ERISA's Rich History: A Conversation With Phyllis Borzi

Phyllis C. Borzi, assistant secretary of labor of the Employee Benefits Security Administration, sat down with Kristen Ricaurte Knebel of Bloomberg BNA recently to discuss where ERISA was, how far it has and hasn't come and what might need to be done to bring the law into the future.

“One of the things that I always think is so interesting about the passage of ERISA, and I think it's true of any major law, is that people have this sense that things happen rapidly, but they don't, and ERISA was the perfect example. It was passed in ‘74, but it was 15, 20 years before that, that things began to percolate up in the consciousness of the public. It takes a long time to move people, not just members of Congress, but the general public,” Borzi said.    

Enacted in 1974, a confluence of events led to the passage of ERISA, Borzi said. Events including recommendations made in 1965 by the President's Committee on Corporate Pension Funds and Other Private Retirement and Welfare Programs, which was a cabinet-level committee appointed by President John F. Kennedy in 1962; a series of academic papers written by Merton Bernstein, a professor at the University of Washington in St. Louis; and in 1972, and a special airing on NBC called “Pensions: The Broken Promise.”          

“There were all these scandals about investments, usually they were scandals involving multiemployer plans, mobs taking over these pension plans, there were hearings on the Hill, and then in ‘72, NBC did this blockbuster special called, ‘The Broken Promise,’ and it put a public face on all of these different issues,” she said.          

There was a lot of opposition to legislating retirement plans, particularly in the employer community, which didn't want Congress telling them what to do, Borzi said.

“We have a voluntary system still, ERISA didn't change that. What ERISA did change was that it said if you want to make these promises you have to stand behind them,” Borzi said.

‘Vexing' PBGC 

One area of ERISA that has proven difficult over the years is the function of the Pension Benefit Guaranty Corporation.

“There was never agreement when ERISA was passed and there isn't agreement now as to what PBGC was supposed to be,” she said.

“The reason the PBGC has proved to be a vexing, difficult program is because unlike these other areas of ERISA, where there was broad, general consensus,” there was dispute over what it should look like, she said.

“There was a segment of the Congressional folks and the stakeholders who thought that PBGC should be set up like a real, commercial insurer, Lloyds of London, at the time they were always talking about Lloyds of London,” she said. On the other side, there were people who wanted the PBGC to be a social insurance program, or a “safety net,” Borzi said.

“There's always this schizophrenia, if you go and look at the legislative history, you'll see that nobody could agree on that. And actually in the conference they had these two different models and the true insurance company, the Lloyd's of London lost, and PBGC as enacted was designed as a social insurance company,” she said.

Excerpted from a story that ran in Pension & Benefits Daily as part of the special report, ERISA @ 40 (9/9/2014).