Although pension benefits have been better protected in the first 20 years of ERISA's existence, the law has failed to eliminate the pension funding problems and other abuses that prompted its passage, corporate executives say.
In anticipation of the Labor Day anniversary of the Employee Retirement Income Security Act of 1974, Buck Consultants Inc., New York, surveyed more than 600 corporate executives to assess their opinions on ERISA's general effectiveness. While 74% of respondents said ERISA had accomplished its goal of protecting pension rights, 71% said ERISA still has not eliminated pension underfunding problems.
A huge majority (83%) of those surveyed believe Congress should reform the Pension Benefit Guaranty Corp. An even greater majority (85%) believe more of the cost of plan terminations should be borne by employers with underfunded plans.
Respondents said the most important objectives for any congressional PBGC reform bill should be reducing the number of underfunded plans (68%), accelerating the funding of underfunded plans (64%), reducing the PBGC's deficit (48%) and requiring plan sponsors with underfunded plans to disclose to employees the plans' status and limits on guaranteed benefits (46%).
A large majority (87%) of those surveyed said Congress should not require non-discrimination testing for defined contribution plans.
Corporate executives also believe ERISA spawned a number of unintended, negative side effects, including too many legal requirements (cited by 81% of respondents), a slowdown in the establishment of new employer-sponsored retirement plans (66%) and too many plan terminations (57%).
ERISA has been less effective in eliminating specific abuses than in generally protecting workers' pension rights, respondents said.
Although some 75% said inequities in the way pension benefits were provided were common prior to ERISA, only 58% believe ERISA has eliminated such inequities.
Some 64% believe abuses in the investment management of pension funds were common prior to ERISA's passage, and 53% believe ERISA has erased such abuses.
Corporate executives remain unconvinced that ERISA's 404(c) section ensures enough protection from fiduciary liability to make it worth the effort of voluntary compliance.
Only 42% believe 404(c) compliance is worth changing plan design to meet the criteria for safe harbor protection. A large majority (78%), however, still said it was worthwhile for plan sponsors to implement some or part of 404(c)'s requirements, regardless of any exemptions provided.