The introduction of public pension plans in the United States was significantly shaped by lobbying and advocacy from employee groups, including unions and professional associations. Even today, worker representation remains crucial for addressing issues such as workplace safety, pay, and benefits, as well as for ensuring that pension plan administrative decision-making reflects the interests of rank-and-file workers. Yet, as deregulation, corruption, and political upheaval escalate in state governments, some lawmakers are attempting to silence workers by removing employee representatives from these critical democratic institutions.
Pensions Have Always Been Important to Labor
The establishment of public pensions in the United States evolved in tandem with the rise of democratic, organized employee groups, including labor unions, and the shift from patronage-based to meritocratic public employment. As government workers gained job security and longer tenures through civil service reforms, such as the Pendleton Act of 1883, public administrators faced challenges in encouraging retirement among aging employees. Defined benefit pensions emerged as a result of coalition advocacy by workers themselves, serving as a tool to attract and retain skilled workers in a merit-based system, and as a solution to facilitate orderly workforce transitions.
This model remains vital today, as NPPC and its affiliates carry on the tradition through coalition advocacy and democratic board oversight of pension systems.
Ohio’s Pension Governance Woes
Public pensions are a vital portion of Ohio’s economy. Communities benefit greatly from retiree spending – for each dollar paid out in public pension benefits, $1.36 in economic activity is generated. According to recently released data from NCPERS, in 2023, pension plans in Ohio had a total economic impact of $39.24 billion, generating $8.72 billion in state and local tax revenue.
The five pension systems in Ohio hold a combined balance of $253.2 billion. The STRS Retirement Board, which manages $95 billion in the teachers’ retirement system, has faced ongoing challenges, beginning with back-to-back fiscal losses in 2022 and 2023, followed by $10 million in board-approved staff bonuses, while retirees endured a 5-year COLA pause.
In 2024, Attorney General Dave Yost filed a lawsuit to remove two board members amid unsubstantiated allegations of public corruption and the mishandling of funds. Since then, there has been ongoing adversity, including board resignations and staff turnover.
With 12 hours to go before the final state budget was passed in May 2025, state lawmakers included a last-minute measure slashing member representation on the STRS governing board by more than half, undermining transparency and democratic oversight in a system that over 500,000 retired and active educators depend on for a secure retirement.
What the Research Says
Membership representation on committees such as the STRS Retirement Board does more than just give members a voice when it comes to their benefits. Research suggests that public pension systems with strong governance—especially those whose boards include stakeholder representatives such as union members and retirees alongside professional and governmental appointees—tend to achieve stronger long-term investment performance.
This blend of stakeholder input and professional oversight enhances organizational capabilities, aligns investment strategy with mission, and supports higher net returns. The facts support the theory that a holistic approach to pension board governance consistently delivers better fiscal outcomes, as well as legal compliance, overall stakeholder satisfaction, and minimum impact on taxpayers.
According to the National Association of State Retirement Administrators (NASRA), there are four primary criteria that pension governance boards regulate:
- 1. State laws and regulations
- 2. Federal requirements, such as those on the tax qualification of the trust and the investment of assets
- 3. Industry standards, such as those set forth for accounting, financial reporting, and actuarial valuations
- 4. The system’s policies, procedures, and strategic plan
While the degrees of responsibility and authority of each governing member vary from system to system, the inclusion of contributing and retired members has been proven to improve a board’s ability to meet the standards set by state and federal officials.
A 2023 study by researchers at Stanford University determined that “an investor’s organizational capabilities determine what asset classes are investable and how investors can invest in them.” In other words, managing a pension plan isn’t just about asset allocation and investment choices. Those decisions are dependent on sound governance of the board itself and the culture within the organization.
The Center for Retirement Research at Boston University developed a “Board Effectiveness Index” (BEI) in 2019 using investment returns as a measurement of board effectiveness across four key factors: board structure, composition, size, and member tenure. There are three common ways retirement boards are structured:
- 1. Single Fiduciary Board – A single group of people is responsible for both managing investments and overseeing day-to-day operations, including paying benefits and maintaining records.
- 2. Separate Investment and Administrative Boards – One group handles the investments, and the other manages the administrative tasks.
- 3. Sole Individual Fiduciary – A single person, generally the State Treasurer or Comptroller, makes all fiduciary and administrative decisions. A non-voting board typically supports this person.
The study found a positive correlation between having board composition and the BEI, resulting in higher 10-year returns for systems that include working and retired members on their governing boards. Single-fiduciary boards, utilized by approximately 75% of all public pension systems, consistently outperform other board structures.
Pension experts have also long believed that the best way to manage a pension fund is with a single fiduciary board that handles both investment and administrative duties. This structure helps avoid decisions being made in isolation, as investment and administrative choices often intersect and affect each other. The theory suggests that decisions about how to invest money should be tied to actuarially assumed return rates and actuarially required contributions for both employees and employers. These connections are more readily recognized when employees have a seat at the governing table.
How Will This Affect Ohio?
In May 2025, the Ohio Retirement Study Council and RVK Investment Research released “Observations on the Composition of Public Pension Boards”, which determined that board “structure outlives individuals and thus has a far more lasting effect on good pension plan investment and administration decisions.” In essence, when lawmakers decide how to structure a pension board, it’s essential to consider how it will affect the board’s ability to fulfill its primary responsibility. An effective structure doesn’t assume that all trustees will always be faultless; instead, it should be designed to endure the possibility that some board members may not fully uphold their fiduciary duties.
Given the recent upheaval at STRS, lawmakers appear to have made a hasty decision to reorganize the board structure in a way that will minimize governing diversity and worker representation, homogenizing the voices on the board. This is in direct opposition to what the research shows is a more organized, effective, and fiscally sound structure.
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