Academic journal article Washington and Lee Law Review

Contemporary Social Policy Analysis and Employee Benefit Programs: Boomers, Benefits, and Bargains

Academic journal article Washington and Lee Law Review

Contemporary Social Policy Analysis and Employee Benefit Programs: Boomers, Benefits, and Bargains

Article excerpt

Cleaning up this Godforsaken mess will become the political and moral struggle of our time.1

L Introduction

The foregoing quotation does not refer to environmental issues,2 civil rights concerns,3 the strains on our jurisprudential system,4 or the AIDS epidemic.5 Instead, the "Godforsaken mess" is this country's system of privately-sponsored employee benefit programs. Although others might argue that their favorite social woe is more compelling, there is little question that the economic issues associated with the aging of baby boomers, the largest demographic group in the United States population,6 will raise significant issues of domestic social policy. Such issues include intergenerational conflict, the basic structure of federal entitlement programs, and the relative responsibility of individual workers and their employers.

Problems are becoming particularly poignant as the oldest baby boomers begin to reach their fifties. The projected effect of the baby boom cohort on the current retirement income support system is staggering. Estimates indicate that by the time the youngest of the boomers reach age sixty-five, 56.3% of the federal budget will be devoted to Social Security, Medicare, and other retirement programs.' According to the Bipartisan Commission on Entitlement and Tax Reform, by 2012 "there will not be one cent left over for education, children's programs, highways, national defense or any other discretionary program."8 Optimistic demographic estimates indicate that life expectancies are increasing by seventy-two days each year, while at the same time fertility rates are dropping.9 Both factors contribute to the financial issues confronting older Americans.

The problems of retiring boomers and, concomitantly, younger generations that may be forced to support them, are exacerbated by deficiencies in the private pension system. The average "replacement rate" of a typical defined benefit pension plan is only 22% of final salary after twenty years of service.'o The lack of inflation protection in most defined benefit pension plans further contributes to the long term insufficiency of retirement income. Additionally, as individuals continue to retire under early retirement programs associated with corporate downsizing and as life expectancies increase, the long term issues are becoming increasingly acute. Assuming a 4% inflation rate, a pension benefit can lose 69% of its value over thirty years. " The trend toward defined contribution plans probably will not provide a solution for retiring boomers.12 As a result, some commentators and pension activists are advocating federal mandates requiring private employers to sponsor retirement plans.'3

Even such a dramatic increase in the federal regulation of private employment arrangements would not be unprecedented. Federal regulation has transformed workplace relationships in this country. Much of the early legislation focused on the collective bargaining process,14 child labor, wage levels, and hours worked.15 In response to other perceived problems, Congress fashioned a patchwork of regulatory law which shaped various facets of the employer-employee relationship. Concerns about job security culminated in many diverse obligations, such as notice requirements for plant closings"6 and guaranteed leaves of absence for the care of ill family members.l' Biased workplace practices resulted in federal prohibitions against employer discrimination directed toward varied classifications including race"8 and disability.'9 More obscure legislative efforts addressed employment of seamen on merchant vessels,2 established support programs for displaced homemakers,21 and limited the use of lie detector tests in the workplace.22

Perhaps nowhere has the federalization of a sphere of the employment relationship been as extensive as in the arena of privately-sponsored employee benefit programs. Beginning in 1974, Congress dramatically expanded federal regulation of the terms of employment arrangements when it passed the Employee Retirement Income Security Act of 1974 (ERISA). …

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