Policy-Making for Private Pensions

Abstract

This chapter states that a pension plan is a financial intermediary. A pension plan is also a contractual arrangement that employers and unions use to manage employees. It also transfers claims to income from an employee’s working years to his or her retirement years. New patterns of business organization gave rise to what may be called the employee’s pension problem. A pension plan creates financial claims on behalf of employees. The Social Security Act of 1935 had a profound effect on private pension plans because it profoundly changed the employer’s pension problem. The tax rules for retirement plans reduced a high earner’s tax liability. The differences between single-employer and multiemployer pension plans are reviewed. Officials in Congress and the executive branch agreed that federal policy should accommodate pension and welfare-benefit plans.