Op-Ed ¦ July 5, 1991
More regulations bring more cost, less rule

By David Langer

Legislation the Department of Labor is expected to re-propose later this year to toughen enforcement of private pension plans undoubtedly will again leave out a noteworthy offender. The three main sections of the proposal target private sponsors by calling for strengthening plan audits, incentives for private enforcement and disincentives for unlawful behavior. But what of the abuses of the government itself? The evidence of its acts harmful to pensions is powerful, and it ought to be the primary target.

No one, of course, questions that fraud and fiduciary breach occur among a number of the some 800,000 qualified pension plans. How could it be otherwise with a couple of trillion dollars scattered among so many plans? There are participants and beneficiaries who are being deprived of their rightful benefits, and there are corrupt fiduciaries who leave plan participants painfully shortchanged, as recent congressional testimony vividly described.

Should further action by taken to punish and to try to prevent such violations? Absolutely, but it should be carefully aimed at problem areas and avoid casting a sweeping net that would embroil sponsors in yet another round of law and regulation that will, if the past is a guide, fall with a heavy hand on all plans regardless of likelihood of culpability. Recognition is needed beforehand that plans covering most participants are being run in a decent, law-abiding manner.

But the Labor Department and the House Ways and Means Committee's Subcommittee on Oversight have focused only on causes of financial injuries to participants of a limited number of individual plans. They fail to see the problems caused by the colossal failures of the executive and legislative branches that adversely affect all 800,000 plans and their participants and are driving away or otherwise discouraging plan sponsorship. Such problems include:
• The rapidly escalating and mind-boggling complexity of pension laws and
regulations issued since the Tax Equity and Fiscal Responsibility Act of 1982.
• The out-of-control budget deficit, which has caused the government to invade
the private pension system for funds by cutting back on permissible defined
benefit plan contribution levels (thereby impairing plan solvency) and by
adding a host of annoying excise taxes.
• The Pension Benefit Guaranty Corp.'s shaky actuarial foundation, creating a
worrisome tontine in reverse, where premiums instead of benefits have been
rising rapidly for the surviving defined benefit plan sponsors.

It is fair to conclude that the unsound management of government creates far more extensive damage to pension expectations than the isolated instances of illegal behavior of individual fiduciaries. It certainly does not matter to a retired person that the loss of reduction of a pension came about because of plan fiduciaries' abuses or by mismanagement and corruption at the government level.

The Labor Department would do well to take a close look at the behavior of its brethren-in-government before heaping another truckload of laws and regulations on plan sponsors, thereby motivating more to shun plans. It also could promote the concept that members of the executive and legislative branches need to observe the same fiduciary standards pension plan fiduciaries are required to obey.

Any new enforcement rules the Labor Department still feels are needed to curb errant plan fiduciaries should be designed to provide injured participants and beneficiaries access to remedies with a minimum of additional burden and cost for both sponsors and government.

- David Langer, a consulting actuary and president of David Langer Co., Inc.
New York

Copyright 1991 Crain Communications, Inc., Pensions & Investments, July 5, 1991
Reproduced with permission.