Reality Testing for Pension Reform

These are interesting times in the pension world now that there are two diametrically opposed proposals for change before Congress. The first is the Pension Preservation and Savings Expansion Act of 2003 recently introduced by Representatives Portman and Cardin. This bill embodies the traditional type of pension reform, an omnibus statute that tinkers with almost every aspect of the private pension system to make incremental changes. The second is the Administration's attempt at radical change and simplification. Its proposal contemplates a sweeping consolidation in the number and types of defined contribution plans. This paper evaluates these two approaches - one evolutionary, the other revolutionary - and then considers an alternative. Its analysis focuses on the nuts-and-bolts of the private pension system, that is, on the plans that comprise it and the rules that govern them. Its thesis is that examining the architecture and machinery of the private pension system can teach us much about directions for reform.