In an Oct. 5 story on a bill that would have changed the pension system for congressmen, it was erroneously reported that members are entitled to retire at 80 per cent of their retirement salary base. Under the present system, a member accrues 2.5 per cent for each year of service so that after 20 years he or she would receive only 50 per cent base salary.
Timely crutches for the country's limping private pension system wre offered this week by two top government leaders.
In a speech Monday to the American Bar Association, Sen. Jacob K. Javits (R-N.Y.) called for "an integrated national retirement income system."
Citing the recent creation of the Department of Energy, he proposed that all existing and future pension systems, including the Social Security Administration, be consolidated into one new agency.
Yesterday Labor Secretary Ray Marshall annnounced a proposed simplification of the annual report filed by pension plan administrators under 1974 Employee Retirement Income Security Act (ERISA).
Regulation under this act has become so burdensome that, in the words of one of its chief supporters, Rep. John N. Erienborn (R-III.). "There are many people who would like to blow out the candles on its third birthday cake instead of celebrating."
Beginning in 1977, Marshall announced, administrators will no longer be required to send an identical copy of Form 5500 they file with the Internal Revenue Service to the Labor Department as well. Moreover, Form 5500 will be simplified to eliminate questions of no use to either agency.
The object of a centralized pension system would be not only to provide better retirement income security, but to increase capital formation and expand employee stock ownership.
Javits said that a coordinated approach is the best defense against economic downturns that could cause private plans to fold and put "staggering unfunded liabilities" on the federal government.
Javits envisages inclusion of Social Security in the umbrella agency, because of integration of Social Security funds with private funds could have adverse effects on benefits unless policy is carefully coordinated.
As employer-paid Social Security taxes rise, it is anticipated they will play a larger part in the whole consideration of private pension benefits. Javits denied charges by one ABA member this constituted the first step toward federalization of the private pension system.
While these remarks were directed toward the pension crisis that looms at the end of the century because of the declining birth rate, Javits also addressed a more immediate problem: how to reform the three-year-old Employee Retirement Income Security Act.
ERISA, is suffering from multijurisdiction woes, resulting in bureaucratic overlap and delay, the lawyers agreed. Former Labor Department pension administrator William J. Chadwick estimated there are 40 laws and 20 agencies involved in running ERISA. A California attorney told how he spent 2 years and made 12 trips to Washington to 4 agencies just to get a definition for a client.
Javits' super-agency would take over the main administration now carried out by Labor, the Internal Revenue Service and the Pension Benefit Guaranty Corp., ERISA's insurance carrier.
Labor administrator Ian D. Lanoff and PBGC administrator Matthew Lind agreed in principle the super-agency was a good long-term solution. However, IRS assistant commissioner Alvin D. Lurie vehemently disagreed, saying that no other single agnncy could administer ERISA unless it were the IRS - and he didn't want that extra burden.
Lurie's many reasons why it was impossible to take IRS out of ERISA essentially boiled down to his claim that only IRS has the expertise as the result of dealing with the tax aspects of pensions for 50 years.
He revealed that the Carter administration is about to try to solve the chaotic situation by retaining the multiple jurisdiction but carefully defining the responsibilities of the two main agencies involved.
It is believed the solution will call for Labor to keep primary jurisdiction over fiduciary responsibility and prohibited transactions, and the IRS to tend to participation, vesting and funding. Both Javits and Lanoff also accept this compromise for the short term.
Marshall's announcement yesterday answered a General Accounting Office critique issued last May that ERISA had serious implementation problems resulting in delays.The Secretary admitted little had been done to enforce its provisions to protect beneficiaries from trustees' abuses. Labor Department employees were so busy explaining how ERISA worked, they didn't even have time to develop a training manual for its enforcement strategy.