In February 1852, blacksmiths Henry and Clement Studebaker opened a shop in South Bend, Indiana. The brothers’ business gradually expanded to include more of their family and more products. The company manufactured wagons and later automobiles, debuting their first model in 1902. After decades of success the company made history again – this time for darker reasons.
When the Studebaker-Packard Corp. shuttered its South Bend manufacturing plant in December 1963, it quickly became clear that its finances, including its pension plan, were in disarray. Thousands of workers received lump sum payments worth a fraction of the pension benefits they’d earned over their careers. Thousands more received no pensions at all.
The misfortunes of Studebaker’s employees drew national attention to the importance of pension reform. The danger was clear: Without protection for pensions, workers risked losing the retirement benefits they’d earned through years of hard work. The solution was the Employee Retirement Income Security Act of 1974.
ERISA established standards for private sector pension and health benefit plans, increasing protections for plan participants and their families.
This year, we recognize the fortieth anniversary of ERISA, signed by President Gerald Ford on Labor Day: Sept. 2, 1974. During the last four decades, the retirement landscape has changed dramatically. And while some updates and reforms are needed, ERISA remains the cornerstone of employee benefits law.
Over the past 40 years, more and more of America’s workers have switched from traditional pensions to 401(k)s and similar plans. With the rise of these defined contribution plans, America’s workers have had to take on the responsibility and the risk of saving, investing and managing their own money. This means more options, more complexity and more responsibility for those workers, and makes it even more important for us to help ensure financial literacy for those workers.
This year, roughly 3,650,000 Americans will celebrate their 65th birthday. By 2030, nearly one-fifth of the population will be 65 or older. ERISA will hit that milestone nine years later, but this law isn’t anywhere close to retiring. In fact, as America’s retired population continues to grow, ERISA is more relevant than ever before.
Phyllis C. Borzi is the assistant secretary of labor for employee benefits security.
Tags: EBSA, Employee Benefits Security Administration, Employee Retirement Income Security Act of 1974, ERISA, pension reform, pension security, Phyllis Borzi, Retirement Security, Studebaker pension failure