EPILOGUE
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271 Epilogue As I have emphasized at many points in the book, ERISA introduced a new conceptual frame of reference for federal pension policy. Before the mid 1960s, lawmakers generally thought of pension plans as tools for managing employees.This view entailed a permissive approach to private-sector practices . In particular, the federal government left it to the parties to the employment contract—employers, employees, and unions—to establish the terms of the pension promise. In contrast, ERISA reflects a worker-security conception of private pension plans. According to this view, pension plans are tax-subsidized vehicles for providing retirement income to workers.The reformers who championed the worker-security theory claimed the federal government should take a more assertive role in the private pension system. Most importantly, they argued that pension promises had to be secure. In passing ERISA, Congress established a comprehensive regulatory framework to promote this goal. Since 1974, federal policy has evolved along lines broadly delineated by the worker-security theory. One strain of development involves ERISA’s protective policies. ERISA aims to make pension expectations secure. Congress has acted several times to refine or extend the measures that implement this protective goal. Another line of development involves tax policy. Here action has been anything but consistent. Congress has seesawed between measures that expand and contract access to tax-free retirement saving . The only consistent pattern is that the tax laws get more complicated. The most important development since ERISA, however, has been a profound shift in the composition of the private pension system. In 1974, defined-benefit plans dominated the private pension system. In the last two decades,defined-contribution plans and,in particular,401(k) plans have surpassed defined-benefit plans to become the primary retirement savings ve- 272 / Epilogue hicle for private-sector workers.This shift raises important policy issues and may be changing the function of the private pension system. Although ERISA was known as the “pension reform law,” it has also had a major effect on medical provision in the United States. ERISA fundamentally altered regulatory jurisdictions in health care at a time when the industry was entering a period of transition. While the preemption language in ERISA greatly narrowed state authority, federal courts have interpreted ERISA to provide few federal protections to health plan participants.The result was a “regulatory vacuum” as the health-care industry began the shift to managed care. The splintering of regulatory oversight and a political backlash against managed-care organizations have created a patchy, disjointed regulatory regime. Whether and how long this state of affairs persists depend to a great extent on how federal courts interpret ERISA’s preemption provision.The political history of ERISA suggests that,without the threat of conflicting state laws, employers and unions that sponsor multistate health plans will oppose initiatives to create federal minimum standards for health plans or expand the liability of such plans. the evolution of protective policies The legislators who drafted ERISA expected Congress to revisit the statute soon after enactment.1 Because ERISA was a big step in a new direction,lawmakers tried not to take a bigger step than was needed. On a variety of regulatory issues, Congress chose less stringent measures than it might have because legislators believed a less stringent rule might suffice or because legislators worried that stricter regulation would overburden plan sponsors. Over the last three decades, Congress has amended ERISA on a number of occasions to refine or extend the provisions that implement ERISA’s protective goals. These revisions force lawmakers to address the same tradeoff ERISA’s drafters confronted. Protective measures increase costs, which may lead employers to shut down a plan or reduce benefits. At the same time, federal policy is committed to the view that pension plans should not make promises they cannot keep.The economic downturn that began in 2000 has made this tradeoff particularly compelling. ERISA’s minimum vesting and funding standards and the termination insurance program are the principal reforms that implement the statute’s protective goals. Congress has revised the vesting and participation standards several times. Today, employees must participate earlier in their retirement plan and vest more quickly.2 Indeed, former Javits staffer Frank Epilogue / 273 Cummings, now a leading ERISA attorney, suggests that Congress may have “over-solved” the problem of forfeiture risk.3 His observation highlights a tension between ERISA’s goals of promoting equity—that is, ensuring that workers...


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