Chicago-Kent College of Law
Reviewing Teresa Ghilarducci & Christian E. Weller, Eds. Employee Pensions: Policies, Problems & Possibilities (LERA 2007)
A little over thirty years ago Congress enacted the Employee Retirement Income Security Act (ERISA),1 a comprehensive reform of the existing system of pension regulation.2 Solidly into its fourth decade, ERISA has been the object of much commentary as the various federal courts have struggled to infuse its complicated and sometimes imprecise pieces with coherent meaning. 3 Some have suggested that ERISA's primary goal of reducing the risk to employees of employer default has largely been achieved.4 Others believe that almost every aspect of the statute relating to pensions has been at least modestly successful5 but that those provisions of the statute dealing with health insurance and other welfare plans 6 cry out for significant reform.7
In their new book, Employee Pensions: Policies, Problems Possibilities, editors Teresa Ghilarducci and Christian E. Weller have assembled a group of essays which seeks to evaluate and reform existing pension policy. Of the eleven authors whose work Ghilarducci and Weller have collected and edited, only two are trained as lawyers. The others are mostly economists with a few public policy academics and practitioners rounding out the mix. For ERISA lawyers in the audience, the book provides a welcome opportunity to focus on pension benefits issues through a non-legal lens. Rather than parsing various provisions of the statute and relevant cases, the authors in this collection take up the question of the future of employee pensions from the perspective of economics, labor organizing, and simple income security. It is a refreshing read for anyone who is typically limited to legal materials when thinking about pensions, and each of the essays is accessible enough that students would also benefit from exposure to the book.
Employee Pensions is organized in a way that quickly reveals the policy biases of both the editors and contributors. Each essay is located in one of four major sections: "Justification for the Employer-Based System," "Getting Defined Benefit Plans Ready for the Future," "Ways to Improve Defined Contribution Plans," and "Understanding the Political Dimensions of Pension Reform." In the first essay, the editors make their views about pension reform plain: the Pension Protection Act of 2006 (PPA)8 fails to deal adequately with "high degrees of inequality in retirement saving accumulations by income and race, high costs of defined contribution plan administration, lack of support for innovative defined benefit pension design, and corporate disincentives to sponsor pensions." 9 The PPA, the editors believe, "discourage[s] firms from continuing [defined benefit] plans."10 This is because the PPA "goes overboard in the opposite direction by making perfectly sound companies speed up funding for any pension debt, thereby raising the unpredictability of pension contributions."11 Throughout their essay, indeed throughout Section I, the consistent message is that defined benefit plans are superior to defined contribution plans and, therefore, as much as possible should be done to encourage employers to offer defined benefit plans. However, the PPA discourages defined benefit plans and favors defined contribution arrangements without "addressing the existing shortcomings of [defined contribution] plans."12 The shortcomings of defined contribution plans include hidden, often high fees that can substantially erode a plan participant's account balance. 13
Together We Can: Imagining the Future of Employee Pensions
Employee Rights and Employment Policy Journal
Available at: https://scholarship.law.bu.edu/faculty_scholarship/2105