Nevin's Data "Points"

Twenty years ago, I authored [i] a cover story about the then-newly enacted Pension Protection Act of 2006 with an ambitious headline: “The Pension Protection Act: This Changes Everything.”   Twenty years later, it seems like a reasonable time to ask: Did It? The short answer, I think, is yes — though probably not quite in the ways we expected in 2006. The PPA was a sweeping piece of bipartisan legislation, addressing among other things defined benefit funding, pension accounting, and cash balance plans — it was titled the PENSION Protection Act, after all.  And it was, for the benefits promised by those plans, an important defensive measure. [ii]    However, to my eyes then — and now — the most lasting influence of the PPA was on the defined contribution side, where it helped change not just plan design, but the industry's thinking about participant behavior. To Appreciate 2006, Go Back to 1986 Twenty years earlier, the Tax Reform Act of 1986 had significantly tigh...

 The latest academic “dig” against 401(k) plans? Vesting schedules. More specifically, firms with a combination of high turnover and vesting schedules, which means that workers are leaving behind employer contributions. Or, in the parlance of these new critics, being “robbed.”  I stumbled across this “scandal” in an op-ed provocatively titled, “ This giant pension scandal is hiding in plain sight ,” which, in turn, drew from the points made in an academic paper titled, “ Megacompany Employee Churn Meets 401(k) Vesting Schedules: A Sabotage on Workers’ Retirement Wealth .” The “scandal” is the legal vesting schedules under ERISA, notably the three-year variety in place at certain large, high-turnover employers. The MarketWatch article [i] —and, more significantly, the academic paper [ii]  upon which it is based, see the vesting schedule as part of some orchestrated conspiracy deliberately crafted to “rob” [iii]  individuals of benefits/compensation to ...