Abstract: Unintended Consequences of Retirement Regulation

Paula Gajewski


When hearings began on the state of America's faltering private pension system in the 1960s, Congress knew that action was required on its part to preserve the retirement security of millions of American workers. Senators Harrison Williams and Jacob Javits took the lead in crafting the Employee Retirement Income Security Act (ERISA). What Congress could not fully predict were the myriad ways in which pension regulations would intersect with simultaneously evolving securities reforms. A key loophole in the legislation made defined contribution plans a more attractive choice than defined benefit plans, contributing to the most visible of ERISA's unintended consequences, the demise of the traditional pension. Regulation created a pension system in which individuals have greater nominal control of retirement investment, but which is dominated by institutional investors on Wall Street.