An article in yesterday's paper said that a White House reorganization plan for ERISA would affect 1.75 million pension plans covering 70 million people. The figures also include welfare plans, like health care and disability benefits.Welfare plans are included in the administrative reorganization but are virtually unaffected by the paperwork reduction.
The White House unveiled yesterday a plan for reorganizing the administration of the private pension system that it hailed as "the solution to most of ERISA's problems."
Since its enactment in 1974, the Employe Retirement Income Security Act (ERISA) has been the object of criticism by business, labor and government watchdog agencies. Because its creators failed to assign precise responsibilities to the Treasury Department and the Labor Department, which have dual jurisdiction over ERISA, the law's first years have been marked by delays in issuing regulations, conflicting agency interpretations, bureaucratic runarounds and burdensome reporting requirements, the White House said.
As a result, there have been overlapping investigations and costly, duplicative paperwork. In nearly four years, only half of the 215 necessary regulations have been issued, and only half of the 955 applications for prohibited transaction exemptions have been processed. (A prohibited transaction is a self-serving one or one with a potential conflict of interest, such as a deal where one brother's company pension fund invests in another brother's insurance company.) Delays of 15 months are routine.
President Carter made a campaign promise of a massive bureaucratic overhaul. The ERISA plan is the fourth such reorganization announced. The others have been consolidation of equal employment opportunity programs, federal emergency preparedness, and civil service reform.
Specifically the reorganization would give to Treasury the responsibility for setting pension plan minimum standards for funding, participation, vesting rights and benefits payments. However, Labor would retain a veto power over certain Treasury rulings affecting collective bargaining.
Labor would have jurisdiction over establishing fiduciary standards for pension and welfare benefit plans. Treasury would audit plans and levy tax penalties while Labor could bring civil suits against wayward plans and trustees.
The biggest change affecting business is an estimated 20 percent reduction in paperwork. The amount of time required to fill out the forms will be reduced from 9 million to 4 million work hours. Specifically, the plan description form EBS-1 would be eliminated, small plans with fewer than 100 participants would be required to the annual reports only once every three years and short forms in between. Summary annual reports would be simplified, as would benefit statements.
There are now 1.75 million pension plans covering 70 million persons that come under ERISA. The proposed reorganization will not jeopardize active or retired workers pensions. In fact, said James McIntyre, director of the Office of Management and Budget, it can be expected to increase protection by making the law less confusing - and thereby causing administrators to make mistakes - as well as by speeding up enforcement.
The reorganization plan will become law automatically after 60 legislative days if it is not voted down. But if the session ends before the 60 days are up - as seems likely - the Congress will have had to approve it for the plan to go into effect.
The elements of the reorganization were worked out last year by the cabinet officers and legislators concerned. Congressional approval is expected. However, it is clear some leading Senators regard the reorganization as only temporary. Sen. Harrison Williams (D-N.J.), chairman of the Labor subcommittee, said yesterday. "The plan is not objectionable, given the expressed commitment in the plan for an evaluation and legislative recommendations in early 1980. My committee will be following with great interest the progress of the agencies under this temporary plan."
He and co-chairman Jacob Javits (R-N.Y.) have introduced a bill to create an eventual new, centralized agency to administer ERISA that would remove private pension plans from the jurisdiction of Labor and Treasury. Hearings will be held on this and related bills next week.