Most trustees who serve on Illinois public pension boards know they have four duties: the duty of loyalty; the duty to follow the "prudent man standard"; the duty to diversify plan assets; and the duty to follow the Pension Code.
But what trustees might not know is that the General Assembly amended Pension Code Section 1-114, effective January 2012, essentially to add a new fifth duty: the duty to report a "reasonable suspicion" of a false statement or falsified records being submitted to the Pension Fund.
Mary Patricia Burns, president of Burke Burns & Pinelli, Ltd., spelled out the details and ramifications of the new law Monday afternoon at the 2012Association of Illinois Public Retirement Systems annual conference at the Drury Lane Oak Brook.
The session, titled "Implementation of PA 97-0651 and Fraud Detection," provided Ms. Burns an opportunity to educate her fellow Illinois attorneys, trustees and plan administrators on the duties imposed by the recent amendment to Sections 1-114 and 1-135 of the Code. Ms. Burns has over 20 years of experience representing public retirement systems, and currently serves as outside and/or fiduciary counsel to several governmental pension funds.
In her speech Ms. Burns explained that Section 1-114, which applies to all public funds, sets forth that trustees who breach their fiduciary duties may be held personally liable and that Section 1-135 requires trustees to report reasonable suspicions of false statements or falsified reports being submitted to a pension system. While the Pension Code has always had a provision providing for criminal penalties to anyone who defrauds a pension system by knowingly making a false statement or falsifying a record, the new law imposes a burden on trustees to find out about that alleged fraud and report it.
The Association of Illinois Public Retirement Systems consists of pension administrators from each of the state's statutorily authorized public pension funds. Other topics discussed included the status of pension reform efforts and implementation of the new GASB rules.