By Karen Friedman
The New Year is always a great time to take stock and resolve to do better.
I’m already making headway on my personal goals of hitting the gym, eating healthier (mostly), and generally getting in better shape.
Our resolutions at the Pension Rights Center, however, are a bit more ambitious.
We’re working hard to get America’s retirement system in the best shape possible. That’s not an easy task – but PRC, working with our allies, is up to the challenge.
As we set our policy goals, we believe that looking backward can help us move forward.
Significantly, this year marks the 50th anniversary of the landmark federal private pension law, the Employee Retirement Income Security Act (better known as ERISA). It’s the perfect time to examine what worked about the law, what didn’t, and where we go from here.
First, let’s talk about why Congress passed ERISA.
Back in 1974, there were few laws regulating pension plans. Employees often lost their pensions, even after a lifetime at one company, because they didn’t work until their 65th birthday. There were no rules to ensure that plans had enough money to pay promised benefits. And if a company went bankrupt and the plan ran out of money – the collapse of the Studebaker-Packard Corporation’s pension plan is the most memorable example – people could lose everything.
ERISA sought, first and foremost, to end broken promises to workers and retirees. It established minimum standards for how long people needed to work to earn a pension and created funding and fiduciary rules to ensure plans were appropriately funded and administered solely in the interest of workers and retirees. It also birthed the Pension Benefit Guaranty Corporation (PBGC), which guarantees that promised pension benefits will be paid, even if the plan goes belly-up.
Because of ERISA, millions of people are receiving benefits from pension and retirement savings plans that they might not otherwise be getting.
But despite ERISA’s successes, millions of Americans are approaching an inadequately funded retirement, with hardships ahead.
There have been a lot of changes that were unimaginable when Congress passed ERISA.
For instance, Congress could not have anticipated that, fifty years later, employer-paid, guaranteed defined benefit plans would largely be replaced by less secure, nonguaranteed 401(k)-type plans, where individuals have to shoulder the risks and responsibilities of contributing, investing, and trying to make their assets last through their retirement.
Nor could they imagine that despite the billions of dollars conferred by Congress in tax subsidies to encourage employers to set up plans and encourage employees to save, half of all private sector workers do not have pension or retirement benefits to supplement Social Security. And they might be surprised that millions of people who do participate in 401(k)-type plans are not saving enough to make it through retirement.
Let’s look at the statistics. According to Survey of Consumer Finances, about half of all households that have 401(k) plans have saved $87,000 or less in their retirement savings accounts – and even those approaching retirement have amassed only about twice that amount. Studies show the situation is even more dire for Black and Hispanic workers, who are far less likely than their white counterparts to have retirement savings, and for women, who statistically have lower retirement savings than men.
PRC is working diligently to reduce such inequities, expand coverage and increase retirement income adequacy, protect pension promises, and ensure that participants’ and beneficiaries’ rights are not eroded. Here are some of PRC’s broad goals and resolutions for 2024 and beyond:
The Pension Rights Center has always been a fierce defender of the retirement rights of workers, retirees, and their families. As ERISA turns 50 – and the PRC turns 48 – we rededicate ourselves to improving our retirement system and achieving retirement income security for all!