What Happens to Taxpayer-Funded Pensions When Public Officials Are Convicted of Crimes?
Reason Foundation

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What Happens to Taxpayer-Funded Pensions When Public Officials Are Convicted of Crimes?

The police officer charged with killing George Floyd is eligible for his full taxpayer funded pension. In fact, a majority of states provide retirement benefits to officers and public servants convicted of serious crimes.

Even before the recent nationwide calls for police reform, one question that was frequently asked following the conviction of a public official or employee: What will happen to their taxpayer-funded pension?

The answer depends on whether or not the state that employee lives in has a law on the books requiring pension garnishment or forfeiture. For example, Minnesota does not have a pension forfeiture or garnishment law. Thus, Derek Chauvin, one of the Minneapolis police officers formally charged with killing George Floyd, will be entitled to his full, partially taxpayer-funded, pension benefits when he’s eligible for the benefits—even if convicted of killing Floyd.

Contrast this with Illinois, which does have a pension forfeiture policy. Former Illinois Gov. Rod Blagojevich is losing out on what would’ve been his $65,000 annual state pension because he was convicted of felony crimes stemming from his time as governor. As WMAQ reported at the time:

In her 10-page statement (.pdf), [Illinois Attorney General Lisa] Madigan relates Pension Code to the charges with which Blagojevich was ultimately convicted: “None of the benefits herein provided for shall be paid to any person who is convicted of any felony relating to or arising out of or in connection with his or her service as a member,” Section 2-156 of the Pension Code states.

Across the country, 30 states have some sort of public pension garnishment or forfeiture laws. Of those 30, only 15 states will revoke or garnish an employee’s pension benefit if he or she is convicted of a felony related to their misconduct on the job (Figure 1).

The other 15 states with public pension garnishment or forfeiture laws will only revoke a public employee’s pension benefits, including police officers, for what are considered “financial crimes” such as fraud, embezzlement, theft, and bribery.

Additionally, some states have public pension forfeiture and garnishment laws but they are written so that they do not apply to police officers. The states with garnishment or forfeiture laws that exempt police, or only apply the laws to financial crimes should not be seen as having a comprehensive policy that would apply to common police misconduct cases. This leaves only 13 states with comprehensive policies for most police convictions, as displayed in the map below.

Public Pension Forfeiture and Garnishment Policies by State

Scroll down to Figure 1 below for a more in-depth description of each state’s specific forfeiture and garnishment laws. 

What Is Pension Garnishment and Forfeiture?

Pension garnishment is the policy of using a convicted elected official’s or public employee’s taxpayer-funded pension benefit to offset the cost of his or her incarceration, pay for restitution for bodily injury or loss of property, or to help pay settlements in a civil suit. Garnishment is typically the less severe punishment for the employee, as they are still eligible to receive any benefit above the amount owed due to their misconduct. In addition, any beneficiaries of that benefit would not be shut out from future payments.

Pension forfeiture, on the other hand, is the policy of revoking any taxpayer-funded pension benefit the convicted member has earned in their civil service. Any potential pension payment the government employee would have earned is erased, and the pension system itself would absorb any contributions his or her employer (and thus taxpayers) made on their behalf. In some states, the public employee would be entitled to receive the amount they themselves paid into the pension fund.

The majority of the states shown in Figure 1 with pension garnishment or forfeiture laws require the public employee to be found guilty, plead guilty, or plead no contest to felonious criminal charges before any garnishment or forfeiture can occur. Because this standard is set so high, these policies are rarely used outside of headline-grabbing cases.

Forfeiture is the more common method states have used to withhold pensions for convicted public employees. Of the 30 states with laws on the books, 27 of them include at least some form of pension forfeiture. Only three states expressly permit garnishment while excluding any kind of forfeiture.

Another interesting statistic is the dispersion of forfeiture and garnishment laws. The vast majority of states with no laws are in the northwest and the north-central United States. Only 5 of the 23 states east of the Mississippi River do not have laws permitting the garnishment or forfeiture of a public employee’s pension.

Do Forfeiture and Garnishment Policies Affect the Solvency of a Public Pension System?

Garnishing or revoking an individual employee’s pension will have a near-zero impact on the public pension fund’s solvency due to the sheer size of most public sector defined-benefit plans in the United States.

Arguments Over Legality and Morality

Garnishment and forfeiture are better understood as issues of legality and morality, and the arguments surrounding these policies aim to address two questions.

First, are pensions part of compensation, or are they gifts from the state?

Keith Brainard of the National Association of State Retirement Administrators (NASRA) proposed this question back in 2012 when the Jerry Sandusky case was major news. Sandusky, a longtime defensive coordinator for the Penn State football team, was found guilty of 45 counts of child sexual abuse and amid the scandal, there were questions about Sandusky’s pension. If pensions are earned parts of compensation, they would typically follow the same policies and laws that govern other parts of compensation. Brainard, at the time, stated that “normally, an employer wouldn’t and probably couldn’t go claim back wages that were paid” and “pension benefits are part of the compensation just as much as wages.”

Second, does somebody who has committed a felony while performing a public sector job deserve to be supported in his or her old age at taxpayers’ expense?

In Illinois, the state with the oldest forfeiture laws dating back to 1955, the Supreme Court answered this question by stating that the policy was designed for the purpose of “ensuring the public’s right to conscientious service from those in governmental positions.”

If the legality in the first question is found to be valid in state court—implying that pensions are eligible to be forfeited or garnished—then one might expect that most state legislatures would push forward with enacting some form of a pension forfeiture proposal as a deterrent to bad behavior by public employees.

States that have expressly rejected the legal validity of pension garnishment and forfeiture, such as Washington state in Leonard v. Seattle, 81 Wn.2d 479 (1972), may require a new court case before the legislature would feel comfortable pushing such policies forward.

Would Pension Forfeiture Laws Reduce Police Misconduct?

Anecdotal evidence of pension forfeiture laws dissuading law enforcement officers from committing misconduct was found in a 2017 study in the Journal of Law, Economics, and Policy. The study concluded that “initial and admittedly casual evidence suggests that states with stronger pension forfeiture laws experience lower rates of police misconduct.”

Conclusion

Regardless of the justification for using pension garnishment and forfeiture policies, it is important that lawmakers understand the impacts and function of these pension policies.

While these policies will neither help nor hurt the overall solvency of large public pension systems, they can add transparency, accountability, and be used as a deterrent from any misconduct by public employees.

The effectiveness of pension garnishment and forfeiture laws is currently difficult to quantify and largely anecdotal, but allowing courts the ability to modify public employee benefits could be an important policy pursuit to help prevent further taxpayer dollars from going to public employees who have disgraced their positions and failed to properly serve the taxpayers partially funding those retirement benefits.

Figure 1

State-by-State Breakdown
StatePolicyLawDoes This Policy Apply to Police?Does This Policy Only Apply to Financial Crimes?
AlabamaMembers of the teachers, public employees, and judicial retirement plans would forfeit their right to retirement benefits if convicted of certain felony offenses related to their public position. Members would instead receive a refund of their retirement contributions.ForfeitureYesYes
AlaskaA public officer who is convicted of a federal or state felony, bribery, receiving a bribe, perjury, subornation of perjury, scheme to defraud, fraud, mail fraud, misuse of funds, corruption, or evasion may not receive a state pension benefit if the offense was in connection with the person's duties. Members would instead receive a refund of their contributions. Members who forfeit their pension are unable to accrue future service credit in any state-pension covered position.ForfeitureYesYes
ArizonaNo policyNone--
ArkansasA beneficiary of the retirement system will have their benefit forfeited if they murder an active member of a public retirement system. For the purposes of this study, AR will be listed as not having a policy.None--
CaliforniaAny elected official or employee who is convicted for bribery, embezzlement, extortion, perjury, or conspiracy to commit those crimes in the course of their service will have their pension forfeited. Members would instead receive a refund of their contributions, minus the accrued interest on those contributions. ForfeitureYesYes
ColoradoPension benefits may be garnished for restitution for the theft, embezzlement, misappropriation, or wrongful conversion of public property, or in the event of a judgment for a willful and intentional violation of fiduciary duties to a public pension plan where the offender or a related party received direct financial gain. GarnishmentYesYes
ConnecticutPension benefits may be forfeited or garnished by court order for convictions of embezzlement, theft, bribery, or felonies committed through misuse of a government office or job.Forfeiture and GarnishmentYesYes
DelawareA beneficiary of the retirement system will have their benefit forfeited if they murder an active member of a public retirement system. For the purposes of this study, DE will be listed as not having a policy.None--
District of ColumbiaNo policyNone--
FloridaMembers forfeit their pension benefits if they are convicted of committing felonies related to misuse of public office, crimes where the victim was under 16 years of age, sexual battery when the victim is under 18 years of age, or use/misuse of power, rights, privileges, duties as it relates to their public position.ForfeitureYesYes
GeorgiaPublic employees who are convicted of committing crimes related to their employment will forfeit any benefit after the date of conviction.ForfeitureYesYes
HawaiiNo policy.None--
IdahoNo policy.None--
IllinoisPension benefits are forfeited for members who are convicted of a felony relating to their service as an employee. The member is entitled to a refund of their contributions.ForfeitureYesNo
IndianaPension benefits may be garnished upon conviction of a misdemeanor or felony relating to an offense which causes their employer financial loss. Member forfeits any future benefit.Forfeiture and GarnishmentYesYes
IowaNo policy.None--
KansasNo policy.None--
KentuckyMembers who are convicted of a felony that is related to their public service shall forfeit all retirement benefits. Members are entitled to a refund of their contributions, plus interest.ForfeitureYesNo
LouisianaPension benefits may be garnished if a public employee or elected official is convicted of misconduct detrimental to their position.GarnishmentYesYes
MaineMembers who are convicted of a crime relating to their employment may have their pension benefits forfeited by court order. In addition, any dollars in the members pension account is available to pay for any court-ordered restitution for economic loss to the State or local government due to the members crime.Forfeiture and GarnishmentYesNo
MarylandPublic employees who are convicted of a felony arising out of the misuse of their position forfeit their retirement benefits.ForfeitureYesNo
MassachusettsMembers who are convicted of a crime related to their duties as a public employee forfeit their pension benefits. In certain cases, that members contributions may be garnished to pay restitution to the state or employer.Forfeiture and GarnishmentYesNo
MichiganA member who is convicted of certain felonies relating to their public service may have their rights to a pension benefit forfeited, along with the forfeiture of their contributions into the system.ForfeitureYesYes
MinnesotaNo policy.None--
MississippiNo policy.None--
MissouriA member of any state or local public retirement system will forfeit their right to pension benefits if convicted of a felony in 'direct relation' to the employee's duties. The member is entitled to a refund of their contributions, plus interest.ForfeitureYesNo
MontanaPension benefits may be partially or fully forfeited if a member causes the death or disability to a member of any state-covered retirement plan. For the purposes of this study, MT will be listed as not having a policy.None--
NebraskaNo policy.None--
NevadaPublic employees hired after 2015, and convicted of a felony, forfeit their rights to a retirement benefit.ForfeitureYesYes
New HampshireNo policy.None--
New JerseyAny state or local board-administered retirement system can cause the forfeiture of retirement benefits for members who are convicted of misconduct. Members who are convicted of sexual offenses relating to their service face mandatory forfeiture.ForfeitureYesNo
New MexicoElected and appointed officials are subject to garnishment up to an amount of their entire salary and pension benefit if they are convicted on felony corruption charges.GarnishmentNoYes
New YorkFor any felonious crime committed after 2017, an elected or appointed official may have their pension benefits forfeited.ForfeitureNoNo
North CarolinaAny elected official who is convicted on state or federal corruption charges shall forfeit their retirement benefits.ForfeitureNoYes
North DakotaNo policy.None--
OhioA member of one of the state retirement plans will forfeit their retirement benefit is convicted of bribery, theft, or engaging in a pattern if corrupt activity.ForfeitureYesNo
OklahomaState and county employees who are convicted of a state or federal felony forfeit any future accrued retirement benefits and are subject to a return of their contributions or a reduced pension benefit.ForfeitureYesNo
OregonNo policy.None--
PennsylvaniaAny public employee who commits theft, bribery, forgery, perjury, or is convicted of a felony relating to their position will forfeit their right to a pension benefit. The employee will have their contributions reimbursed. In addition, those reimbursed contributions may be used to fines or to make restitution for the victims of any of those crimes.Forfeiture and GarnishmentYesNo
Rhode IslandAny retirement or OPEB benefit earned by a public employee will be reduced or forfeited if that employee is convicted to any crime related to their position.ForfeitureYesYes
South CarolinaNo policy.None--
South DakotaNo policy.None--
TennesseeAny employee hired after 1981 and covered under a state retirement plan will forfeit their pension benefit if convicted of a felony in the state court of malfeasance.ForfeitureYesNo
TexasElected officials in the public employee retirement system will forfeit their pension benefits if convicted of felonious corruption or abuse of office.ForfeitureNoNo
UtahPublic employees convicted of a felony related to the performance of their position shall forfeit their retirement benefit.ForfeitureYesNo
VermontPublic officials will have their full or partial pension benefit revoked if convicted of crimes related to their employment.ForfeitureNoYes
VirginiaNo pension benefit may be paid to a public employee who was terminated because of dishonesty or malfeasance.ForfeitureYesNo
WashingtonNo policy.None--
West VirginiaNo policy.None--
WisconsinNo policy.None--
WyomingNo policy.None--