When a Promise Isn't a Promise: Public Employers' Ability to Alter Pension Plans of Retired Employees

Source: Gavin Reinke, Vanderbilt Law Review, Vol. 64 no. 5, 2011

This Note analyzes the permissibility, under the U.S. Constitution, of public employee pension reforms that alter the amount of benefits to which retired employees are entitled, and proposes a solution to ensure the continued solvency of state public employee pension funds. Part II examines the underlying causes of the current pension crisis. Part III discusses current state attempts to reduce the pension benefits of retired public employees and explains the legal challenges to these reforms that are currently pending in state courts. Part IV analyzes the legal claims in more detail and explores whether pension reforms that reduce benefits for retired public employees violate substantive due process, the Takings Clause, or the Contracts Clause of the U.S. Constitution. Part V proposes that Congress encourage states to enact minimum funding requirements, similar to those in the Employee Retirement Income Security Act of 1974 (“ERISA”) that govern private employee pensions, by allowing states that choose to adopt such requirements to issue tax-exempt bonds for the purpose of funding public employee pensions.

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