Pension Reform

New Ohio Law Follows ALEC Model to Protect Pensioners and Taxpayers

SB 6 follows the principles laid out in the ALEC model State Government Employee Retirement Protection Act.

In December, Ohio Governor Mike DeWine signed Senate Bill 6, which codified the gold standard of state fiduciary rules to protect public pension beneficiaries and taxpayers. The legislation follows the principles laid out in the ALEC model State Government Employee Retirement Protection Act, one of the ALEC Essential Policy Solutions for 2025.

Senate Bill 6 was sponsored by the late Ohio State Senator Kirk Schuring. His legislation requires that fiduciaries only consider pecuniary factors—those having a material effect on the financial risk and return—when making investment decisions. This standard ensures that funds contributed toward pension benefits are used solely for the financial interests of participants and beneficiaries. Other states including Arkansas, Florida, Kentucky, Montana, New Hampshire, South Carolina, Utah, and West Virginia have implemented similar protections.

Politically motivated investment strategies do not help public pension systems provide for retirement security. In recent years, some investment firms and pension systems have focused on strategies like ESG (environmental, social, and governance) rather than maximizing returns. They have also used their control of proxy votes to influence company decisions in ways that go against the financial interests or workers, retirees, and taxpayers. The latest edition of ALEC’s Unaccountable and Unaffordable reports that state pension liabilities total nearly $7 trillion, or just under $21,000 for every man, woman, and child in the United States. Using these funds for political crusades instead of prioritizing investment returns can exacerbate the problem of unfunded liabilities, requiring additional contributions from taxpayers and pensioners.

As Andy Puzder and Mike Edleson explained in The Wall Street Journal, and as ALEC research shows, politicized investing yields lower returns than investing without political constraints – a story that California knows all too well. CalPERS, California’s largest pension system, decided to divest from all tobacco-related stocks in 2001. Two decades later, the tobacco stock divestment has cost California public sector workers and retirees at least $3.5 billion.

Pensions are designed to securely provide retirement to public employees. Contributions are paid out during employment and benefits are paid out after retirement. To operate according to their design, the funds must be invested with this focus on financial risk and return. Thanks to the enactment of Senate Bill 6, taxpayers in Ohio can be sure that political and social objectives are not being prioritized over the health of public pension plans.


In Depth: Pension Reform

Modern, 401(k)-style plans are now commonplace in the private sector. For state workers, however, traditional pensions are still the norm. As former Utah State Senator Dan Liljenquist wrote in Keeping the Promise: State Solutions for Government Pension Reform, this is not a partisan issue, but a math problem. State Budget…

+ Pension Reform In Depth