By Robert D. Klausner
2005 witnessed significant public interest in the ethics of the men and women who unselfishly volunteer their time as trustees of this countrys 2500 public employee retirement systems. The focus was on a few scandalous, but extremely rare instances of improper behavior on the part of trustees who accepted gifts or other consideration. This misconduct arguably tainted their impartiality and departed from the fiduciary standard of acting in the best interests of the plan required of all trustees.
In response to these types of concerns the Louisiana Legislature required all vendors of services to the states 14 state and statewide pension plans to report entertainment or other expenditures made to or on behalf of pension staff and trustees. Every board of trustees and retirement staff should have a written standard of ethical conduct. Below is a sample code of ethics setting forth the basics that should be included in any such directive. The systems own code of ethics is intended to be in addition to any statutory code of ethics adopted by a state or local government. A code of ethics should deal with more than just accepting a meal or other gratuity. It should be a comprehensive look at maintaining the fiduciary duty of fair dealing in all aspects of plan management.
CODE OF ETHICS FOR TRUSTEES AND STAFF PURPOSE
This section shall set forth a code of ethical conduct for Trustees, staff and contractors in the course of their dealings with the Pension Fund.
STANDARD
The Trustees in all transactions shall abide by the _Prudent Fiduciary Rule_ as generally recognized in the American Law of Trusts.
EXISTING LAW
The Trustees recognize that in addition to the provisions of these rules, they are governed by (insert any applicable state statute or local ordinance).
CONFLICTS OF INTEREST
No Trustee shall engage in any transaction or vote in any matter in which the Trustee shall receive any direct or indirect personal gain. This shall not include, however, employee Trustees voting on benefit increases applicable to all Pension Fund members and beneficiaries.
DISCLOSURE OF CONFLICTS
Prior to voting on any matter in which a fiduciary reasonably believe a conflict of interest exists, the Trustee shall publicly announce the conflict and refrain from voting. The conflict statement required by this rule shall be recorded in the minutes of the Board meeting. In determining whether a conflict exists, Trustees shall in all actions endeavor to avoid the appearance of impropriety.
PRIOR COMMUNICATION WITH BENEFIT APPLICANTS
Trustees shall not engage in prior communication with any applicant for benefits on any matter which is currently pending a hearing before the Board of Trustees. This shall not preclude Trustees from answering questions of general application to members where the information provided involves a restatement of benefits under the Trust and does not involve consideration of matters which will be presented in any evidentiary proceeding. All requests for information in conflict with this rule shall be referred in writing to the Administrator or other appropriate staff member for a written response.
STANDARD OF CARE
Trustees should remain cognizant that statements regarding benefits may be relied upon by applicants to their detriment thereby creating an estoppel for the Board. Trustees, in addressing benefit questions by members, should clearly indicate that they are in no way capable of binding the Fund and that all questions are ultimately settled by the Board acting as a body.
COMMUNICATIONS WITH POTENTIAL CONTRACTORS
Trustees shall not engage in prior communication with persons or entities seeking to establish a contractual relationship with the Board concerning any promise of future employment. All contacts by potential contractors shall be referred to the Administrator or to a committee of Trustees designated by the Board.
COMMUNICATION WITH MONEY MANAGERS
All communications between individual Trustees and money managers shall be for informational purposes only. No individual Trustee may bind or promise any consideration on behalf of the pension fund except as approved by the Board.
APPLICABILITY TO STAFF AND CONTRACTORS
All staff members and contractors shall be bound by this code of ethics in their dealings with Trustees and the Fund. All such persons are responsible to the Board of Trustees and Pension Fund and not any individual Trustee.
REPORTING OF GIFTS; PROHIBITIONS
No Trustee, staff, or fiduciary may receive anything of value from a contractor or other person doing business with the Fund, excepting meals under $______, which are consumed in the presence of the contractor. This limitation does not apply to meals provided as part of the program at an educational conference and which are provided to all participants. This rule does not apply to charitable donations made in honor of the Fund or its Trustees or staff. This rule does not prohibit acceptance of marketing materials of nominal value received by all participants at educational conferences.
