By the time ERISA turns 50, pension funds may not exist. Instead, there may be 100 million individual accounts, either scattered in hundreds of institutions, or in one government-controlled trust fund combining all of an individual's retirement savings in one record.
Indeed, most pension experts agree that 25 years from now, the traditional defined benefit plan will be almost extinct.
Executives at many of America's largest companies are watching their large pension surpluses shrink and are discovering they may have to start feeding their pension plans again, just as the costs of pensions for their aging work forces are rising.
Little wonder, then, that cost-managed 401(k) plans, in which the employees pick up most of the tab, look attractive in comparison.
Moreover, a labor shortage -- likely to get worse over the coming decades -- and a more mobile work force also are putting pressure on companies to beef up retirement benefits for younger, more mobile workers -- most often through 401(k) and cash balance plans.
Hundreds of companies also are looking at trimming their pension costs for older, more expensive workers by converting their old-line pension plans into hybrid cash balance plans. That's because traditional defined benefit plans are linked to the pay workers receive just before retirement, whereas in cash balance plans, the costs are spread out evenly over the length of workers' tenures.
Add to that mix the uncertain future of the Social Security system, and employers might feel an even greater financial strain, some sources say.
But Sylvester J. Schieber, research director at Watson Wyatt Worldwide, Bethesda, Md., who has conducted extensive research on the subject, predicts employers will be loathe to pick up even more costs for their employees' retirement benefits if Social Security goes belly up.
In 2024, "401(k) plans will continue to grow and prosper. Defined benefit plans won't be extinct, but they will be under a great deal of pressure," said Vance Anderson, who was majority staff director and general counsel of the House Education and Labor Committee's pension task force when ERISA was enacted 25 years ago.
Yet 401(k) plans in the 21st century may, in fact, look a bit like traditional pension plans. Already, some employers -- anticipating their workers might outlive their nest eggs -- have begun offering retiring employees the chance to buy annuities through work, instead of taking their retirement money as a lump sum. A rise in interest rates or a downturn in the stock market could accelerate this movement, experts say.
Employers -- and even the federal government -- could step in to educate workers on the advantages of annuities over lump sums, said Nell Hennessy, senior vice president at ASA Inc., Washington.
"Employers don't want to end up in a situation where they have a lot of old former employees who are starving to death, so they will want to make sure they have helped them to the extent they can," she said.
Some companies may go so far as to require that employer contributions must be taken in the form of annuities -- although employees would be free to take lump sums on their own contributions, she said.
Other experts suggest employers may be less important in offering a retirement vehicle and managing that money.
People who work several jobs or work for employers that don't provide retirement plans might be able to set up personal 401(k)-type retirement plans, said Tom Woodruff, president of an eponymous consulting firm in Greenwich, Conn. Mr. Woodruff headed Jimmy Carter's Presidential Retirement Commission, which offered suggestions to improve the pension system.
And because of the changing nature of the work force, Frank P. VanderPloeg, of counsel in the Chicago law firm of Sonnenschein Nath & Rosenthal, predicts a smaller role for employers in managing retirement savings for workers. Mr. VanderPloeg, an adjunct professor of law at DePaul University, Chicago, anticipates individuals will be in charge of single retirement accounts that will meld Social Security money, individual retirement accounts and employer contributions. These accounts would give workers full control over deciding how much to invest and how to invest their retirement savings.
"Employers are getting attacked from two directions," Mr. VanderPloeg said.
For one thing, lawmakers and regulators are cramping the ability of employers to design retirement programs, and for another, employees are demanding more flexibility in managing their retirement savings, he said.
Moreover, because a large percentage of the work force is not covered by employer-sponsored plans, the only way to provide universal coverage would be outside of that arena, Mr. VanderPloeg said.
Ted Benna, president of The 401(k) Association, Bellefonte, Pa., agreed.
"It's possible we will ultimately see a system where retirement savings might be direct deposited at the choice of the employee, and the employer ceases to play a role" in managing the accounts, he said.
The problem with that kind of system, though, is that it is subject to the vagaries of the stock market, while employers free workers of that responsibility in traditional pension plans.
"As long as the market continues to show excessive growth, people tend not to pay any attention to it," said Mark J. Ugoretz, president of the ERISA Industry Committee, a Washington trade group. "But should the bubble burst . . . they're going to be very upset because, unlike in defined benefit plans, they are not protected."
Karen Ferguson, director of the Pension Rights Center, Washington, and usually at opposite ends of the debate with employer groups, agrees.
The retreat from pension plans will have "a disastrous impact on future retirement security," she said.