BEST PRACTICES: Governance of Public Employee Postretirement Benefits Systems Flashcards
A state or local government or other designated governing entity should establish rules of governance for its postretirement benefit systems that define the key elements necessary for trustees and other fiduciaries to fulfill their responsibilities, in accordance with fiduciary standards.
What is the duty of loyalty in the context of postretirement benefit system governance?
The obligation to act for the exclusive benefit of plan participants and beneficiaries, putting their interests above all others.
What does the duty of prudence/care entail for trustees of postretirement benefit systems?
The obligation to act prudently and reasonably in managing the plan, including investment decisions and ensuring plan design and funding practices follow policies.
How should the board size of a postretirement benefit system be determined?
The board should be neither too large to be unwieldy nor so small as to risk narrow decision-making or inability to get a quorum; optimal size depends on the system’s complexity.
What factors contribute to effective board composition in postretirement benefit systems?
A diverse mix of skills, competencies, and behaviors, including leadership, financial management, and knowledge of decision-making principles.
Why is transparency important in the governance of public employee postretirement benefit systems?
Because public monies fund these plans, transparency ensures accountability and trust in how funds are managed and benefits are administered.
What should a governance manual for postretirement benefit systems include?
Authority outline, roles and responsibilities, committee charters, policies, and any applicable statutes or regulations for transparent and effective governance.
Why are term limits defined for board members of postretirement benefit systems?
To balance continuity with fresh perspectives, preventing stagnation and ensuring dynamic governance.
How often should the board of a postretirement benefit system conduct self-evaluations?
Periodically, to assess if it fulfills its duties, responsibilities, and maintains due diligence and oversight.
What is the purpose of developing, adopting, and abiding by a code of ethics for governing boards?
To establish standards of conduct specific to trustees and plan employees, ensuring decisions are made in the best interest of system participants.
Why is it essential for new trustees to receive orientation training?
To understand their responsibilities, fiduciary duties, and the duties of the system’s employees and agents, ensuring informed and effective governance.
What are the two primary fiduciary duties outlined for trustees of postretirement benefit systems?
Duty of loyalty and duty of prudence/care.
Why must fiduciaries avoid being motivated by personal views on social or political issues in their decision-making?
To ensure decisions are made solely for the benefit of plan participants and beneficiaries, not based on personal biases or interests.
What is the significance of having a diverse board composition in postretirement benefit systems?
To ensure balanced deliberations and decision-making that reflect the varied interests of stakeholders, including plan participants, retirees, and citizens.
How can term limits for board members impact the governance of postretirement benefit systems?
They help maintain a dynamic governance structure by introducing fresh perspectives while ensuring continuity.
Why is a code of ethics crucial for the governance of public employee postretirement benefit systems?
It sets standards of conduct for trustees and plan employees, ensuring decisions are made in the best interest of participants and comply with ethical and legal standards.
