Unintended Consequences?

Just read a thoughtful piece by Jennifer Mueller, titled “How the Janus Ruling Might Doom Public Pension Next”. Of course, the Janus, in this case, is the (Mark) Janus versus AFSCME lawsuit, which saw the Supreme Court overturn 40 years of “settled law” dealing a blow to organized labor’s fundraising activities. Mueller believe’s that this legislative decision could create a similar outcome for public pension systems that mandate employee contributions to help fund future benefits.

Let’s assume that a public union worker that opposes many of the union’s positions refuses to allow a deduction for “dues”.  Would they also feel the same way if they knew that their employee contributions to the pension fund were being used to impact proxy voting decisions for many of the same issues that the union employee was opposed to when they withheld their dues? As Mueller points out when DB pension systems were first launched the plan’s investments consisted mostly of bonds and cash.  However, today those plans have roughly 50% of their assets in equity-related securities, which allow for a voice through the proxy process.

Public DB pension systems are already facing funding challenges, let’s hope that an employee of a public union and a participant in the retirement system can appreciate the benefit that is being provided later in life. A benefit that most of us in the private sector would love to have available.  It would be tragic if Janus versus AFSCME began to be applied to pension contributions, but if it were, defined contribution systems, in which the individual controls the investment decisions, would likely become the retirement system of choice. Oh, no!

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