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

Von M. Hughes is Partner and Managing Director, and Head of Strategic Advisory at PAAMCO, an investment firm headquartered in Irvine, California with offices in London and Singapore. The firm’s clients include large public as well as private pension plans. Hughes is a frequent speaker on topics of hedge fund structure and public pension governance and has written articles for the Harvard Law Review, The Hedge Fund law report, and other publications.

• ForewordIntroductionPART IIntroduction and Current Marketplace1 History of Public Pensions 3Introduction Early Pension DevelopmentPublic Pension Development Early Twentieth-Century Development Late Twentieth-Century Development Chapter Notes 2 Public Pension Marketplace 21Introduction 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 ExpendituresU.S. Public Pension Trends Public Pension FundingAddressing the Funding Gap Design Shift Chapter Notes PART IIPension Plan Design3 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 Notes5 Beyond Defined Benefit Introduction Defined Contribution Plans DC Plan Types FM.indd 6 6/26/2019 2:04:21 PMDC 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. DCHybrid Plan Designs Side-by-Side (or DB+DC) Cash Balance Plan Alternative Hybrid Designs Chapter Notes PART IIIInvestment Policy and Implementation6 Investment PolicyIntroduction 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 Notes9 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 IVPlan Governance11 Governance Structure Introduction Legislative Oversight Common Governance Structures Governing Fiduciaries: Trustees Board Composition Core Competencies and Education Financial E