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The collapse of Enron and the resulting consequences for participants in the Enron pension plan represent a watershed event for the future of the modern American pension system. In terms of national notoriety, this event is similar in magnitude to two prior public scandals in the history of the pension system. The first such scandal occurred during the decade of the 1960s: the closing of the Studebaker automobile plant and the termination of its underfunded pension plan. Shortly thereafter came the second scandal, heralded by Congressional hearings revealing the misuse of plan assets for personal gain by officials of the Teamsters union. These two landmark events raised public awareness of problems in the pension system and led to the enactment of the Employee Retirement Income Security Act of 1974 (“ERISA”). ERISA forms the underlying regulatory structure for the pension system today.
The Enron story challenges all of the stakeholders in the modern American pension system to reconsider ERISA’s regulatory structure. This structure derives from a paradigm that no longer exists today—the workplace environment and the business market structure of the 1950s and 1960s. The fundamental public policy question raised by Enron is how to modernize ERISA so that the pension system remains viable for American businesses and their workers in the twenty-first century.