board governance

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 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 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 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 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 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.