Blog: Legal Issues

Hear from a range of perspectives on what role the federal government should play in addressing state and municipal pension debt.
Denver teachers should be concerned about how their school district's budget is being spent and how little control they have over their retirement plan.
Judge recently dismissed CPS's lawsuit claiming the state funds schools inequitably and operates an inequitable pension system. As a a result, the district once again faces serious finance troubles and Gov. Rauner is withholding $215 million for CPS until the legislature enacts pension reforms.
Teachers unions have a complicated relationship with Wall Street and hedge funds.

Roughly half of American private sector workers don’t have a retirement savings plan at their jobs.  But it’s not by choice.  Eighty-four percent of these workers don’t have access to plans.  

And educators aren’t immune.  Only one-fifth of early childhood teachers have a retirement plan, according to the National Child Care Staffing Study. Unlike most elementary and secondary teachers, many early childhood teachers aren’t public workers and aren’t eligible to participate in their state’s teacher pension plan. (They also earn significantly less in salary.)   

The federal government now offers a low-cost retirement option called, my retirement account or myRA.  There’s no minimum amount and workers who don’t have a 401k or pension plan can set-up automatic deductions from their paycheck into a myRA account.  Once in the account, the savings are invested in bonds backed by the U.S. Treasury.  While this won’t yield high investment returns, it is a safe bet and has no fees.  

One drawback, however, is that workers have to choose to sign up for myRA on their own initiative.  And Americans aren’t very good at saving.  Yet, empirical research, shows that automatically enrolling or nudging employees into a plan (while still allowing them to opt out) is a much more effective way to boost participation.  

A pension law that would have reduced benefits for city workers was ruled unconstitutional. The ruling is a tough blow for the city’s finances and could worsen the situation for new and future workers.
Illinois' pension plan is bad for new teachers. But you don't have to take our word for it.
An Illinois judge has ruled unconstitutional the state's 2013 pension reform law. That is potentially very problematic for new teachers and those who aren't yet teaching.
Implementing a strong but flexible state legal mechanism may be one way to prevent legislatures from underfunding state pension plans.
San Jose Mayor Chuck Reed is sponsoring a statewide ballot initiative that would change California’s constitution to allow state and city governments to make prospective changes to retiree benefits. To better understand the initiative and why he’s sponsoring it, I spoke with Mayor Reed.