Volume 2, Issue 1
Jon G. Miller
While both private-sector and federal employees’ pension plans are regulated by the Employment Retirement Income Security Act (ERISA), public-sector employees at the state and local level enjoy no protection from federal regulation. The following note examines the issues presented by the lack of ERISA-style protection for these public pension plans. Mr. Miller first identifies several problems to which public-sector retirement plans are susceptible. Such plans commonly are underfunded by their states, which often use pension funds for other purposes. Also, Mr. Miller explains, public pension plans are subject to a heightened potential for abuse and self-dealing by fiduciaries. While many states regulate their pension plans, Mr. Miller points out that existing regulation varies widely form state to state. Mr. Miller discusses the current safeguards for state and local employees’ retirement plans, concluding that existing regulations inadequately protect the integrity of public pensions. The note next discusses the difficulties inherent in enacting ERISA-like federal protections for state and local government employee pension plans. In conclusion, Mr. Miller advocates enactment of federal regulation of the fiduciary standards and reporting, vesting, and fiduciary requirements for public retirement plans, allowing, however, for flexibility and time for the states to conform their individual plans to a uniform system.