While terms used to describe the Employee Retirement Income Security Act when it was signed into law by President Gerald Ford 40 years ago include “horrible” and “terrible,” a panel of retirement planning experts agreed Tuesday that the law has had a positive impact on Americans’ retirement savings.
“The structure” of ERISA “has served us well,” said Ann Combs, principal and head of government relations at Vanguard, during a Tuesday morning panel discussion titled ERISA @ 40, at the American Society of Pension Professionals and Actuaries annual conference in National Harbor, Maryland, just outside Washington.
The “flexibility of the investments [allowable under ERISA] have allowed [the law] to evolve and adapt to new plan structures,” said Combs, who was the former assistant secretary of Labor and head of the DOL’s Employee Benefits Security Administration (EBSA) from 2001 to 2006. The law’s drafters “were wise to basically adopt the modern portfolio theory that you can invest in riskier assets if they [are] diversified.”
Indeed, Dallas Salisbury, president and CEO of the Employee Benefit Research Institute, added during the panel discussion that “where we are today in [the retirement saving] system is where ERISA would ultimately lead us.” While “ERISA has ended up not restricting flexibility” in how people can save, the law has resulted in “tremendous difficulty” for defined benefit plans. “Pre-ERISA there were only DB plans.”
Alvin Lurie, president of the law firm Alvin D. Lurie PC, who was the first person to administer the IRS’ ERISA program in Washington in the mid-’70s, noted that ERISA came to be “because the economy was suffering” and “big employer plans became underfunded.” However, he said, “it was not foreseen [that under ERISA] 401(k)s and other plans would have taken over.”
Mark Iwry, senior advisor and deputy assistant secretary at the Treasury Department, added that since ERISA, “a lot has been done by administrative action [as well as] legislation” to help retirement savers. “The federal framework around ERISA is a very positive part of what came with the new law,” he said. ERISA “was a job well done.”