Don't do it, Ms. Kaptur. If it ain't broke, don't fix it.
Don't revive the proposal to require joint trusteeship of the nation's single-employer defined benefit plans.
Rep. Marcy Kaptur, D-0hio, is considering resurrecting a bill that would require just that. Why risk inflicting serious damage on the single-employer pension system for no obvious gain? What, in the single-employer defined benefit pension system, is so broken that joint trusteeship is required or desirable? What would be worth the risk that more employers would drop defined benefit plans in favor of defined contribution plans?
Is there really such a risk? After all, employers have cried wolf over almost every change made to the private pension system in the past 25 years. They have claimed this change or that change would be the final nail in the coffin. And yet there are still many defined benefit plans.
Yes, there is a risk. No one can deny that all of the changes of the past 25 years have taken a toll on the number of defined benefit plans. Would the growth of defined contribution plans have been as great if there had been less regulation of defined benefit plans? The one time corporate top management went to the barricades for pension plans - normally a low priority item for it - was when Rep. Peter Visclosky proposed joint trusteeship of all corporate pension plans seven years ago.
Clearly, corporate top management believes strongly that joint trusteeship of single-employer plans is a non-negotiable item.
If joint trusteeship is mandated, more defined benefit plans will be terminated. Why? Perhaps the employers feel that because the employees carry little or none of the investment risk in a defined benefit plan, there is no reason they should have input on the investment process. Perhaps they feel the employee trustees would be too conservative in the investment policy, and thus increase corporate pension costs. Perhaps employers feel the process of electing employee trustees would become a Trojan horse for unions to organize non-union companies.
And what is to be gained by joint trusteeship? Most corporate defined benefit pension plans are well-funded and well-managed. The incidents of malfeasance affecting corporate defined benefit plans are very few - certainly no greater than at jointly trusteed multiemployer plans. So what would joint trusteeship achieve?
A member of Ms. Kaptur's staff said her proposal would give working families more retirement security. How would joint trusteeship do this? There are more effective ways to aid retirement security if Rep. Kaptur is really interested in that - easing, not increasing the regulatory burdens on defined benefit plans to encourage more of them, for example. Or increasing the maximum contribution limits on defined contribution plans.
Pensions & Investments has in the past argued that corporations ought to have rank-and-file representation on the board of trustees, but not equal representation. We have argued some representation might increase employee appreciation for the defined benefit plan by eliminating some of the mystery about it and improving communication about the plan among employees. However, while we believe some employee representation might be beneficial from a morale point of view, the effect would be so modest as to be not worth fighting about.
And we do not believe the change should be mandated by the government. The possible benefits of mandating such a change are far outweighed by the potential costs.