The ERISA Industry Committee's 60-page position paper on pension issues presents a succinct set of analyses and recommendations of current pension issues that ought to lead a debate on reform. The timing couldn't be better in terms of a national policy discussion coming in the midst of a presidential campaign.
For the first time ever, politicians can speak about Social Security reform without sounding their own professional death knells. But for private pension policy, the problem hasn't been that politicians don't want to address it - rather they often view it as an issue too complex or boring for their constituents or one that they themselves don't understand. Too often pension sponsors have stayed disengaged from debate on pension proposals. But the issue of private pensions deserves an overarching reform discussion.
The trade group of pension sponsors wants comprehensive pension policy reform - from privately sponsored pensions, including defined benefit and 401(k) plans, to the government-sponsored Social Security system. Its paper touches on the broad policy implications of the private pension system, from capital formation to fiscal and tax policy.
The committee seeks elimination of many of the regulations that have wound up hurting pension plan improvement and formation. It wants the government to stop legislating more rules that further complicate the private system and discourage employers from keeping or offering pension plans.
The committee warns that the private system, overburdened by regulation and tax policy changes, is reaching a breaking point, jeopardizing the retirement income of future retirees, particularly the huge baby boom generation, and the capital pension fund investments provide to the economy.
The committee presents reform from the point of view of corporate pension sponsors. A biased view, yes, but these sponsors provide a key component of retirement income for millions of employees, whose Social Security safety net is becoming more fragile, making them more dependent on the strength of the private pension system. The committee is right. Increasingly complex regulation has failed to increase overall coverage and has discouraged sponsors from setting up defined benefit plans.
On broader issues, the committee calls for an immediate reform of Social Security financing before it reaches insolvency, but it doesn't go into specifics. It keeps the focus of its proposals on the private pensions.
The committee calls for a number of specific changes, mostly geared to simplifying or eliminating some pension regulation, while keeping intact the basic protection of the Employee Retirement Income Security Act. Among them, it asks Congress to stop revenue-driven pension legislation and warns the loss of tax incentives for employer-sponsored pension plans would kill the private system.
No Congress would agree to keep its hands off any revenue source. But that suggestion would have a chance if Congress moves to downsizing government, reducing the craving for revenue.
Another suggestion would liberalize rules on funding, in part to allow companies to contribute more in good times to make up for difficulties in lean years. This proposal could have a better chance of passage.
The pension system needs reform. The question is whether the committee can get itself heard among the tumult of issues of the presidential campaign.