The Town of Coventry, Rhode Island, is expected to run out of money for funding its pensions for school employees in the year 2025. The Town Council recently passed a resolution that claims neither the Town nor the School Committee has an obligation to fund the pension plan, and that neither is liable for the underfunding. The plan is only 30 percent funded, a level significantly below the 80 percent threshold considered acceptable by some think tanks.

The Coventry case has spawned a great deal of discussion, with some legal experts arguing that pension funds, not the government entity, own pension benefits and that the government has no funding obligation.

“It’s all over the lot, and one of the reasons is that state laws have a lot to do about it," said Ballard Spahr labor and employment partner John P. McLaughlin. "It’s never been dealt with head-on. In Pennsylvania, I don’t think Coventry could get away with the argument they’re trying to make. As I said, though, it’s uncharted waters.”

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Labor and Employment
Municipal Recovery