that do not qualify for rollover treatment.

840 CMR 14.00 establishes the framework by which PERAC's rules apply to all retirement boards and by which individual boards may obtain approval for supplementary rules tailored to their particular needs. PERAC's rules apply universally unless the Commission provides otherwise or a board has obtained approval for supplementary rules. A board may request supplementary rules if they are consistent with PERAC's rules (or good cause exists for an exception), their purpose cannot be accomplished by amending the Commission's rules, and the proposed rules were the subject of a public hearing with reasonable notice. Approved supplementary rules remain in effect according to their terms until amended or repealed as approved by the Commission.

840 CMR 15.00 is an omnibus regulation covering several administrative requirements for retirement boards. Boards must require all members and beneficiaries receiving benefits to file attestations of continued eligibility at least every two years, and must withhold benefits from those who fail to comply. The regulation also governs the purchase of creditable service, both prior membership service and non-membership service, including the order in which multiple purchase types must be completed. Additional sections address regular compensation definitions, benefit calculation factors, and the use of board credit and debit cards. Boards may satisfy the attestation requirement through semi-annual third-party data matching in lieu of individual attestations.

840 CMR 16.00 governs the employment of qualified investment managers by retirement boards, setting out when boards may or must use external investment managers and the requirements for doing so. Any board that has received an investment exemption pursuant to 840 CMR 19.00 must employ a qualified investment manager to manage the system's funds; no unqualified person may provide investment advice to an exempt board. Investment management must be by written contract that designates the manager as a fiduciary, specifies investment objectives and brokerage practices, and does not contain indemnification provisions. All qualified investment managers must annually submit a current Form ADV Part II to both the board and PERAC.

840 CMR 17.00 establishes ethical and conduct standards for both retirement board fiduciaries and qualified investment managers. All board members and retirement system staff must be bonded for at least 10% of the fund or $500,000 (whichever is less, up to the bond maximum). Fiduciaries must subscribe to a code of ethics requiring integrity, professional conduct, competence, and independent professional judgment. They must comply with M.G.L. c. 268A (the conflict of interest law), act in accordance with the system's documents and instruments, and are prohibited from self-dealing, acting adversely to the system, or receiving personal compensation from parties transacting system business. Investment managers face similar conduct standards and additional disclosure requirements.

840 CMR 18.00 requires every retirement board to file a statement of investment objectives with PERAC and to periodically update it. Before designing an investment program, boards must consider their most recent actuarial valuation, consult with their investment consultant, and address questions about the system's growth stage, liability stream, demographic forecasts, and funding status. Asset allocation decisions must be made using a liability-sensitive approach that tailors the portfolio to the system's liability profile. The required statement of investment objectives (filed on Form 18) must be signed by each board member and include detailed information about fiduciaries, terms of employment, investment policies, and performance benchmarks.

840 CMR 19.00 establishes the process by which retirement boards may obtain exemptions from the investment restrictions of M.G.L. c. 32, § 23(2)(b), allowing boards to invest in a broader range of assets through qualified investment managers. Boards that received exemptions before the effective date of 840 CMR 19.00 retain them for those asset classes. For new exemptions, boards must follow a competitive selection process with specified criteria for choosing investment managers across equity, fixed income, cash, real estate, and other asset classes. PERAC may revoke an exemption if a board fails to maintain required standards, and boards that lose their exemptions revert to the legal list investment restrictions of M.G.L. c. 32, § 23.

840 CMR 21.00 establishes a list of investment types that retirement boards are categorically prohibited from making, regardless of whether the board has received an investment exemption under 840 CMR 19.00. The prohibited categories include purchases on margin, short sales, speculative futures contracts (with limited exceptions for forward currency contracts), certain options transactions, lettered or restricted stock, direct mortgage investments, most collateral loans, loans to employees or individuals, and direct purchase or lease of real estate. Limited exceptions exist for certain forward currency contracts against international portfolio holdings (up to 25% of non-dollar holdings) and for covered call options against domestic equity securities (up to 25% of the equity portfolio).

840 CMR 23.00 authorizes the actuary to amortize both realized and unrealized investment gains and losses over a five-year period (or another period prescribed by the Commissioner) when determining the retirement system's annual appropriation amounts. A realized gain or loss is defined as the profit or loss on the actual sale or maturity of an investment measured against its book value; an unrealized gain or loss is the difference between the current market value and the value included in system assets at the last previous valuation. This smoothing mechanism helps retirement boards avoid sharp year-to-year swings in required employer contributions caused by short-term market volatility.

840 CMR 25.00 governs the field examinations of contributory retirement systems conducted by PERAC to assess each system's financial condition and compliance with M.G.L. c. 32. Examinations must be conducted at intervals not exceeding every three years and must cover the period since the last examination. Before an examination begins, the board's administrator receives an Internal Control Questionnaire from PERAC. A board may also hire a certified public accountant or public accountant to conduct the examination; upon PERAC's acceptance of that report, it satisfies the statutory examination requirement. PERAC audit staff may rely on portions of a board-selected accountant's work and supplement it to complete the required examination.

840 CMR 26.00 governs the retention and qualification of investment consultants by retirement boards. Any board employing a consultant must apply to PERAC for approval using Form 25 before executing any new contract or extension. Consultants must be registered investment advisers under the Investment Advisers Act of 1940. The selection process requires boards to establish written criteria, obtain competitive proposals, and execute a written contract specifying services, fees (which must be fixed-dollar, not percentage-of-assets), and termination provisions—with no indemnification clauses. Consultants must disclose all compensation arrangements, conflicts of interest, and third-party referral fees to both the board and PERAC.

840 CMR 27.00 establishes PERAC's authority to issue protective orders against retirement boards whose investment or recordkeeping practices are not being conducted with reasonable care, skill, prudence, or diligence. PERAC may issue an immediate temporary order upon reasonable belief of improper practices, which remains in effect pending a full investigation and hearing. An investigative hearing may be convened within 60 days of a temporary order, with at least 30 days' notice required in other cases. After findings of fact, PERAC may issue a permanent order directing the board to take or cease specific actions; violations of such orders are punishable under M.G.L. c. 32, § 24.

840 CMR 28.00 authorizes and governs the use of electronic signatures by retirement boards governed by Chapter 32, enacted in response to the growing use of digital document workflows. The regulation defines "electronic signature" broadly to include digital signatures, faxed signatures (if legible), and signatures transmitted as part of scanned documents. Electronic signatures have the same legal effect and enforceability as wet (handwritten) signatures for retirement board purposes. The regulation also addresses attribution of electronic signatures, security procedures for verifying their authenticity, and makes clear that wet signatures remain permissible—retirement boards may choose which format to accept.