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Seeking the perfect plan for retirees

February 3, 2025

This article is one of a four-part series written by Lisa Germano, CPA, JD, that reflects on the retirement ecosystem 50 years after the Employee Retirement Income Security Act of 1974 (ERISA) was enacted. Browse all articles in the series here.

With profit-sharing plans now the norm, we must educate and incentivize American workers on how and when to save.

By Lisa Germano, CPA, JD 

In 2024, the 50th anniversary of the Employee Retirement Income Security Act (ERISA) was celebrated for the results it achieved and critiqued for its failures — with debates about both creating lively and informative discussion. Practitioners widely discussed the impacts ERISA had on the American economy for establishing a new industry known today as the “401(k) market” and for the outcomes attained (or not) by American private sector workers.  

On its anniversary weekend, many who were part of its creation and those who led government efforts toward its enactment joined with ERISA practitioners who came into this profession in its aftermath for in-person meetings held in Washington, D.C. Although a celebratory and delicious cake was shared, the passion for ERISA’s history and concern for its future led us to discuss, debate and predict the future. 

Based on the current environment and considering the history leading up to ERISA’s enactment, there was more to discuss than time allowed. I can only imagine the conversations had over the 10 years it took to enactment — there are so many viewpoints to ponder. 

This article will offer my reflection as having participated in those robust and thoughtful conversations with the hope it will spark thoughtful discussion within your community, both professionally and personally. 

To create a lens into the future, let’s first break down in simplistic terms the American private sector retirement spectrum as I see it: 

  1. Employers are increasingly in the spotlight to help their employees retire at the right time. This includes the responsibility to balance current pay with deferred pay into the retirement plan and educate employees about investments, lump sum-to-annuity retirement income, decumulation strategies, and costs of mutual funds and fees. 
  2. For the first time, a generation (Baby Boomers) is testing post-ERISA retirement in a 401(k) world — one without the private pension income older Boomers and their parents used that was key for many middle-class workers. 
  3. Generations following Baby Boomers see retirement in a different way. It’s likely we’ll need new definitions and employers will have to be flexible to changing employee needs. 
  4. Bringing back some type of guaranteed monthly payment will help workers plan for retirement and offer more security in retirement years. The ideal environment could be an ERISA-covered plan with its fiduciary bumper guards for fee oversight to ensure participants do not unnecessarily spend savings or pay unreasonable fees.

Thanks to ERISA, we do not need to worry about employers failing to properly fund retirement plans or improper investments: the U.S. Department of Labor (DOL) has that covered with its enforcement of timely participant contributions and prohibited transactions for  certain parties or investments. 

The tax code under ERISA provides details on proper funding of employer contributions and  plan requirements to communicate to participants about features. The IRS monitors compliance with those terms. 

With plan funding and compliance security in place, and participant behavior currently engrained in the economics of 401(k) plan marketing and communications, we are on our way to closing some gaps in the current environment based on historical review of participant behavior and employer response to guidelines and incentives. 

A recent Employee Benefits Research Institute (EBRI) policy forum1 furnished fresh statistics for the current and future integration of Social Security with private sector-defined contribution plans — and the retirement income outcome for different wage populations. 

Using both IRA and defined contribution balances, the study revealed:

  • Social Security is a vital part of individual retirement incomes, especially among lower-income workers. 
  • The Social Security system works together with the defined contribution system, which are projected to provide similar levels of average replacement rates across individuals of all incomes now in their 30s.
  • Lower-income individuals receive larger income levels from Social Security, while higher-income individuals receive larger shares from the private system. 
  • Middle-income individuals rely heavily on the private system to provide sufficient replacement income in retirement.
  • The defined contribution system is improving, so that future retirees can expect more retirement income from DC plans than those retiring now.
  • Cutting Social Security benefits would have a dramatically negative impact on workers’ retirement security.

If we agree that Social Security will remain the main retirement source of income for lower-wage earners, that income group can better utilize Roth IRAs. Creating an income bridge to leave Social Security untouched until age 70 for these earners could provide an enhanced retirement income cushion. 

If we also agree that the 401(k) was established to assist the middle class to save for a retirement income congruent to their preretirement income, then the focus should be on this group of future retirees. We must create incentives to entice this group of workers to participate in the salary deferral feature. 

Workers who are in the upper middle class and above are left to create their own retirement income. A conclusion can be drawn that they do not need the 401(k) plan to fund sufficient retirement income due to their career earnings wealth. 

We know there are outliers in all these generalizations, but if we are crafting a view to the future, it helps to keep a focus on the areas needing the most assistance. Public policy works best in a focused arena with advocacy toward specific goals. In an ideal world, the goal is identified and then solutions brought from compromise among differing views. 

The data shows these actions could help secure future retirees’ financial security:

  1. Keep Social Security intact for lower middle class and lower-wage earners. 
  2. Begin educating students as early as elementary school about budgeting and the differences between saving and investing. 
  3. Educate today’s middle-class workers about their personal responsibility to prepare for their own retirement and help them understand how to accomplish this goal. Provide personalized tools to help them plan. 
  4. Continue to provide incentives for small business employers to fund and maintain retirement plans. Small businesses are among the higher-wage earners, but their income is often not consistent. Although we can generalize, often these owners put off their own retirement income savings to fund their businesses. Wealth for small business owners is often the most centralized and thus nondiverse investment in their portfolio because it is the value of their business. It’s critical to offer incentives to business owners to encourage them to save. 

This article seems all about 401(k) plans — profit-sharing plans. And it is! The salary deferral option offered in many profit-sharing plans is the most popular choice for employers, not the pension plan. Thus, the future of retirement should focus should be on this plan type and its incentives and features. 

The pension plan insured by the Pension Benefit Guaranty Corporation, an agency under the DOL and created by ERISA, is not as prolific today. Even though most of us at that 50th anniversary celebration wish an employer pension would continue to be the ideal for American workers, we’ve reluctantly accepted the reality: We’re not going back to that environment. 

 A summer 20242 study of 3,600 American retirees gives us a window for the future: how to improve results, see what is successful, and further plan for the next group of retirees. 

In this study, among the 58% who retired earlier than expected, the most common reasons were having a health problem or disability (38%) or changes at their company, such as downsizing, closure, or reorganization (23%). Longevity planning must be part of the education goals. 

Sixty-eight percent of retirees with debt reported having credit card debt outstanding. Teaching how to use other forms of loans and debt management is critical.

Given their economic circumstances during retirement, half of the retirees said they saved less than what was needed for retirement. One in three said they saved the right amount, and 17% said they saved more than what was needed.

Knowing for sure that I will not be around to celebrate ERISA’s 100th anniversary, I anticipate there will be many new legislative debates and proposals to create an ERISA 2.0. The piecemeal nature of legislation in the past 50 years and the whiplash — both legislative and regulatory — that occurs when there is a change in presidential administrations in Washington, D.C., can hinder achieving any federal goal. 

Perhaps a national retirement income policy that implements lessons learned as well as the dynamics of a fast-changing worker economy, the proliferation of small businesses, and technological enhancements to improve education will improve results for future retirees. With such a policy, stability can co-exist with flexibility. 

Lisa Germano, CPA, JD, is president and general counsel at Actuarial Benefits & Design Company in Midlothian. Lisa’s professional career is everything ERISA: tax code compliance and fiduciary governance to help employers find the right retirement plan solution for their workers. She incorporates the rich history of ERISA and its aftermath to help workers plan and achieve their personal goals for the lifetime chapter that starts when full-time work ends. She is a long-time VSCPA volunteer and former chair of the Board.


  1. 94th Public Policy Forum, Dec. 5, 2024.
  2. 2024 EBRI Issue Brief, Nov. 7, 2024.