1.3 Fiduciary Duties

Meeting room

1.3 Fiduciary duties

Responsibility for investing assets and paying benefits always rested with the Board of Trustees subject to a general body of law applicable to trusts. In 1982, prior limitations on the investment of assets were lifted and an approach reflecting federal law found in the Employee Retirement Income Security Act of 1974 (ERISA) was adopted. Article 1 of the Illinois Pension Code was revised establishing the Exclusive Benefit Rule which applies to both the administrative and investment responsibilities of the Board. The Rule states:

A fiduciary with respect to a retirement system or pension fund established under this code shall discharge his or her duties with respect to the retirement system or pension fund solely in the interest of the participants and beneficiaries and:

  1. For the exclusive purpose of:
    1. Providing benefits to participants and their beneficiaries; and
    2. Defraying reasonable expenses of administering the retirement system or pension fund;
  2. With the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character with like aims.
  3. By diversifying the investments of the retirement system or pension fund so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and
  4. In accordance with the provisions of the Article of the Pension Code governing the retirement system or pension fund.

Delegation of Fiduciary Duties

The day to day operation of a multi-billion dollar pension fund is beyond the realm of possibility for a “volunteer” Board of Trustees with full time employment responsibilities. The Illinois Pension Code also provides for the delegation of fiduciary duties to:

  1. Appoint one or more investment managers to manage (including the power to acquire and dispose of) any assets of IMRF; and
  2. Allocate duties among themselves and designate others to carry out specific activities other than the management of assets.

Towards that end, IMRF has delegated fiduciary duties to: a national bank to act as Master Trustee; over 50 investment managers in all major investment disciplines to manage assets; an independent investment consultant; and, IMRF staff.

Duty To Report Violations

Any Trustee who learns of a breach of fiduciary duty must report the incident to fiduciary counsel and the Board President or the Executive Director.