ERISA lawyers know that employee benefit plans offered by state and local governments to their employees are not subject to ERISA, the federal law that generally governs benefit plans of private employers. However, other federal laws can reach government plans. For example, the Securities & Exchange Commission (SEC) recently announced a settlement with the State of Kansas concerning the state’s failure to disclose substantial underfunding of its pension plans in connection with a sale of state bonds.
It appears that the settlement involved no monetary sanction. However, the state agreed to provide more disclosure concerning its pension plans and to institute better procedures to capture material financial information relating to such plans.
Although the SEC does not have authority to force state and local governments to fund their plans, it does have the authority to enforce better disclosures of funded status if the government wishes to tap public markets for its bonds. Government entities may wish to keep that fact in mind as they make decisions about pension funding.