Legal Constraints on Changes in State and Local Pensions

Alicia H. Munnell Laura Quinby

SLP#25

The brief’s key findings are:

  • In responding to pension shortfalls, most states are legally constrained from reducing future benefits for current workers.
  • These constraints make it difficult to adjust to changing conditions and to share the burdens of reform fairly between new and current participants.
  • The legal boundaries for pension benefits are typically defined under a contracts-based approach rather than a constitutional provision.
  • Narrowing the contract definition to when the worker performs the service would still protect benefits earned to date, while allowing adjustments to future benefits.