Public Pensions and Fiduciary Law: A View From Equity

Controversies involving fund management may be the next frontier of public pension litigation. Recent scandals involving fraud, bribery, and corruption of public pension officials and other third parties have drawn the public eye toward the management of retirement assets. Individual and entity custodians, including pension boards of trustees, are charged with making investment and other decisions relating to pension funds. Unlike private pensions, there is no federal oversight of asset managers or others in control of retirement funds. Yet these funds hold more than three trillion dollars in assets. Until now, the guardians of these monies have operated almost invisibly in the background of the public pension crisis. This Article advances the retirement reform debate by looking more closely at the fiduciary relationship that exists between trustees and beneficiaries involving public sector employee pension funds. It offers a singular view from historic equity. The Article aims to see how equity in the medieval world relates to the modern pension problem. From that viewpoint, it evaluates what the fiduciary relation means, or should mean, in the changing legal environment of public retirement systems. The main objective is to raise issues involving fiduciary law and public pensions that have been undervalued or ignored. Based upon fiduciary law’s ancestry in equity, the Article offers guidance in assigning and defining obligations and associated remedies in the government pension situation. It contemplates the equitable dimension of the public pension problem, analyzes circumstances where fiduciary violations may arise, and suggests possible outcomes. It also comments on deficiencies in current law. Overall, the Article provides a deeper perspective of the fiduciary principle and corresponding doctrine in the context of government retirement systems.