Every law needs a non-renewable sunset provision. ERISA shows us why.
Do you still wear bell-bottom jeans? Does your hair have an unnatural curl to it? Are you again trying to Whip Inflation Now? The Employee Retirement Income Security Act was signed into law on Sept. 2, 1974, smack dab in the middle of Paul Anka's and Odia Coates' three-week run at the top of the charts with the forgettable "(You're) Having My Baby." A week later, NBC debuted a trio of future hits in "Little House on the Prairie," "Chico and the Man" and "The Rockford Files." I'd ask if this all makes you nostalgic for "That 70s Show," but the first episode of that series was set more than two years after ERISA was enacted.
Rather than pop culture, consider the state of the retirement industry in the era of ERISA. You need to remember two events. First, in 1964 Studebaker closed its American auto plant, leaving a pension plan so severely underfunded most of the employees were left with little to nothing in terms of retirement benefits. This exposed a major risk to workers who relied on their pensions. In the fall of 1972, NBC broadcast an hour-long show titled "Pensions: The Broken Promise." If you're one of those folks who believe pensions are better than 401(k) plans, you should probably try to find a copy of this documentary.
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From this boulevard of broken pension dreams hatched ERISA. It was a law designed to safeguard and protect pension plans. In 1974, the retirement world really meant pensions. Defined benefit plans ruled the landscape like massive dinosaurs, while the tiny mammal-like defined contribution plans had to scurry about to avoid being crushed by the feet of pension plans.
We all know the retirement plan industry today is the exact inverse of what it was at the birth of ERISA. ERISA is 40 years old. (What is that in dog years?) It arrived a full decade before the 401(k). It was created to protect workers' retirement. Today, it struggles to cope with the 401(k) and, if anything, it impedes the ability for at least a third of American workers to have access to a 401(k) plan. And that is perhaps its greatest sin.
Most of the advances in retirement plans have come from the IRS, not the DOL. The IRS has shown us how to pool small companies into Multiple Employer Plans, but the DOL continues to put up barricades. The MEP represents the easiest path for getting those not in retirement plans into retirement plans. Why are ERISA and the DOL preventing this solution?
I've always thought every law needs a non-renewable sunset provision. This would require lawmakers to update legislation before it grows stale. ERISA is a great example of this need. It must be trashed and rewritten from the ground up. Pensions are passé. ERISA has to reflect the realities of this next generation of retirement plans.
After all, there's a reason why you don't use your high school yearbook picture today.
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Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
