U.S. Public Pension Handbook: A Comprehensive Guide for Trustees and Investment Staff

Foreword

Introduction

PART I
Introduction and Current Marketplace
1 History of Public Pensions 3
Introduction
Early Pension Development
Public Pension Development
Early Twentieth-Century Development
Late Twentieth-Century Development
Chapter Notes

2 Public Pension Marketplace 21
Introduction
Global Retirement Market
Global Pension Trends
Population Aging
Global Regulatory Environment
U.S. Retirement Market
U.S. Public Pension Market
Members and Beneficiaries
Pension Coverage and Type
Public Pension Revenue
Public Pension Expenditures

U.S. Public Pension Trends
Public Pension Funding
Addressing the Funding Gap
Design Shift
Chapter Notes

PART II
Pension Plan Design

3 Defined Benefit Model
Introduction
Public Pension Designs
Defined Benefit Plan Design
Regular Service-Related Benefits
Normal Service Benefit
Early Retirement Benefits
Postemployment Benefit Adjustments
Service Credits
Ancillary Pension Benefits
Healthcare Benefits
Disability and Death Benefits
Deferred Retirement Option Plan
Pension Benefit Adequacy
Replacement Ratio
Social Security Coverage
State Tax Liability
Chapter Notes

4 Actuarial Valuation Concepts
Introduction
Actuarial Valuation
Demographic Assumptions
Economic Assumptions
Actuarial Cost Methods
Cost Method Classifications
Actuarial Cost Methods
Impact of GASB Changes
Chapter Notes

5 Beyond Defined Benefit
Introduction
Defined Contribution Plans
DC Plan Types
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DC Plan Services
DC Investment Options and Services
Comparison of DB and DC Plans
Persistence of the DB Design
Disadvantages of Defined Benefit
Advantages of Defined Contribution
Disadvantages of Defined Contribution
Pension Design Risk: DB vs. DC
Hybrid Plan Designs
Side-by-Side (or DB+DC)
Cash Balance Plan
Alternative Hybrid Designs
Chapter Notes

PART III
Investment Policy and Implementation
6 Investment Policy
Introduction
Investment Policy Statement
Statement of Goal, Purpose, or Mission
Identification of Decision-Maker(s)
Statement on Managing Risk of Overall Portfolio
Performance Measurement and Evaluation
Legal Standards
Chapter Notes

7 Asset Allocation Policy
Introduction
Why Asset Allocation Policy Matters
How Asset Allocation Policy Is Set
Peer Comparison
Mean Variance Optimization (MVO)
Determining Eligible Asset Classes
Establishing Capital Market Assumptions
Finding an Efficient Frontier
Choosing an Optimal Asset Allocation
Asset Liability Management (ALM)
Chapter Notes

8 Public Pension Portfolio
Introduction
Asset Allocation Data
Asset Allocation Trends
Equities
Fixed Income
Alternative Assets
Private Equity
Hedge Funds
Real Estate and Infrastructure
Environmental, Social, and Governance
Increasing Overall Portfolio Risk
Chapter Notes

9 Public Pension Performance
Introduction
Public Pension Performance
Performance Attribution
Performance Variation
Asset Class Performance Characteristics
Performance Benchmarks
Performance vs. Benchmark
Chapter Notes

10 Public Pension Contributions
Introduction
Contributions as Pension Revenue
Contribution Funding Policy
Annual Required Contribution
Managing Contribution Volatility
Funding Policy Best Practices
Employer Contribution Indices
Employee Contributions
DC Contributions
Chapter Notes

PART IV
Plan Governance
11 Governance Structure
Introduction
Legislative Oversight
Common Governance Structures
Governing Fiduciaries: Trustees
Board Composition
Core Competencies and Education

Financial Expertise
Diversity (Race and Gender)
Committee Structure
U.S. Sovereign Wealth Funds
Chapter Notes

12 Why Governance Matters
Introduction
Impact on Performance
Impact on Asset Allocation
Impact on Funding
What Fiduciaries Think
Chapter Notes
Appendix: Sample “Best Practices”
NCPERS Best Practices
GFOA Best Practices
Clapman Report

13 Fiduciary Responsibility 311
Introduction
ERISA Exemption and Relevance
Duties of a Fiduciary
Duty of Prudence
Duty of Loyalty
Duty of Impartiality
Duty with Respect to Delegation
Duty with Respect to Co-Trustees
Duty to Furnish Information to Beneficiaries
Duty to Segregate and Identify Trust Property
Trustee Liability
Chapter Notes

14 Public Pension Staff
Introduction
Pension Staff Overview
Pension Staff Studies
Passive vs. Active Management
Internal vs. External Management
Compensation
Pension Consultants
External Managers
Investment Policy
Manager Selection Criteria
Research on Manager Selection
Chapter Notes

15 Delegation and Pension Evolution
Introduction
Prudent Investor Rule
Delegation Redefined
Five Parameters of Prudent Delegation
Public Pension Evolution
Chapter Notes

16 Federal Pension System
Introduction
Federal Civilian Employees
Civil Service Retirement Disability Fund
Eligibility
Federal Retirement Benefits
The Thrift Savings Plan
Military Personnel
Military Retirement Fund
Eligibility
Active Retiree Benefits
Reservist Benefits
Disability Retirement
Ancillary Military Benefits
Chapter Notes

Endnotes
 
Index

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