NATIONAL HARBOR, Md. – There’s very little that’s “defined” about defined contribution plans, leaving employees to their own devices and too often with little or no money saved for retirement, one of the government’s top retirement and health policy officials said Tuesday.

“Had we shifted properly” from defined benefit to defined contribution retirement plans in the years since the Employee Retirement Income Security Act was adopted in 1974, “we’d see more employers making defined contributions to their plans,” Mark Iwry, the Treasury Department’s deputy assistant secretary, said.

Iwry’s comments came during a retrospective of ERISA, now in its 40^th year, at the American Society of Pension Professionals and Actuaries annual conference here.

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To its critics, ERISA triggered the decline in defined benefit pension plans, in part by increasing regulatory costs like premiums paid to support the Pension Benefit Guaranty Corp. But the law was written to help protect workers’ pensions, so the decline of defined benefit plans was an unintended consequence, as was the widespread adoption of the 401(k).

Iwry was joined on stage by Alvin Lurie, who served as the assistant IRS commissioner during the years ERISA was crafted.

“It was not foreseen (that as a result of ERISA) 401(k)s and other plans would have taken over," he recounted.

Lurie also told of how the law's supporters scurried to push the legislation through Congress ahead of events that eventually led to President Richard M. Nixon’s impeachment and resignation.

“I think we got a grand compromise, which has worked surprisingly well,” Lurie said in assessing ERISA four decades after its birth.

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Vanguard’s government affairs chief, Ann Combs, who served as the assistant secretary of Labor for Employee Benefits Security Administration from 2001 to 2006, also sounded a positive note about ERISA.

“And on the whole, I think it has held up pretty well,” she said.

The “flexibility of the investments (allowed under ERISA) have allowed (it) to evolve and adapt to new plan structures,” Combs said. The law’s drafters “were wise to basically adopt the modern portfolio theory that you can invest in riskier assets if they (are) diversified.”

Although he called the law a “job well done,” Iwry was less sanguine.

“We’ve gone to a contribution that’s up to the employee. It’s not defined,” he said, lamenting the fact that tens of millions of workers have no retirement plan whatsoever.

This “shift to undefined benefits,” he said, can be reversed by the wider adoption of automatic enrollment features and longevity annuities in 401(k)s and other defined contribution plans.

Along those very lines, Iwry and his counterparts at the IRS announced guidelines late last week saying plan sponsors can include deferred-income annuities in target-date funds that are the default option for workers who don’t select a different investment on their own.

Regulators said plans can offer such funds even if they’re limited to employees over a specified age.

“By encouraging the use of income annuities, today’s guidance can help retirees protect themselves from outliving their savings,” he said in a statement that accompanied the news.

It was a note that he struck once more on stage Tuesday.

“Left to their own devices, without prompts, many won't save,” he said. That’s why, he indicated, government will continue to offer ways to refine and enhance defined contribution regulations to help sponsors and workers looking for way to improve retirement security.

“The fact is that we still have such a large percentage of our population who are not eligible and don’t participate. We need to correct that,” Iwry said.

Lurie, meanwhile, helped to finally resolve a minor mystery in the pension world, to the delight of the audience at Tuesday’s meeting.

According to the “urban legend,” as Lurie put it, the committee that was formulating the IRA was struggling to come up with an acronym that would be easy for taxpayers to pronounce.

So they settled on an IRS colleague named Ira Cohen.

More ASPPA conference coverage:
GOP Senate could propel retirement reform
ASPPA names Keck president

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Treasury deputy laments shift to &lsquo;undefined benefits&rsquo;

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