Reflecting back on ERISA's first 40 years, the people who've administered it say there were some hits and some misses.
The Employee Retirement Income Security Act made some great advances in retirement security since its passage in 1974, but missed some opportunities as well, like structuring the Pension Benefit Guaranty Corp. and keeping the focus on fiduciary duty, said past and present Labor Department officials who gathered in Washington to celebrate the law's anniversary.
Phyllis Borzi, the current assistant secretary of labor for the Employee Benefits Security Administration, was among those discussing the tribulations when she welcomed seven former officials from EBSA predecessors — the Pension and Welfare Benefits Administration and the Pension and Welfare Benefits Program, whose tenures stretched back to 1977.
In the miss category, Ms. Borzi put the law's Title IV, which created the PBGC, as “the most amended and least successful.
“It was not ready for prime time. A fundamental question is "what the heck is this supposed to be?' Those fundamental questions were never resolved and still have not been resolved,” Ms. Borzi said.
The PBGC has suffered without a clear sense of its purpose and not knowing whether to be an insurance agency, a pension bureau or some other type of guarantor, Ms. Borzi said.
“It was not properly designed,” said Alan Lebowitz, who retired this year as EBSA's deputy assistant secretary for program operations and was the longest serving official of the unit. “I think the PBGC system eventually is going to get bailed out.”
Leslie Kramerich, who served at both EBSA and the PBGC and is now chief policy officer for the PBGC, said she was worried about the PBGC's financial status and mission as more defined benefit plan sponsors close or consider closing their plans. “Funding relief is going to be huge, and asset-to-liability dynamics are going to be huge,” Ms. Kramerich said.
The PBGC has a long history of deficits. According to the agency's latest exposure report, released in June, the single-employer program is improving, but the guaranty program for multiemployer pension funds is not. The current $24.7 billion single-employer deficit is projected to shrink to $7.6 billion by 2023, and is “highly unlikely” to run out of money in the next decade due to strong market returns, rising interest rates and higher PBGC premiums. But on the multiemployer pension side, severe underfunding problems in several plans are projected to cause the agency's deficit to grow to $49.6 billion by 2023 from $8.3 billion currently, the report said.