In tight labor market, the lack of ERISA rights for government workers is leading to calls for protection parity in benefit plans
Attorney looks at evolution of ERISA and why discussions for change are percolating
Media Contact: Barbara M. Fornasiero, EAFocus Communications; barbara@eafocus.com; 248.260.8466
Royal Oak, Mich.—August 3, 2022—The Employee Retirement Income Security Act (ERISA) of 1974 established standards for private employer pension plans in order to protect employee benefit plan participants and their beneficiaries. While the exclusion of government pension plans from ERISA protections may appear conspicuous today, national employee benefits and ERISA attorney J.J. Conway of Michigan-based J.J. Conway Law explains that municipal and state leaders at the time vigorously opposed such intrusions in the management of government pension plans.
“The move to enshrine pension rights really took shape in 1963 after the closure of the Studebaker Corporation plant in Indiana left employees with little to no retirement income. Various politicians, notably Senator Jacob K. Javits of New York, introduced bills that ultimately became ERISA in 1974,” Conway said. “ERISA initially seemed to be opposed by nearly everyone – except the American worker. Employers opposed it. Unions opposed it. But government employers frankly fought the hardest to keep ERISA or ERISA-like protections out of their pension plans. Now, with an epidemic of underfunded public worker pension plans throughout the U.S., exempting governments from ERISA’s funding requirements and other protections is proving to be a very bad idea.”
Without ERISA protections such as requiring the disclosure of financial and other key information to plan participants, establishing standards of conduct for plan fiduciaries and providing legal recourse through federal courts, government pension plans went unchecked for decades. It wasn’t until such cataclysmic events as the national recession in 2008, which hit the tax coffers of cities and states, and the Detroit bankruptcy in 2013, which threatened the pensions of police, fire and municipal workers, that the vulnerability of public pension plans became widely discussed.
“The Detroit bankruptcy proved the vulnerability of municipal workers nationwide who realized that with no ERISA-equivalent, their pensions were not automatically non-dischargeable in bankruptcy. More recently, it’s been the exorbitant fees of hedge fund managers who now have a stranglehold on managing government pension plans – with minimal accountability and little to no positive investment results for plan participants – that is catching the ire of public sector workers,” Conway said. “When private pension plan participants call foul over high fees or other irregularities, ERISA provides them with easily defined avenues for relief.”
The complaints extend to other pension-related matters. In Michigan, for example, the Office of Retirement Services (ORS) – which serves as the administrator for the retirement plans of state employees, public school employees, judges, state police and National Guard members – stands as judge and jury when it comes to determining a disability for medical retirement.
“In a private retirement or disability plan, ERISA provides employees the right to argue their case and present medical expert opinions. With ORS, there is often times a single physician making the call, with the government employee having no real opportunity to fight the decision,” Conway explained. “The contrast between ERISA’s regulatory protections and lack of ERISA protections is stark. With other employee-rights movements underway nationwide, this area of government worker oversight is ripe for change.”
Conway adds that in a tight labor market, benefit plans are taking on greater importance; therefore, it is quite possible that state governments will pass reform legislation that, at a minimum, lets government workers know that their benefit rights mean something.
“If a government employee becomes disabled from working, under no circumstances should that employee have less protections than a counterpart working in the private sector,” Conway said.
About J.J. Conway Law
J.J. Conway Law was founded by John Joseph (J.J.) Conway in 1999 to work with individuals seeking full access to the employee benefits they have earned. The firm has been involved with nationally significant employee benefit, disability and pension cases, including class action lawsuits for such landmark decisions as requiring Michigan private insurers to cover autism health treatments for children through age 18 and protecting the pension rights of City of Detroit employees, police and firefighters as well as Wayne County employees by holding their trustees accountable for investment decisions. The firm’s motto is “Conquer Tomorrow®” and is dedicated to making tomorrow easier for their clients across the United States. Learn more on the firm’s website.