PERAC Memo #10 - 2019: Administrative Reminders

M E M O R A N D U M

TO: All Retirement Boards

FROM: John W. Parsons, Esq., Executive Director

RE: Administrative Reminders

DATE: January 24, 2019

In the past, PERAC has sent an annual memo to the Retirement Boards that reviews points which the Commission would like to emphasize regarding asset management. This year, we are expanding the subject matter to focus on issues that cover a wide variety of retirement board activities. It is hoped that Boards will consider these comments as helpful.

Section 23B/Contract Expiration

(see PERAC Memo #18/2015 "Section 54 of Chapter 46 of the Acts of 2015")

April 2019 will mark the term limit for many existing relationships, as Section 23B requires a new search for the service after seven years. Boards should review the existing time frames for these contracts and institute a program to conduct and complete searches before the new deadline.

Cash Books

(see PERAC Regulations 840 CMR 4.00 and PERAC Memo #15/2015)

Retirement boards are reminded of their duty to submit accurate cash books to PERAC on a timely basis. Accounting standards require that transactions be accurately identified and properly classified. Complete Cash Books include Cash Receipts, Cash Disbursements, Trial Balances, and Adjusting Journal Entries. Cash Books must be provided to PERAC within four weeks of the close of the month.

Monthly Financial Reporting to Board

A complete financial package must be provided to the Board on a monthly basis. Each month, the Board administrator must prepare a packet consisting of: Cash Reconciliations (including bank statements), Trial Balance, Cash Receipts, Cash Disbursements, Adjusting Journal Entries, Budget to Actual Expense Comparison, and Cash Flow Forecast. A notation should be made in the minutes indicating that the documents have been presented to the Retirement Board.

Vendor Selection

(see PERAC Memo #32/2018 "Procurement")

The competitive process mandated by Section 23B and the fiduciary duty owed by the retirement board require that RFPs and notices ensure the broadest response from potential service providers. Restrictions on participation that would bar service providers not currently active in the Massachusetts public pension arena violate this duty. Points may be awarded for Massachusetts experience in grading responses, but such experience must not be a barrier to entry.

Child Support Enforcement

(see PERAC Memo #19/1998)

Prior to releasing a member's accumulated deductions pursuant to G.L. c. 32, §11(1)(c), Board staff must confirm whether the member has outstanding child support obligations with the Department of Revenue (DOR).

Management Fees/Monitoring

In many investment relationships, fees paid to managers are directly withdrawn from the value of invested funds. These fees must be disclosed for authorization by the Board, reflected in the general ledger, and reported on Schedule 7 of the Annual Statement. The Board has a fiduciary responsibility to review management fees and compare them to contracted rates. All management fees must also be included on a warrant for ratification by the Board at its next regularly scheduled meeting. Fees must be recorded in G/L account #5304.

Board Minutes

The official record of Board actions must be detailed in the Minutes of all regular and executive session meetings, maintained as permanent records. Written minutes must be approved by the Board at the next meeting. The Board must comply with the Open Meeting Law, G.L. c. 30A, §§18-25 and 940 CMR 29.00.

Board Minutes/Remote Participation

After adopting remote participation, a Board must follow appropriate roll call protocol and Attorney General guidelines. Individuals participating remotely must be noted in the minutes.

Board Minutes/Executive Session

Executive session minutes must be recorded per 840 CMR 6.12, 10.12(3)(e), and G.L. c. 32, §20(5). Once disclosure of executive session minutes would no longer defeat their lawful purposes, those minutes must be disclosed unless subject to an exemption. Public bodies must periodically review executive session minutes to determine whether continued non-disclosure is warranted.

Refunds

In cases involving members who transferred in from another system and are then eligible for a refund, 3% interest should be applied for the entire career. The Annuity Savings Fund history should be requested from the prior system to ensure the correct rate is applied rather than the §22(6)(b) regular interest rate.