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Employee Retirement Income Security Act

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									 Uniform Management of Public
Employee Retirement Systems Act
        (“UMPERSA”)


        June 16, 2005
            GFOA
      Summer Conference

                                  1
Objective of This Session:
 What is UMPERSA; and
 How will public plans in Maryland be
  affected by the adoption of UMPERSA
  principles by the Maryland General
  Assembly?




                                         2
UMPERSA Defined:
 UMPERSA = Uniform Management of
  Public Employee Retirement Systems Act;
 A parallel to ERISA (The Employee
  Retirement Income Security Act of 1974);
 UMPERSA applies to public plans, while
  ERISA applies to most corporate and Taft-
  Hartley plans.



                                              3
The Intent of UMPERSA:
 To ensure that public pension plans uphold
  fiduciary standards;
 Applies to defined benefit plans and
  defined contribution plans;
 Similar to focus of ERISA – fiduciaries
  must act solely in the best interest of plan
  participants and beneficiaries.



                                             4
History of UMPERSA:
 Initiated by Uniform State Law
  Commissioners (National Conference) in
  1997;
 Reviewed by 16+ states, but not adopted
  by any until 2005;
 Wyoming and Maryland enacted in 2005.




                                            5
Maryland Takes Action:
   Introduced in the 2005 Legislative Session via
    Senate Bill 370;
   Passed unanimously by the Senate and the
    House;
   Signed by Governor Ehrlich on April 26, 2005;
   Becomes effective on July 1, 2005;
   Will require public pension funds in Maryland to
    certify their compliance to the Joint Committee
    on Pensions by July 1, 2006.




                                                       6
Adoption of UMPERSA in Maryland

 Senate Bill 370 added Title 40 to the State
  Personnel and Pensions Article of the
  Annotated Code of Maryland
 Title 40 imposes the principles of
  UMPERSA that address investment and
  management of funds for a public pension
  system effective July 1, 2005.




                                            7
UMPERSA Provisions:
 Maryland imposes the provisions of
  UMPERSA that “address the investment
  and management of funds” on any public
  pension system established after June 30,
  2005.
 Existing plans must certify that provisions
  adhere to principles or explain deviations.




                                                8
Existing Statutory Requirements in
Maryland:
 ERISA-like language in statutes governing
  the Maryland State Retirement System
  (State Personnel and Pensions Article,
  Title 21);
 Article 95, Section 22 of the Annotated
  Code of Maryland imposes the ERISA-like
  fiduciary duty requirements to local
  pension systems.


                                              9
UMPERSA vs. ERISA
 UMPERSA mandates the adoption of an
  investment policy statement; ERISA does
  not.
 UMPERSA identifies specific asset
  management principles to be employed by
  plan trustees; ERISA does not.
 UMPERSA has more stringent
  requirements for fiduciary independence
  than ERISA.

                                        10
Fiduciary Standards
   Duty to administer plan in conformance with plan
    documents
   Duty of loyalty – fiduciaries must act for the
    exclusive purpose of providing benefits to plan
    participants (avoid conflicts of interest)
   Duty to invest plan assets prudently (including
    delegation)
   Duty to diversify investment of plan assets
   Monitor investment performance
   Control plan expenses

                                                   11
What We Do Not Know Yet
 Those specific provisions of UMPERSA the
  bill would require adherence
 Certification requirements




                                             12
Requirement Indications
 Legislative requirements to be released
  before September 2005
 Focus will be on generally accepted
  fiduciary principles such as diversification
  and delegation
 Requirements will be reviewed by Joint
  Committee prior to release



                                                 13
Who will be affected in Maryland:
 Public pension funds established July 1,
  2005 and later – plan provisions must
  comply
 Public pension funds established prior to
  July 1, 2005 – must certify compliance or
  explain deviations




                                              14
Many likely to already be in
compliance:
 State statutes already impose fiduciary
  standards on local retirement systems;
 Many systems have plan provisions in
  place meeting UMPERSA standards;
 Many systems have operational provisions
  in place meeting UMPERSA standards.




                                         15
Next Steps:
 Obtain clarification regarding which
  UMPERSA “investment and management
  of funds” principles will be required for
  compliance in Maryland, since not all
  provisions of UMPERSA will be required
 Review plan provisions and operations to
  determine compliance and deviations
 Meet compliance requirements by July 1,
  2006.

                                              16
Speakers:
   Carol Boykin, CFA              Mary Claire Chesshire,
   Managing Director with          Esquire
    Bolton Partners, Inc.          Partner with Whiteford,
                                    Taylor & Preston, L.L.P
   Investment consultant
                                   Member of WTP’s
   Focused on pension plans        Employee Benefits practice
    for public, corporate and       group
    multi-employer plans           Focused on private,
   23 years of investment          governmental and non-
    experience                      profit organizations
                                   23 years experience in the
                                    employee benefits field.




                                                             17

								
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