Trustees of public pension funds in the State of Illinois have a fiduciary duty to act solely in the best interest of the participants and beneficiaries of the pension fund, as detailed in the Illinois Pension Code. An audit of the pension fund helps trustees to fulfill these fiduciary duties. The following is Part 2 of our Public Pension Plan Trustee series.
Part 2 – Retirement and Disability Benefits
The most significant expense to a pension fund is the retirement and disability benefits paid to its participants and beneficiaries. The Illinois Pension Code sets forth the manner in which benefits are earned and subsequently paid. An audit provides reasonable assurance (which is a high, but not absolute, level of assurance) that these benefits have been paid in accordance with the Illinois Pension Code.
The independent certified public accountant (CPA) typically tests a sample of payments to participants and beneficiaries receiving pension, disability, or other benefits to determine whether the payments have been calculated correctly and that proper records are being maintained to support the payments. In addition, the CPA will perform analytical procedures to look for unusual items that may indicate potential problems requiring further investigation. Finally, the CPA tests removals from the benefit roll to determine that benefit payments have been stopped appropriately.
For a fund trustee, an audit provides reasonable assurance that the benefits are appropriately paid to those who have earned them under the Illinois Pension Code and are not being disbursed in error. Benefit payment errors grow over time and may affect the fund’s ability to provide earned benefits to its participants and beneficiaries in the future. Identifying problems with benefit payments on a timely basis assists a Trustee with safeguarding the fund’s assets.
Click here for Part 1 of this series.
Legacy News Flash Issued 9/1/2016