The financial crisis has underlined difficulties faced by states and their subdivisions in paying benefits to their employees. The most spectacular example is Detroit's bankruptcy, but state and local employers across the country face sharp cuts in benefits as their employers fight for solvency. A federal solution such as ERISA is precluded by considerations of federalism and the impracticability of getting major legislation through Congress. This Article proposes an alternative solution: a uniform state code, following other uniform state laws such as the Uniform Commercial Code, that states could adopt to govern both state and local plans. It would finance all plans on a statewide basis, with common administration by a nonpolitical council, which would supervise actuaries and inspectors general to protect the integrity of funds invested and disbursed according to standards established by the code. Statewide funding for state and local plans would have advantages already enjoyed by states such as New York, including more sophisticated fiduciaries to supervise investments, reduced costs imposed by financial intermediaries, and greater diversification of investments. The code would go beyond existing state/local plans to create state emergency funds to parallel the federal Pension Benefit Guaranty Corporation, to assure continued benefits during unexpected crises. Making the code uniform would enable adopting states to follow each others' practices and interpretation of code provisions. Moreover, subject to Congressional approval, it would facilitate interstate compacts, under which states could combine benefit and emergency funds, increasing their safety, ability to diversify, and leverage over financial intermediaries.
- state pension,
- uniform state law,
- interstate compact,
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