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."
Join the Discussion
After you comment, click Post. You can enter an anonymous Display Name or connect to a social profile.
LATEST MANAGEMENT & LABOR HEADLINES
San Jose Election Tests Political Risk of Cutting Pensions7 hours ago
Government Gives Gas Stations Some Competition7 hours ago
The Driver Behind Public Transit’s Transformation in Atlanta7 hours ago
Should Doctors Be Drug Tested?4 hours ago
White House Gives Millions to Colleges That Link Job Training to Industry Needs8 hours ago
Yes, the Rent Really Is Too Damn High1 day ago