The US Pension Fund System
The US corporate pension system has matured along with the country's demographic cycle. It consists of both defined benefit plans and defined contribution plans. For the past several decades, the US corporate Defined Benefit (DB) system has contributed significantly to the retirement needs of millions of Americans. Consequently, the aggregate long-term retirement system in America is perhaps the finest in the world. Active participants in the aggregate national DB system are now roughly equal to inactive participants (primarily retirees).
The Employee Benefits Security Administration is responsible for administering and enforcing the fiduciary, reporting and disclosure provisions of Title I of the Employee Retirement Income Security Act of 1974 (ERISA). At the time of its name change in February 2003, EBSA was known as the Pension and Welfare Benefits Administration (PWBA). Prior to January 1986, PWBA was known as the Pension and Welfare Benefits Program.
The provisions of Title I of ERISA, which are administered by the US Department of Labor, were enacted to address public concern that funds of private pension plans were being mismanaged and abused. ERISA was the culmination of a long line of legislation concerned with the labor and tax aspects of employee benefit plans. Since its enactment in 1974, ERISA has been amended to meet the changing retirement and healthcare needs of employees and their families. The role of EBSA has also evolved to meet these challenges.
The administration of ERISA is divided among the US Department of Labor, the Internal Revenue Service of the Department of the Treasury (IRS), and the Pension Benefit Guaranty Corporation (PBGC). Title I, which contains rules for reporting and disclosure, vesting, participation, funding, fiduciary conduct, and civil enforcement, is administered by the US Department of Labor. Title II of ERISA, which amended the Internal Revenue Code to parallel many of the Title I rules, is administered by the IRS. Title III is concerned with jurisdictional matters and with coordination of enforcement and regulatory activities by the US Department of Labor and the IRS. Title IV covers the insurance of defined benefit pension plans and is administered by the PBGC.
Prior to the 1978 reorganization, there was overlapping responsibility for administration of the parallel provisions of Title I of ERISA and the tax code by the US Department of Labor and the IRS, respectively. As a result of this reorganization, the US Department of Labor has primary responsibility for reporting, disclosure and fiduciary requirements; and the IRS has primary responsibility for participation, vesting and funding issues. However, the US Department of Labor may intervene in any matters that materially affect the rights of participants, regardless of primary responsibility.