Pension Forfeiture: A Problematic Sanction for Public Corruption

By Jacobs, James B.; Friel, Coleen et al. | American Criminal Law Review, Fall 1997 | Go to article overview

Pension Forfeiture: A Problematic Sanction for Public Corruption


Jacobs, James B., Friel, Coleen, O'Callaghan, Edward, American Criminal Law Review


I. INTRODUCTION II. DESCRIPTION AND COMPARISON OF PENSION FORFEITURE STATUTES.

A. Who Imposes the Sanction and When

B. To Whom the Statutes Apply

C. Offenses Which Trigger Pension Forfeiture

D. Full vs. Partial Forfeiture

E. Mandatory vs. Discretionary Forfeiture III. THE NATURE AND LEGAL STATUS OF PUBLIC SECTOR RETIREMENT

PENSIONS

A. The Gratuity Theory of Public Pensions

B. The Contractual Theory of Public Pensions

C. Vesting under the Contractual Approach

D. Limited Constitutional Protection of Public Pensions

E. Other Theories of Public Pensions IV. CRITIQUE OF PENSION FORFEITURE

A. Rationales Offered for Pension Forfeiture

1. Public pensions are a reward for faithful service

2. Pension forfeiture is "just deserts" for breach of the public

trust

3. Pension forfeiture deters public corruption

4. Pension forfeiture has symbolic importance

B. Criticisms of Pension Forfeiture

1. Pension forfeiture impinges on contractual rights

2. Pension forfeiture provides a disincentive for persons to enter

and remain in public service

3. Pension forfeiture does not recognize the employee's and

dependents' reliance on pension benefits .

4. Private pensions are protected from forfeiture in cases of

employee misconduct.

5. Pension forfeiture statutes are not sufficiently calibrated to

the wrongdoing. V. RECOMMENDATIONS.

A. Corruption Controllers Should Rely on Criminal Fines as a

Financial Penalty.

B. Congress Should Consider Extending ERISA to Public Pensions.

C. New Jersey's Approach to Pension Forfeiture Provides a Model

for State Legislatures VI. CONCLUSION.

I. INTRODUCTION

Since the Watergate scandal, corruption controllers have launched far-reaching efforts to punish and deter public corruption.(1) Among various policy initiatives and structural reforms, pension forfeiture is becoming increasingly popular. Although pension forfeiture statutes differ in detail, they basically provide that upon conviction of certain criminal offenses, some public servants forfeit their right to receive pension benefits or a portion thereof.(2)

At first blush, pension forfeiture does justice, even poetic justice. Bribery and other forms of corruption are serious offenses; why should an official who has enriched himself through violation of the public trust draw payments from the public treasury for the rest of his life? However, when we consider the nature and purpose of public pensions, and the purposes and administration of pension forfeiture, pension forfeiture is a more problematic sanction. Moreover, since the Employee Retirement Income Security Act (ERISA)(3) prohibits pension forfeiture in the private sector, we must ask whether the differences between the public and private employment contexts are great enough to justify diametrically opposed policies on pension forfeiture.(4)

Private employee pensions that have vested (i.e., the employee has satisfied the statutory age and/or years-of-service requirements) are protected from forfeiture for misconduct under the anti-alienation and anti-forfeiture provisions of ERISA, sections 203(a) and 206(d)(1), as interpreted by the United States Supreme Court in Guidry v. Sheet Metal Workers Nat'l Pension Fund et al.(5) Similarly, ERISA bars "bad boy clauses," i.e., provisions permitting cancellation of the pension rights of a private employee who engages in conduct injurious to his company.(6) Ironically, the trend in the public employment realm is to expand the government's authority to forfeit pension benefits.

There are compelling reasons to examine pension forfeiture closely. …

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