401(k) Specialist Issue 3 - 2024 - 14

401(k) COVER STORY
A
The Employee Retirement Income
Security Act-better known as simply ERISA-was
enacted in 1974-in spectacularly
bipartisan fashion-in response to growing
concerns about the security of private-sector
pensions. The law came about following
some high-profile pension failures, including
the collapse of the Studebaker Corporation's
pension plan in the 1960s, which left many
workers without retirement benefits. ERISA
established minimum standards for pension
plans, ensuring that benefits are protected
and fiduciaries manage plans responsibly. It
also created the Pension Benefit Guaranty
Corporation (PBGC) to safeguard pension
benefits for workers if their plan fails.
As 401(k)s and IRAs started to become
more popular in the 1980s and the decades
since, ERISA evolved to accommodate the
newer retirement vehicles. Key changes
included enhanced fiduciary responsibilities,
greater emphasis on participant disclosure,
and rules governing how contributions and
investments are managed. The law also expanded
to provide protection for retirement
savings portability and flexibility, ensuring
individuals could manage their retirement assets
across various job changes and plan types.
As the workplace continues to evolve,
ERISA has evolved right alongside it.
" Defined contribution plans have
become the vital force behind a secure
retirement for most U.S. workers, and while
ERISA has laid a strong foundation for
14
ISSUE 3 2024 | 401kSpecialist.com
As ERISA marked its 50th anniversary this fall,
there has been plenty of reflection on the profound
impact this landmark legislation has had on
the nation's retirement landscape. It's hard to overstate
that impact, actually, for a law often referred
to as " the most important law that nobody's ever
heard of " (outside of the retirement and employee
benefits industries, anyway).
retirement savings in America, the work
is not yet done, " Michael Davis, head of
global retirement strategy at T. Rowe Price,
said as the company presented its ERISA
50th Research Project in September. " By
focusing on adoption of effective auto-features,
addressing racial and gender savings
disparities, and delivering personalized
solutions for workers, we can continue to
improve retirement coverage and outcomes
for all Americans. "
Jeff Clark, Head of Defined Contribution
Research at Vanguard, echoed that sentiment,
and said that 50 years after ERISA,
401(k) plan design is stronger than ever.
" The power of automatic savings solutions-such
as auto enrollment and annual
auto increases-has improved outcomes for
participants, " Clark said.
While much has been written about the
history of the law and important changes
to it over the past 50 years, 401(k) Specialist
wanted to take a closer look at what the
next 50 years might hold in store.
" Defined
contribution plans
have become the
vital force behind a
secure retirement for
most U.S. workers,
and while ERISA
has laid a strong
foundation for
retirement savings in
America, the work is
not yet done. "
- Michael Davis,
T. Rowe Price
No Crystal Balls
Predicting how ERISA will evolve in the
next 50 years is no easy task. One reason
why, says Wagner Law Group Founder
Marcia Wagner, is the heightened level of
partisanship that currently exists making it
difficult for even technical corrections legislation
to be enacted. " Assuming that bipartisanship
reemerges to some extent, it would
be appropriate for Congress to consider the
decline of the traditional defined benefit
plan and its replacement by the 401(k) plan,
as well as the phenomenal growth of IRAs, "
Wagner said.
" Even if the Fifth Circuit again invalidates
the DOL's efforts to redefine those
parties who are ERISA fiduciaries because
they receive a fee, it is difficult to quarrel
with the DOL's conclusions that the manner
in which the private sector operates currently
is radically different from the manner
in which it operated in 1974. "
Other than there being increased attention
to the role of fiduciaries in the welfare
plan context, Wagner said she does not
believe the role of fiduciaries will change.
401(k) Specialist Issue 3 - 2024

Table of Contents for the Digital Edition of 401(k) Specialist Issue 3 - 2024
