Investment Practices of State and Local Pension Funds: Implications for Social Security Reform

Center for Retirement Research at Boston College, 1999

Posted: 10 Mar 2010

See all articles by Alicia H. Munnell

Alicia H. Munnell

Boston College - Center for Retirement Research

Annika E. Sundén

Stockholm University - Swedish Institute for Social Research (SOFI)

Multiple version iconThere are 3 versions of this paper

Date Written: May 1, 1999

Abstract

The investment practices of public pension funds have become a topic of major interest in the wake of President Clinton's 1999 proposal to invest a portion of the Social Security Trust Funds in equities. Both supporters and opponents of the proposal point to the performance of public plans to argue their case. Supporters cite the success of Federal plans, particularly the Federal Thrift Savings Plan (TSP), which has avoided picking individual stocks by investing in a stock index and has steered clear of projects with less than market returns. Divestiture of stocks for social or political reasons has also not been a problem, and TSP has avoided government intervention in the private sector since individual portfolio managers vote the proxies. Opponents of Social Security Trust Fund investment in equities point to state and local pension funds. They contend that state and local pensions often undertake investments that sacrifice return to achieve political or social goals, divest stocks to demonstrate that they do not support some perceived immoral or unethical behavior, and intervene in corporate activity. Opponents claim that if Social Security's investment options were broadened, Congress would use the Trust Fund money for similar unproductive activities. An important question is the extent to which allegations about state and local plans are true.

Suggested Citation

Munnell, Alicia and Sundén, Annika E., Investment Practices of State and Local Pension Funds: Implications for Social Security Reform (May 1, 1999). Center for Retirement Research at Boston College, 1999. Available at SSRN: https://ssrn.com/abstract=1126399

Alicia Munnell (Contact Author)

Boston College - Center for Retirement Research ( email )

Fulton Hall 550
Chestnut Hill, MA 02467
United States
617-552-1762 (Phone)

Annika E. Sundén

Stockholm University - Swedish Institute for Social Research (SOFI) ( email )

Kyrkgatan 43B
SE-106 91 Stockholm
Sweden

Register to save articles to
your library

Register

Paper statistics

Abstract Views
382
PlumX Metrics