Nearing a presidential election, pension industry executives might be forgiven for hoping there is no second term for the Clinton administration. Not since the enactment of the Employee Retirement Income Security Act of 1974 has an administration proposed or signed into law more legislation, or pushed more regulatory changes, affecting pensions than the Clinton administration. In all, the administration produced a far-reaching program of change to income, retirement and investment policy, but to little apparent effect, except perhaps the weakening of corporate support for pension plans.
Among the major policy changes:
The $150,000 salary limitation for calculating pensions. This weakened the linkage between executives' pensions and workers' pensions. Senior executives have less interest in improving the pension plan, or the pension system in general, because less of their retirement income will come from it. The cap is so low that young middle management executives might ultimately be affected by it.
The new rule, in general, neither increased the amount of money going to non-executive pensions nor limited executive retirement benefits. Companies simply added or supplemented non-qualified benefits for their executives. It's not even clear the measure raised significant revenue, its real intent.
Cabinet secretaries Robert Reich, Federico Pe?a and Henry Cisneros have advocated using pension funds to finance economically targeted investments in infrastructure or housing, whose return is uncertain. In addition, the Department of Labor sought to establish an ETI database, one any private consulting firm undoubtedly would readily set up to meet any pension fund demand for it.
Secretary Reich urged pension funds to use their proxy votes to encourage, as he calls them, high-performance workplaces, and issued an interpretive bulletin suggesting sanctions if pension funds don't vote their proxies. Pension funds cannot judge which workplaces offer a high-quality environment for workers. Nor should they be forced to vote proxies, only encouraged.
Mr. Reich caused a scare among 401(k) plan participants in November when he issued news releases about abuses in 401(k) contributions and accounts, without emphasizing the vast majority of participants are unaffected by the violations. Mr. Reich abused the opportunity to reform a real problem by seeming to lump together all sponsors.
The president signed a $1 million limit on the tax deductibility of executive compensation, which interferes with a matter that should be decided by the board of directors and ultimately shareholders. Corporations can avoid the limit anyway, and the rule hasn't saved any jobs or increased any wage rate.
The question is: Have these policies made pension beneficiaries and investors more secure? Have they promoted the expansion of pension coverage? There is no evidence they have. Instead, the administration's record has produced an assortment of more government and more costs, without related improvements.
If one theme emerges from the policies it is class conflict, or mean-spiritedness. But striking at the higher-paid doesn't improve the lot of the lower-paid. President Clinton and his administration might have declared in the State of the Union address the end of the era of big government, but he has neither begun to reduce its size in pension and income policy, nor used it as an effective tool in reforming policy.