Vermont's treasurer says the pension forfeiture bill has the support of 46,000 active and retired public employees.
The pending legislation would allow judges to order public employees convicted of financial crimes to forfeit some or all of their pensions.
The bill was introduced after a former state trooper was caught padding his time card to inflate his pension.
Officials hope this measure would deter others from doing the same.
"The vast majority of state employees are honest, hard working, as well as teachers and municipal employees. We have had examples of situations where the public trust has been violated. I think the pension forfeiture law establishes a very balanced approach to addressing that so that there's recourse to the taxpayer for financial crimes," said Beth Pearce, D-Vt. Treasurer.
The bill passed in the House Friday and is headed to the Senate for review. Many states already have similar legislation on the books.