WINTER 2016

46 THE DISTRIBUTOR’S LINK
Jim Truesdell
James Truesdell is President of Brauer Supply Company, a distributor of specialty
fasteners, insulation, air filtration, and air conditioning with headquarters in St. Louis.
Mr. Truesdell is adjunct professor at Saint Louis University and Webster University. An
attorney and frequently published writer, he is the author of “Total Quality
Management: Reports From the Front Lines”.
THE EMPLOYER’S ROLE IN SUPPORTING
SUCCESSFUL RETIREMENT PLANS
For many years the traditional private company pension
plan for employees has been disappearing.
As a result many Americans are approaching retirement
with woefully inadequate nest eggs to fund their golden
years. Where retirement had once rested on twin pillars of
social security and company pension plans it now looks like
an insufficient social security
check stands alone for many
who have failed to contribute
to and build 401K savings
balances that were supposed
to replace the private
pension.
How did this come
about? Ironically it was a “do
gooder” attempt to protect
the working public from
inadequately funded pensions that began the move away
from those pension entities toward plans resting on
employee savings efforts.
The Employee Retirement Income Security Act (ERISA)
of 1974 was enacted to protect workers against the
problem of fluctuating markets, poor investment decisions,
over reliance on the employer's own stock, and and
malfeasance of plan managers. It came into law in the
wake of some high profile plan bankruptcies and widely
reported misappropriation of funds in both individual
company pensions and union plans. The intent was to
strengthen standards for plan trustees and company
representatives who incurred new fiduciary liabilities under
the law as well as voluminous new reporting
CONTRIBUTOR ARTICLE
responsibilities. The Pension Benefit Guaranty Corporation
sprang into being to provide contingent funding for plans
whose funds are not able to deliver on fixed benefits
promised. Companies, under the new law, had to pay
insurance premiums to fund the PBGCI. They faced required
deficiency payments when plans become underfunded even
if, as participants in some
multi-employer funds found,
there was little a company
could do to influence or
control the pension plan
management or investments.
Companies began to
sometimes carry contingent
underfunded liabilities on
their books as declining
interest rates and zigzagging
stock values began to create shortfalls in the money
available to meet benefits promised under those pensions
were were now labeled “Defined BenefitPlans” (so-called
because that is what they do -define what a specific pension
benefit would be upon a worker's planned retirement).
Costs of providing those pensions were continuously
climbing as required actuarial testing and needed fiduciary
insurance added to the company burden.
The answer sought by many organizations and the
alternative which is almost universally in place today is the
so-called “defined contribution” plan. This is the plan to
allow employee saving for retirement (401K or one of its
many variations) whereby the employer provides a tax
deferred structural plan to allow employee saving.
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