Pension News

Thirty-six years ago today the nation’s landmark private pension law, the Employee Retirement Income Security Act of 1974 (ERISA), was signed into law by President Gerald Ford. In honor of the workers who would benefit from the new law, the signing appropriately took place on Labor Day.

ERISA made private retirement plans fairer and helped ensure that workers received the pensions their employers had promised to give them at retirement. ERISA also created the Pension Benefit Guaranty Corporation – the federal pension insurance program. As a result of ERISA, most traditional pension plans are insured, adding an important layer of protection for workers and retirees should their companies go out of business.

Traditional pensions are just as important today as they were when ERISA was passed, because they provide retirees with financial security through the ups and downs of unpredictable economic times. There are, however, still many gaps in ERISA that need to be fixed, and more workers that need to be covered.

While much of the recent focus is on expanding coverage through individual retirement accounts (IRAs) and 401(k)s, we must not forget about ERISA’s initial goals of providing secure retirement benefits to all workers of all economic backgrounds – from the executive to the teacher to the janitor.

Increasing access to IRAs and 401(k) saving vehicles is a good thing, but these saving vehicles are not the complete solution. So far, they have not shown that they can provide sufficient or secure retirement income for most people. Also, the trend towards more individualized saving vehicles has led to new problems for participants that now need to be addressed by the law – participants need more information about the fees they pay for and participants need access to independent investment advice.

Happy Birthday, ERISA. You’ve come along way and helped millions of workers attain secure retirement incomes. But after celebrating where you came from and what you have accomplished in the past, it is time for you to move forward and meet the future challenge of providing safe and sufficient retirement incomes to all working Americans.

For the past several months, the PRC has been maintaining a list of companies that have reduced or stopped matches to their 401(k) plans.  When the economy takes a turn for the worse as it has in the past year, companies view cutting 401(k) matches as an easy way to reduce costs.  Recently, Business Management Daily published an article for employers on how to break the news to employees and how to encourage employees to continue saving despite the loss of the match.  (more…)

With Mother’s Day approaching, it seems only fitting that I put in a plug for the current edition of Mother Jones magazine. Its cover asks, “Who Ran Away With Your 401(k)?” and the issue is required reading for anyone interested in the future of retirement income.   (more…)

 

Happy 34^th Birthday, ERISA!

Today marks the 34^th anniversary of the date that the Employee Retirement Income Security Act of 1974, known to those in the field of pensions as ERISA, was signed into law.  In a tribute to the workers who would be helped by the new law, that day, September 2, 1974, fell on Labor Day. (more…)

When I was head of the Employee Benefits Security Administration (the Department of Labor agency charged with protecting pensions) during the Clinton administration, I became concerned about whether or not people who had 401(k) plans truly understood how much they were paying in fees and what those fees were for. So in 1997 and 1998, we held hearings and issued a report [PDF] on the issue.

A couple of months ago, I decided to take another look at the 1998 report to see what had changed in the last 10 years. (more…)