Pensions were not on my mind in 1974, certainly not on Labor Day of that year. While I was pondering my new college textbooks, President Gerald Ford, less than a month in that role, signed into law the Employee Retirement Income Security Act of 1974 — better known to most of us as ERISA. Little did I know at the time that that law — and the structure it provided to the nation’s private pension system — would, in the years to follow, play such an integral role in my life.
ERISA did not create pensions, of course; they existed in significant numbers prior to 1974. Rather, it was designed to regulate what was there and would yet come to be — to protect the funds invested in those plans for the benefit of participants and beneficiaries with a consistent set of federal standards. And, as part of that protection, to establish the Pension Benefit Guaranty Corporation (PBGC). As President Ford said at the time, “It is essential to bring some order and humanity into this welter of different and sometimes inequitable retirement plans within private industry.”
Has ERISA “worked”? Well, in signing that legislation, President Ford noted that from 1960 to 1970, private pension coverage increased from 21.2 million employees to approximately 30 million workers, while during that same period, assets of these private plans increased from $52 billion to $138 billion, acknowledging that “[i]t will not be long before such assets become the largest source of capital in our economy.” Today that system has grown to exceed $17 trillion, covering more than 85 million workers in more than 700,000 plans.
The composition of the plans, like the composition of the workforce those plans cover, has changed over time. While much is made about the perceived shortcomings in coverage of the current system, the projections of multi-trillion dollar shortfalls of retirement income, the pining for the “good old days” when everyone had a pension (that never really existed for most), the reality is that ERISA — and its progeny — have unquestionably allowed more Americans to be better financially prepared for a longer retirement.
Forty years on, ERISA — and the nation’s retirement challenges — may yet be a work in progress. But by any measure, this “class of ’74” has done the nation a great service.