State and local pension plans invest roughly twice as much in risky assets as would a prudent individual saving for retirement. Indeed, the Society of Actuaries, which represents the actuarial profession, recently pointed to public-pension investment practices “that go against basic risk management principles.” With $3.7 trillion on the line, risk-addicted pensions need an intervention. The question is who can do it.

Many individuals follow a rough “100 minus your age” rule to determine how much risk to take with their retirement...