RULE 075.00.98-003 - Board Regulation 501 - Amendment to the Investment Policy
RULE 075.00.98-003. Board Regulation 501 - Amendment to the Investment Policy
REGULATION 101 - 1957 (as amended in 1987 and amended in May 1998) DISCLOSURE OF INFORMATION
Disclosure of information from PERS records and meetings shall be open to the public as provided by A.C.A. 25-19-101, A.C.A. 21-12-203, and other applicable law. The Executive Director shall seek the advice of the Attorney General when necessary regarding release of information as provided herein. No information on a member's record will be given to any individual or agency except under the following conditions:
1) The individual member may request information on his or her own account by coming to our office in person or by requesting such information in writing.
2) Any person other than the member may receive information on the individual member's account by furnishing the Retirement System with a sighed, notarized statement from such individual member asking that such information be given to the named third party.
REGULATION 102 - 1995 - EXPENSE REIMBURSEMENT FOR MEMBERS OF THE BOARD OF TRUSTEES
In accordance with Act 1211 of 1995 the Board of Trustees does hereby authorize expense reimbursement for board members to attend all regular and special Meetings of the Board and its Committees. Such reimbursement shall not exceed the rate established for state employees by state travel regulations, APERS' Board members shall not be paid a stipend.
The APERS Board of Trustees does hereby delegate to the APERS' Executive Director the approval of all Board of Trustee travel other than travel to attend regular and special meetings of the Board and its Committees.
REGULATION 103 - 1997 - EMPLOYER CONTRIBUTION RATES (as amended in May 1998) - In accordance with the provisions of Act 299 of 1997, the Board of Trustees will establish State Division and School Division employer contribution rates, to take effect on July 1st of each year. Employer contribution rates established by the Board for the Municipal Division and County Division will take effect on January 1st of each year.
REGULATION 104 - 1997 - EMPLOYER REPORTING - TIME AND FREQUENCY OF EMPLOYER AND EMPLOYEE CONTRIBUTIONS AND THE MONTHLY REPORT OF SERVICE AND EARNINGS:
In accordance with Act 299 of 1997 (A.C.A. 24-4-202), the Board hereby adopts the following requirements for employer remittances and reporting. Employer and employee contributions shall be remitted with appropriate forms furnished by APERS and received by APERS within 10 calendar days after the payroll period ending date. Remittances post marked within 9 calendar days after the payroll period ending date shall not be considered delinquent. The monthly retirement report of service and earnings, either in paper form or by electronic media, shall be submitted for receipt by APERS on or before the tenth calendar day of the month next following the report month. If the reports are submitted by mail, either in paper form, tape, or disk, such reports will not be considered delinquent if postmarked by the ninth calendar day.
REGULATION 201 - 1957 (as amended in 1969 & 1994) AGE OF MEMBERS - HOW ESTABLISHED
Effective with application packages distributed after April 1, 1994, proof of age must be provided by the member directly to APERS before a benefit can be paid. Employer certification of a member's age will not be accepted. One of any of the following documents shall be accepted as proof of age:
1. Birth Certificate issued at date of birth.
2. Birth Certificate issued at any date before age 5 when certified by the appropriate administering agency.
3. Baptismal or other church records issued before age 5.
4. U.S. Census Report issued 1920 or before.
5. Social Security document other than application for Social Security number that states age or date of birth recognized by SSA.
For the following, any combination of two that agree:
1. Marriage license.
2. Insurance policy issued at least 10 years prior to current date.
3. Family Bible.
4. Military Discharge.
5. Child's, birth certificate.
6. Application for Social Security Number.
7. Birth certificate issued at date when person was older than age 5 when certified by the appropriate administering agency.
REGULATION 202 - 1957 BENEFICIARY - HOW CHANGED (amended May 1998)
A member of the Arkansas Public Employees Retirement System can only change beneficiary by use of the form designated by the Board of Trustees to be used for such purposes.
REGULATION 203 - 1957 (as amended November 15, 1995) DISABILITY RETIREMENT
Disability retirement for a member of PERS can be approved in one, of two ways:
Before a member can be approved for disability retirement from PERS, he/she must first apply and be approved by Social Security for disability benefits.
If a member is approved for disability payments, then the member shall furnish proof to PERS of such approval and the member, who is otherwise eligible under State retirement law, will automatically be approved for PERS benefits retroactive to the date that benefits would have become payable under law.
Should the member not be approved for Social Security disability payments, the member, after having been denied Social Security through the Administrative Law Judge appeal level, may appeal directly to the Board of Trustees. The member shall be required by the Board to undergo a medical examination, at his/her expense, by a doctor approved by the PERS Board of Trustees. The results of the physician's evaluation will be presented to the Board of Trustees for the Board's review and consideration. If the member refuses to undergo a medical examination, or if the doctor does not indicate that the member is totally disabled, then PERS benefits will be denied.
After retirement on disability, the member will be reviewed by Social Security if receiving benefits from that agency, and the member will have to furnish PERS with a copy of the Social Security findings. -
In those instances where a disability retirant is working, determination as to whether remuneration is substantially gainful, as referenced in A.C.A. 24-3-208, shall be based on guidelines used by the Social Security Administration for the SSDI program.
REGULATION 204 - 1985 - COMPUTATION OF BENEFITS FOR MEMBERS WITH CONCURRENT SERVICE IN APERS
In accordance with the authority provided in A.C.A. 24-4-105(b) (1) and 24-3-301(a), the APERS Board of Trustees has determined that benefits for members with concurrent service within APERS, where a portion of the service is credited at more than one for one (i.e., elected or public safety), shall be computed as follows. A benefit will be calculated separately for service that results in public safety and/or elected credit based on the credited service and final average salary for that service. A benefit will then be computed for all regular service. The benefit computed for each type of service will be added together to obtain the total benefit.
REGULATION 205 - 1986 PHYSICAL OR MENTAL INCOMPETENCY
For the purpose of approving a death-in-service benefit, a dependent child above the age of 18 will be considered mentally or physically incompetent by one of the following methods:
1. Proof that the dependent has been deemed physically or mentally incompetent by an Arkansas Court of Jurisdiction.
2. Verification by the Social Security Administration that the dependent is receiving disability benefits on the deceased member's social security account and that the benefits became effective at the time of the member's death.
If neither of the above can be obtained, the dependent may appeal to the Board of Trustees by the following method:
1. The dependent will furnish to the Arkansas Public Employees Retirement System a description of the physical or mental impairment and a list of all physicians seen for diagnosis or treatment.
2. The Board of Trustees will designate another physician by whom the dependent will be examined at the System's expense.
3. A written statement from the examining physician will be the basis for the decision of the Board of Trustees on incompetency of the dependent.
The Board may require verification of continuing incompetency, or re-examination.
REGULATION 206 - 1991 TERMINATION OF EMPLOYMENT FOR RETIREMENT PURPOSES
A member must terminate covered employment to be eligible for retirement. A member shall not be terminated from employment for retirement purposes if:
a. The person returns to covered employment with a different employer within 30 days of the person's effective date of retirement; or
b. The person returns to covered employment for the same employer within six months of the person's effective date of retirement.
Persons failing to meet termination requirements shall forfeit their benefits until requirements are met.
REGULATION 207 - CANCELLATION OF RETIREMENT
A member may cancel his retirement if he notifies the System in writing prior to the effective date of retirement; or, if after the effective date, he may cancel by notifying the System in writing and returning the benefit payment on or before the fifteenth (15th) calendar day of the month for which he received his first benefit payment.
REGULATION 208 - QUALIFIED DOMESTIC RELATIONS ORDERS
In accordance with Act 1143 of 1993, the Arkansas Public Employees Retirement System will comply with Qualified Domestic Relations Orders (QDRO's) issued by Chancery Courts in the state of Arkansas that meet the following conditions:
1. The QDRO is issued in accordance with all provisions of the model QDRO adopted by the APERS Board of Trustees and approved by the Arkansas Legislative Council.
2. The QDRO, as specified in Section 1. (3) (c) of Act 1143, does not require APERS to provide any type or form of benefit, or pay options not otherwise available under the Plan, does not require the Plan to provide increased benefits, and does not require the payment of benefits to an alternate payee which are required to be paid to another alternate payee under another order previously determined to be a Qualified Domestic Relations Order.
3. The QDRO is issued on or after the effective date of Act 1143 of 1993.
4. The System will review QDRO's for compliance with this regulation and notify appropriate parties of its findings.
In those instances where the alternate payee selects alternative B. under Section III. (DURATION OF PAYMENTS TO ALTERNATE PAYEE) of the model QDRO, the actuary will use the following guidelines in computing an equivalent benefit to be paid for the alternate payee's lifetime:
1. The interest rate will be the valuation rate.
2. The mortality table will be the "50/50 table".
3. The age used in the computation shall be the attained age at the last birth date prior to the effective date of the QDRO.
REGULATION 209 - 1993 - CREDITING RECIPROCAL SERVICE DURING THE SAME FISCAL YEAR
If a member has reciprocal service during the same fiscal year with both the Teacher Retirement System and the Public Employees Retirement System, and if, under the two systems' standard methods of crediting service, the combined service amounts to more than one full year of actual service, then credit shall be reduced in a manner that is most advantageous to the member (determined jointly by APERS and ATRS) so that in any given fiscal year, actual service shall not exceed one year.
REGULATION 210 - 1994 - PUBLIC SAFETY CREDIT (as amended May 1998)
Public Safety Credit will be granted only to those positions delineated in A.C.A. 24-3-102(5), and in the instance of-police officers, only to those officers whose primary duty is law enforcement and who are certified law enforcement officers. The police chief, in the case of a municipality, or the sheriff, in the case of a county, must certify in writing to APERS that the officer's primary duty is law enforcement. In addition, the officer must be certified by the Law Enforcement Training Academy as a "Certified Law Enforcement Officer," or be grandfathered in as of January 1, 1978.
Public Safety credit will not be granted to civilian or temporary employees of a police department. Public Safety credit will not be granted to a municipal police officer or county deputy sheriff whose primary duty is jailer, radio dispatcher, bailiff, probation officer or administrative.
In accordance with Act 485 of 1997, the term "public safety member" shall not include a member whose employment as a police officer or fire fighter occurred on or after July 1, 1997. If a person who is employed in a "public safety member" position prior to July 1, 1997 terminates employment, voluntarily or otherwise, in such a position, he/she shall not be entitled to public safety credit for any subsequent employment in a police officer or fire fighter position covered by APERS that occurs on or after July 1, 1997.
REGULATION 211 - 1995 - CHANGES IN FINAL AVERAGE SALARY AFFECTING BENEFIT COMPUTATION
If earnings reported after the date of retirement are not equal to those certified by the employer, the benefit amount will not be adjusted if the resulting increase or decrease would be $3.00 or less over a 12 month period.
REGULATION 212 - 1995 - COMPLIANCE WITH BENEFIT LIMIT IMPOSED BY SECTION 415 OF THE INTERNAL REVENUE CODE (as amended May 1998)
The following guidelines for complying with qualified plan benefit limitations imposed by IRC Section 415 shall be followed in accordance with Act 739 of 1995.
1. Total employer financed straight life annuity payments to any retired member in any calendar year shall not exceed the dollar limit specified in IRC 415.
2. In any calendar year in which the total straight life annuity payments otherwise payable would exceed the amount permitted under IRC Section 415, the actual amount paid shall be reduced by such dollar difference.
3. A retiree whose benefits are reduced in accordance with IRC Section 415 limitations in any calendar year will be retested in subsequent years in accordance with the following objectives.
* Assurance that APERS will remain in compliance with IRC Section 415, and
* The smallest acceptable cumulative adjustments are made to the benefits paid to any retired member.
REGULATION 213 - 1996 - FIVE YEAR VESTING
In accordance with Act 1356 of 1995, Five Year Vesting becomes effective July 1, 1997. This provision is not retroactive. In order to vest under this provision, a person must be a member of the System on July 1, 1997 and have been a member for not less than 90 consecutive calendar days prior to July 1, 1997 with five or more years of service. If a person is a former member on July 1, 1997 with five years but less than ten years of service, that person must return to covered employment for period of not less than 90 consecutive calendar days after July 1, 1997. If a person is a" former member on July 1, 1997 with less than five years of service, that previous service will be counted toward five year vesting provided the person returns to covered employment for a period of not less than 90 consecutive calendar days, and the previous service has not been refunded.
REGULATION 214 - 1997 - DROP PROVISIONS CONTRIBUTIONS TO DROP ACCOUNT:
* 70% of member's computed benefit after election of a straight life or option benefit, as required by Act 1052 of 1997, and including the temporary annuity, if applicable.
* Contributions to the account shall be increased for COLA'S and Ad Hoc increases granted to retirees.
INTEREST ON THE DROP ACCOUNT:
* Interest at the rate of 6% shall be credited to the date of actual retirement in accordance with Act 1052.
DROP PAYMENT METHODS:
* Member may elect a lump sum or lifetime monthly annuity. If the member elects a lump sum, the member may request that the lump sum be transferred to another qualified plan in a trustee to trustee transfer. If the member elects a monthly annuity for life, the monthly amount shall remain constant for the life of the member. That is, COLA'S and Ad Hoc increases will not be added to this monthly annuity and the balance in the account will not earn interest after the effective date of retirement.
DEATH OF A DROP PARTICIPANT:
.. * In the event a DROP participant dies during the period of participation, the benefit payable from APERS shall be determined as though the participant had separated from service and been found eligible for monthly benefits by the Board on the day prior to the death, with death following immediately thereafter (per Act 1052). The balance in the DROP account shall be paid to the _designated beneficiary.
DEATH OF A RETIREE RECEIVING A MONTHLY ANNUITY FROM DROP:
* Upon the death of a retiree who was receiving a monthly annuity from the DROP, the DROP annuity will be treated as if it had been a straight life benefit, and the undistributed remaining balance in the DROP account, if any, will be paid to the designated beneficiary. The regular monthly retirement benefit will be treated according to the election made by the retiree at his/her entry into the DROP.
FAILURE TO TERMINATE COVERED EMPLOYMENT WITHIN FIVE YEARS OF DROP ENTRY:
* If a DROP participant fails to terminate employment within five years of entry into the DROP, the participant shall forfeit the balance in the DROP account. The participant's employer shall be required to pay all contributions, with interest, that would have been paid on behalf of the member had he/she not participated in the DROP. The employer will acknowledge this requirement on the member's application for participation in the DROP. Retirement credit will be added to the member's record for the time of participation in the DROP in the same manner as if the member had not participated in the DROP.
REVIEW OF PROVISIONS:
* The provisions of the DROP program will be reviewed at three year intervals, or more frequently if necessary. Based on the actuary's review, the contribution and interest rate provisions may be adjusted prospectively to maintain the goal of zero-cost to the System.
REGULATION 215 - SPOUSE'S ACKNOWLEDGEMENT OF BENEFIT SELECTION -
If a member applying for retirement selects a Straight Life Benefit, then the member shall be required to furnish the spouse's acknowledgement of that selection on a form provided by the System. An application shall not be denied because a spouse refuses to sign the form.
REGULATION 301 -1957 PRIOR SERVICE (as amended 1994)
Verification of Service (including wages paid and number of hours worked) for the purpose of determining eligibility for free prior service-purchase of service; or delinquent service, may be established in the following ways:
1) Certification by the payroll or personnel officer or person otherwise responsible for payroll and personnel matters of the department or Agency wherein the work was performed. Acceptable for both hours worked and wages.
2) Certification by the Department or immediate supervisor under whom the employee actually worked. Acceptable for hours worked only.
3) Any documentary proof in the possession of the individual. May be acceptable for hours and/or wages depending on nature of proof. Acceptability will be determined by System.
4) Notarized statements by two co-workers. Acceptable for hours worked only.
REGULATION 302 - 1959 COUNTY EMPLOYEES REPRESENTATIVE
The County Clerks shall be and are hereby designated as the county employees' representative for the transaction of all business with the State Board of Trustees. All business with county officials and employees shall be channeled through the county clerk's office.
REGULATION 303 - 1965 (as amended in November 1997) Requirements for Membership in the System
In accordance with A.C.A. 24-4-101(7) (C), the Board has "final power" to determine who is eligible for participation in the System. Accordingly, all persons appearing on any covered employer's payroll (regular, temporary, or extra help) shall become members of the Retirement System as a condition of employment except as follows:
1. Persons employed for a period of less than 90 consecutive calendar days shall be excluded from membership.
2. Persons who are employed for a period of more than 90 consecutive calendar days, but who do not qualify as full time employees, shall be excluded from membership. A person shall be considered a full time employee if the person works at least 80 hours per month during a period of 90 consecutive calendar days. The 80 hour requirement shall not apply to school division employees. A school division employee shall be considered qualified if that person works at least one half of the time required by a full time person employed in the position during a period of 90 consecutive calendar days.
3. Persons whose rate of pay does not constitute employment that is substantially gainful shall be excluded from membership. For purposes of this regulation, "rate of pay" is equal to monthly earnings reported to the System divided by the hours worked during the report month. A rate of pay of less than the federal minimum wage for the year in question shall not be considered substantially gainful.
REGULATION 304 - 1990 - MEMBERSHIP ELIGIBILITY FOR POLICEMEN AND FIREMEN (as amended in May 1998)
A Municipality which begins participation in this System after July 1, 1981 cannot enroll policemen or firemen in this System. Those positions are covered by the provisions of Act 364 of 1981, which established the Local Police and Fire Retirement System (LOPFI). Municipalities that were participating in APERS as of July 1, 1981 and who were reporting police and firemen to APERS must continue to report police and firemen to APERS.
REGULATION 305 - 1991 WAGES FOR DEPUTY TAX COLLECTORS (As amended November 15, 1995)
Fees paid to county deputy tax collectors for the collection of delinquent taxes and fees paid to deputy sheriffs in lieu of a salary shall be considered wages for retirement purposes. Service credit will be granted for any month in which the deputy tax collector or deputy sheriff works at least 80 hours, provided the deputy tax collector or deputy sheriff is hired with the intent of working at least 90 days.
REGULATION 306 - 1995 - PARTICIPATION IN APERS UNDER THE PROVISIONS OF ACT 398 AND ACT 1292 of 1995 (as amended in 1997 and in May 1998)
In accordance with Acts 398 and 1292 of 1995, when the majority of employees of an entity covered by this Act elect to participate in APERS, the governing body of such entity shall certify such vote to the Executive Director of APERS within 10 days after the vote by the employees. The effective date of coverage shall be either the first day of the calendar month next following receipt by the Executive Director of the election or the July 1st next following the receipt, as determined by the vote.
REGULATION 307 - 1997 - PARTICIPATION IN APERS UNDER PROVISIONS OF ACT 76 OF 1997 -
In accordance with Act 76 of 1997, if the Intergovernmental Juvenile Detention Council of the 10th Judicial District elects, by a majority vote of the Council, to participate in APERS, the Council shall certify such vote to the Executive Director of APERS within 10 days after the vote. The effective date of coverage shall be the later of July 1, 1997 or the first day of the calendar month next following receipt of the election results by the Executive Director.
Should the Council elect to participate, the agency will be placed in the "Other Nonstate Division" and the employer contribution rate shall be the rate for that Division.
Interest on prior service purchases shall be "regular interest" as defined by the Board in Regulation 65.
REGULATION 308 - ENROLLMENT IN APERS BY COLLEGES AND UNIVERSITIES
Arkansas Code of 1987 Annotated 24-7-1002 requires certain employees of state universities, colleges, and community colleges to be enrolled in the Arkansas Public Employees Retirement System (APERS), rather than the Arkansas Teacher Retirement System (ATRS) or the College Alternate Plan. Beginning November 20, 1997, those individuals first employed by the various colleges, universities, or -community colleges in pay grade 17 and below shall become members of APERS. All members of APERS who are promoted to a position grade 18 and above will automatically become a member of ATRS or the College Alternate Plan unless they choose to remain in APERS.
PURCHASE. REFUND REPAYMENT. OTHER SERVICE
REGULATION 401 - 1957 (as amended in 1987) PROOF OF MILITARY SERVICE
Any member of PERS claiming military service shall submit:
1) Proof of PERS covered employment immediately prior to going into military service.
2) Proof of military service in the form of a DD-214 or equivalent document.
3) Proof of rehire by an agency subject to this Act's statutory provisions within six years subsequent to discharge from military service.
Any member of PERS desiring to purchase military service must provide proof of military service in the form of a DD-214 or equivalent document.
REGULATION 402 - 1986 PARTIAL PAYMENT AGREEMENT
Repayment of refunded contributions by a member to re-establish forfeited service must be made in one lump-sum if the total due, including interest, is less than $500. If $500 or more, the member may choose to enter into an agreement with the Retirement System to make partial payments in an amount and by a method determined by the Executive Director, subject to the following conditions:
1. The service credit will not be restored to the member's retirement account until full payment is received by the System.
2. Full payment must be made before a member, or his survivor, makes application for monthly benefits.
3. From each payment received, the System will first credit interest due and the remainder will be applied to reduce the principal due.
4. The System may cancel the agreement and refund to a former member the amount paid under the partial payment agreement if the former member does not pay, in one lumprsum, the total amount due within six months after termination of covered employment.
5. The System may cancel the agreement and refund, to the person eligible for the refund, all amounts paid under the agreement if a member dies before completing payments, with the following exception:
A. If completing the payment will qualify a survivor or dependent for a monthly death-in-service benefit or will increase the amount of such benefit, then the System will accept payment of the balance due in one lump-sum if paid within six months after the death of the member. If not paid within six months, the System will refund the amounts previously paid.
6. A person not a member of the System, but who is a member of another retirement system and eligible for Reciprocal Agreement coverage (Act 488 of 1965, as amended), for the purpose of the partial payment agreement will be considered a member.
REGULATION 403 - 1991 PURCHASE OF MILITARY SERVICE CREDIT
Military service credit eligible for purchase under A.C.A. 24-2-502 shall include active duty and active duty for training; provided, however, active duty for training shall not include summer camp, weekend drills, or other duty with a duration of less than 30 consecutive days.
REGULATION 404 - CONTRIBUTIONS FOR MILITARY SERVICE CREDIT
In those instances where federal law requires that a member receive credit in the Retirement System for service and earnings that the member would have received had the member not been called to active military duty, the employer shall be required to pay the employer contributions that would have been due for the earnings to be credited.
REGULATION 405 - 1995 - PURCHASE OF SERVICE CREDIT FOR TIME LOST DUE TO WORKER'S COMPENSATION INJURY (as amended May 1998)
In accordance with the provisions listed below, an active member of APERS may purchase time lost due to a worker's compensation injury.
* The Member makes a written request to the System to purchase the service.
* The Member provides documentation from the employer and the Worker's Compensation Commission that time was lost due to a worker's compensation injury. Documentation must include a statement by the employer of the exact amount of time lost by month.
* The Executive Director determines that there is sufficient documentation and that all other requirements of A.C.A. 24-4-516 have been met.
* The Member pays or causes to be paid in a lump sum the cost of the purchase as determined by the System in accordance with A.C.A. 24-4-516.
REGULATION 406 - 1995 - PURCHASE OF SERVICE CREDIT FOR STATE SERVICE UNDER A FEDERAL GRANT (as amended May 1998)
In accordance with the provisions listed below, a person who is or was a member of APERS may purchase credit for state service under a federal grant.
* The Member makes a written request to the System to purchase the service.
* The Member provides documentation from the state agency receiving the service and the appropriate federal agency of the time of the service and the amount the person was paid by month.
* The Executive Director determines that there is sufficient documentation and that all other requirements of A.C.A. 24-4-517 have been met.
* The Member pays or causes to be paid in a lump sum the cost of the purchase as determined by the System in accordance with A.C.A. 24-4-517 The Member may purchase all of the service, subject to the maximum stated in the Act, or any portion thereof in multiples of one year.
REGULATION 407 - 1996 - DIRECT TRANSFER OF ELIGIBLE ROLLOVER DISTRIBUTION
As permitted by IRS Regulations issued October 19, 1995. APERS will accept eligible rollover distributions from tax qualified retirement plans under the following conditions.
* The proceeds from the rollover distribution must be used to purchase eligible service credit in APERS or to repay a refund and thereby reestablish forfeited service.
* If the former plan is a defined contribution plan, that plan must permit such rollover.
* The exact source of all funds involved in the rollover must be identified by the former plan. That is, after tax employee contributions, pre-taxed contributions and source (employee or employer), or earnings on contributions.
REGULATION 408 - 1997 - REGULAR INTEREST - In accordance with A.C.A. 24-4-101(19), the rate of interest to be charged for all provisions of Chapters 3 and 4 of Title 24 where reference is made to "regular interest" shall be 7.75% per annum, compounded annually.
ARKANSAS PUBLIC EMPLOYEES RETIREMENT SYSTEM INVESTMENT POLICY
I. STATEMENT OP PURPOSE
The assets of the Arkansas Public Employees Retirement System (APERS) shall be invested as determined from time to time by the APERS Board. This statement sets forth the investment objectives of APERS and the investment policies to be followed in carrying out those objectives.
Investment of the APERS' funds shall be made for the exclusive benefit of the participants and beneficiaries of the System. The purposes of investing APERS' funds are to provide benefits to participants and their beneficiaries and to defray the necessary expenses associated with investing APERS' funds and administering the System.
II. BACKGROUND (HISTORY)
The Arkansas Public Employees Retirement System was established by the General Assembly in 1957 and is governed by a nine member Board of Trustees. From its inception until 1985, the investment of the trust fund was governed by Arkansas Statutes that provided for a permissible list of investments. However, Act 412 of 1985 repealed the permissible investment list and enacted the prudent investor rule. Act 412 of 1985 also allows the establishment of a custodial bank relationship. Act 412 of 1985 states that the System shall seek to invest at least five percent, but not more than ten percent of the System's portfolio in Arkansas related investments, but only when consistent with the fiduciary requirements of the trustees. Act 302 of 1989 allows the System to employ Multiple Discretionary Money Managers as appropriate. Act 1194 of 1997 revises and updates the investment policies and rules, including the prudent investor rule.
III. STATUTORY AUTHORITY
The primary statutory authority for the investment activities of APERS is found in Sections 24-3-401 through 24-3-426 of the Arkansas Code, as amended. Trustees shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. Trustees who have special skills or expertise, have a duty to use those special skills or expertise (24-3-418). The prudent investor rule shall be applied by each party serving in a fiduciary capacity for APERS.
IV. INVESTMENT OBJECTIVES
The investment objectives shall be:
(1) the protection of the APERS' Fund so that such assets are preserved for providing benefits to participants and their beneficiaries; and
(2) to maximize total return - either in the form of income or capital appreciation or both -consistent with prudent risk taking on the amounts available to provide such benefits. For this purpose, short-term fluctuations in value shall be considered secondary to long-term investment results. The long-term return objective for the APERS' Fund shall be to achieve a real rate of return of 3.5%. This is the return over the rate of inflation (as measured by the Consumer Price Index). This objective is not to be a goal from year to year, but is intended as a long-term guideline to those involved in investing the Trust's assets. The investments of the APERS' Fund shall be so diversified as to minimize the risk of large losses, unless under particular circumstances it is clearly prudent not to do so. Investments will be further diversified by hiring an appropriate number of managers whose investment styles are varied enough to provide a balance to the overall risk of the Fund.
V. ASSET ALLOCATION (BY MAJOR CATEGORIES)
To avoid extreme exposure to investment risk, the following percentages represent the minimum and maximum portion at market of the portfolio that may be invested by types:
Market Value Exposure
Domestic Fixed Income
International Fixed Income
Arkansas Related Investments
The Board of Trustees shall review its asset allocation at least annually to determine if the asset allocation is consistent with the level of risk and volatility acceptable to the Fund,
Should actual asset class percentages fall outside the target ranges, the Fund will rebalance to the target percentages. The rebalancing will necessitate the movement of funds from style to style. This rebalancing will occur at least annually unless circumstances dictate that it be done more frequently. Within these broader asset classes, the Trustees shall establish commitment levels to various investment styles, as the dynamics of the Plan's financial needs dictate.
VI. PORTFOLIO GUIDELINES
Through selecting, timing and weighting investments, the Fund's objective is to maximize the total return of the account assets, through price appreciation and/or yield, consistent with the level of risk taken. In determining the appropriate risk posture for the Fund, consideration should be given to the overall risk characteristics of the Fund, and the extent to which components of the Fund are diversified. Additionally, the Board of Trustees establishes the following specific guidelines:
A. Securities may not be purchased on margin.
B. Securities may not be sold short.
C. The System may establish a Securities Lending Program subject to restrictions established by the Board.
D. Each investment manager will be required to invest within the specific guidelines and parameters set by the Board of Trustees.
E. APERS recognizes a legal responsibility to invest in the Arkansas economy, while realizing its primary, legal, and fiduciary commitment is to beneficiaries of the retirement system, under the prudent investor rule.
Arkansas related investments to comply with the provision of Arkansas Code 24-3-414 shall be approved by the Board of Trustees. However, the Finance Committee of the Board shall have authority to approve proposals that do not exceed $5 million. Any action by the Committee shall be reported to the Board at its next regular meeting. All approvals by the Board or Committee will be subject to the established in-state investment guidelines.
VIII. CUSTODIANSHIP OF SECURITIES
Securities may be held by the State Treasurer or, under the authority granted by Arkansas Code 24-3-408, APERS may establish an arrangement with a financial institution, as specified by this Code, for the custodianship of its securities subject to the approval of the Board of a Request for Proposal as well as a proposed contract.
IX. ROLES AND RESPONSIBILITIES
A. Custodian Bank
The custodian bank shall, by nominee agreement, hold any and all securities for the beneficial interest of the APERS fund. Custodial activities will include, but are not limited to, the purchase, registration, and sale of stocks, bonds, notes, and other securities, as well as the collection of any income. In order to maximize the Fund's return, no money should be allowed to remain idle. Dividends, interest, proceeds from sales, new contributions and all other moneys are to be invested or reinvested promptly.
B. Administrative Staff
The Administrative Staff, at the direction of the Finance Committee, executes all investment transactions for those assets managed in-house. In addition, they are responsible for communicating with the investment professionals the information necessary to fulfill contractual obligations. The Administrative Staff also communicates decisions of the Finance Committee to investment managers, custodian bank, actuary, and consultant.
C. Finance Committee
The Finance Committee, at the direction of the full Board, shall review and approve or disapprove investment recommendations not governed by Investment Policy prior to their execution. The Committee may approve or disapprove Arkansas Related Investment proposals if the size of a proposal does not exceed $5 million. The Committee will report any such actions to the Board at its next regular meeting. The Committee may also review and recommend investment policy changes, deletions, or additions. The Committee also shall make recommendations to the full Board concerning contracts of a financial nature, when performed by other than APERS' staff persons, such as, although not limited to, those for investment counselors, custodial arrangements, option programs, and security lending.
D. Board of Trustees
The Board of Trustees shall review the total investment program. The Board shall approve the investment policy and provide overall direction to the administrative staff in the execution of the investment policy.
IX. TOTAL FOND PERFORMANCE MEASUREMENT STANDARDS
A. The Fund's overall annualized total return (price change plus income) should exceed the return available from a policy of "rolling over" 90-day Treasury Bills (as a proxy for the inflation rate) by at least 3.5% percentage points per year measured over a period of 10 years.
B. The Total Fund should rank in the upper 50th percentile compared to the results of other similarly managed public fund portfolios measured over a five-year period.
C. The Fund's annualized total return over rolling five year periods should, after manager's fees, exceed the return of the following Target Index:
37% Standard and Poor's 500 Index
50% Lehman Brothers Aggregate Index
10% MSCI - EAFE Index
3% Salomon Non-U.S. Bond Index
X. PROXY VOTING
The Board has directed that the individual investment managers will be responsible for voting proxies in the best interest of APERS. Each investment counselor is responsible for maintaining records of how each proxy is voted. A written report of proxy voting will be provided to the Board within 30 days from the end of each quarter. A detailed explanation will be given for each instance where the proxy is voted against management.
XI. REVIEW OF INVESTMENT PROCESS
A. On a timely basis, but not less than twice a year, the Board will review actual investment results achieved by each manager (with a perspective toward a three to five-year time horizon or a peak-to-peak or trough-to-trough market cycle) to determine whether;
1. The investment managers performed in adherence to the investment philosophy and policy guidelines set forth herein,
2. The investment managers performed satisfactorily when compared with:
a. The objectives set.
b. Other similarly managed funds.
B. In addition to reviewing each investment manager's results, the Board will re-evaluate, from time to time, its progress in achieving the total fund, equity, fixed-income, and international equity segments objectives previously outlined.
C. The periodic re-evaluation also will involve an evaluation of the continued appropriateness of:
1. the manager structure,-
2. the allocation of assets among the managers; and
3. the investment objectives for the Fund's assets.
D. The Board may appoint investment consultants to assist in the ongoing evaluation process. The consultants selected by the Board are expected to be familiar with the investment practices of other similar retirement plans and will be responsible for suggesting appropriate changes in the Fund's investment program over time.(11/23/1998)
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