A Regular Way to Run a Pension Fund
An old idea for better pension management is finally being tried out, at least in a few places. Wyoming this year became the first state to pass a model law that seeks to make pension systems both more accountable and more flexible. Maryland adopted the same rules for its local government systems.
The law has two main provisions. The first gives pension managers the authority to invest under modern portfolio theory, meaning they should concern themselves with the expected returns of their entire portfolio, as opposed to any single investment. The second requires trustees to have specialized financial expertise--or hire someone who does. The law also creates a number of disclosure requirements to make trustee decisions more transparent.
The law was crafted by a number of different organizations concerned with pensions and published by the National Conference of Commissioners on Uniform State Laws. Because it was a compromise piece of work, there were no advocates strongly promoting the product, and the healthy investment returns of the late 1990s left legislators in some states reluctant to mess with what looked like a good thing.
Now that many pensions are financially strapped, however, the time may finally have come for more widespread action on the uniform act. "Rightly or wrongly, some of the public pension funds have been criticized for perhaps being a little exuberant during the good times," says Kim Johnson, who provides legal advice to pension funds. "Something like the uniform law can temper that exuberance without shutting down the whole investment program."
We invite you to discuss and comment on this article using social media.
LATEST MANAGEMENT & LABOR HEADLINES
Uber, Lyft Are (Probably) Returning to Austin3 days ago
New Study Identifies the Best Cities for Good Government4 days ago
Kevyn Orr on the New Orleans Mayor: 'I Have Rarely, If Ever, Heard a White Guy Speak With Such Passion' About Race4 days ago
Fewer People Are Getting Degrees in Public Service1 week ago
Milwaukee Sheriff Takes a Job With Trump's Homeland Security1 week ago
Tips for States and Cities Trying to Raise Workers' Wages1 week ago