A group of lawyers commissioned by state governments has written a "mini-ERISA" for state and local pension funds.
The Management of Public Employees Retirement Systems Act was written by the National Conference of Commissioners on Uniform State Laws. Each state would have to pass its own version of the act.
Its goal is to improve retirement security for participants through better investment management practices, said John McCabe, legislative director and legal counsel for the NCCUSL. That, in turn, would put less burden on taxpayers supporting the retirement systems, Mr. McCabe said.
The bill is a kind of "mini-ERISA, and I put the emphasis on mini," Mr. McCabe said.
The act is expected to be voted on by the NCCUSL in Sacramento on July 25 or July 26. If passed, it would probably be voted on by American Bar Association delegates next February.
If the ABA approves it, the act would be sent to the various state legislatures for possible passage.
A critic says the act is flawed because it doesn't explicitly require disclosure of some things considered crucial to pension fund oversight, such as trading costs and investment management fees.
John Langbein, professor of law at Yale University, New Haven, Conn., worked on the committee that drafted the act.
He said the primary focus is on reporting and disclosure, to get better information to participants.
"There long has been concern that none of the ERISA safeguard applied to state and local plans," he said.
"In some state and local plans, the information has been very inadequate," Mr. Langbein said.
But larger state plans may not find the act very useful.
"I think it would be great for states that don't have the autonomy we have," said Richard Schumacher, executive director for the $40 billion Ohio Public Employees' Retirement System, Columbus.
The provisions in the act detail the fiduciary duties of trustees, and include sections on reporting on fund performance, actuarial status and producing annual reports.
But one pension expert - Roy Schotland, professor of law at Georgetown University Law Center, Washington - said the act should lay the groundwork for disclosure of more information than it does.
Morever, disclosure of items such as relative risk, how much money external money managers manage, the hiring and termination of managers, and information on management fees and trading expenses isn't included, and should be, he said.
The MPERS Act also doesn't include a section on how trustees should be, or usually are, selected, Mr. Schotland noted.
Speaking generally about the act, Mr. Schotland said: "I don't see how it advances" the industry. Mr. Langbein noted the act doesn't aim to cover every aspect of pension management. Typically, a uniform law will cover an industry parts at a time.
Major parts of ERISA were deliberately kept out, such as prohibited transactions.
"I am very hostile to the prohibited transaction rules in ERISA," Mr. Langbein said.
The act's future in state legislatures is uncertain.
Because it didn't include benefits, Mr. Schumacher of Ohio PERS said legislators may end up tinkering with it to the point where it would no longer be considered a uniform act.
But including benefits and funding would have made the act "dead on arrival," Mr. Langbein said.
And given the potential changes passage of the act could lead to, some questioned the effort for not bringing more state pension funds into the process.
William O. Bell, chief of management policy with the Florida State Board of Administration, Tallahassee, said he could not recall Florida getting involved.
Those involved in creating the act said drafts were widely circulated.
Dissemination of the act was "as broad as we can get," said Dwight Hamilton, chairman of the drafting committee for the MPERS Act, and a practicing attorney in Denver.
Officials from the San Diego City Employees' Retirement Fund, the Colorado Public Employees' Retirement Association and the California Public Employees' Retirement System were involved in the creation of the act, Mr. McCabe said.