‘Every Rotten Idea Since Adam’Blog added by Allen Greenberg on September 3, 2014
Ranked: #112 (621 pts)
Two As, three Bs.
That’s what Buck Consultants gave ERISA in a report card issued on the 40th anniversary this week of the law’s signing by President Gerald Ford.
If you’ve had a chance to read our special report on ERISA’s birthday – and as the editor of our coverage, I have – I don’t think you’d agree with Buck.
There are a few reasons, after all, that ERISA is sometimes known as “Every Rotten Idea Since Adam.”
Buck’s report card gives the law its two As in its “pre-emption of state law and ready access to federal courts” and in its “funding and (creation of the) Pension Benefit Guaranty Corp.”
Buck notes that the law imposed national standards by “superseding the patchwork of state laws that relate to employee benefit plans.” It also applauds the law for letting participants bring civil action to, among other things, address alleged breach of fiduciary responsibility.
The problem with those national standards is that, today, a fast-growing number of states, frustrated by federal inaction to resolve what many perceive as a retirement crisis, are stepping into the retirement game. At last count, legislatures in 17 states are adopting measures to establish state-administered plans that would be accessible by private employers. Who's superseding who now?
On the point of civil action, ERISA has doubtlessly helped to protect participants from rapacious employers. But the swelling number of class-action lawsuits filed by equally ravenous participants raises questions about whether flaws in the law aren’t helping to fuel these battles.
I would have given ERISA a C on both counts.
Same goes for the provisions in the law that established the PBGC, an agency that careens endlessly from one crisis to the next, seems unable to open its mouth without sounding as if it’s forever crying wolf and has to beg Congress to approve any kind of premium increases. (Wait, actually, I like that component.)
Elsewhere, Buck gives the law Bs for “disclosure and reporting,” “fiduciary rules,” and “vesting.”
In my mind, it deserves no better than a “D” for disclosure and reporting, especially when we consider how much confusion remains over questions about fees, problems with the Form 5500, the lack of key details in the new Short Form 5500 and, perhaps worst of all, how little clarity exists over lifetime income questions.
We all know what the Department of Labor and Securities and Exchange Commission are considering regarding fiduciary rules, not to mention recent court action in fiduciary cases, so it’s hard to imagine why anyone might think ERISA deserves a B in that regard.
On vesting, Buck notes ERISA does “a good job of protecting the reasonable expectations of employees and eliminating the view that pensions were mere gratuities.” I could quibble – on behalf of every government and private-sector employee who’s had their pensions cut and the millions more who should brace for that – but let’s leave that one alone for now.
Look, there’s no doubt ERISA represented progress, helping provide a new measure of security for the U.S. workforce that simply didn’t exist before it became law of the land.
Buck acknowledges that ERISA “falls short” in that some of its rules “create ambiguities and leave the responsible parties — sponsoring employers, plan service providers and plan fiduciaries — without clear and concise direction, which has led to inaction and fear of liability.”
But that’s exactly why I’d give ERISA a C- at best, and not the overall B that Buck gave it.
Originally published on BenefitsPro.com
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