The struggle over the fate of defined benefit pensions continues to dominate Institutional Investor’s annual ranking of the 40 most important people in pensions. After the election year of 2014, 2015 seemed quieter, but that may be deceptive. In II’s third annual Pension 40 ranking, there are 15 new names, less than last year’s 22 but emblematic of a rapidly evolving situation. The U.S. presidential election will be held in 2016, with a change in administrations that will almost certainly sweep new names to the fore. In any event, the Obama administration appears to recognize that the finish line is in sight: Stalwarts of defined benefit pension plans, like Phyllis Borzi and Judy Mares at the Department of Labor (No. 5 and 40, respectively) and J. Mark Iwry at the Treasury Department (No. 12), are finally getting traction on long-debated ideas such as fiduciary duties for financial advisers.
But the road is never easy. In late 2014, Congress, in a rare fit of bipartisanship, passed the Kline-Miller Multiemployer Pension Reform Act, which allows Taft-Hartley plans to restructure when it becomes apparent they are failing. (The International Brotherhood of Teamsters’ Central States Southeast and Southwest Areas Pension Fund, run by No. 21 Thomas Nyhan, became the first to restructure under Kline-Miller.) The legislation may be necessary, but it’s still a blow to the foundational federal legislation from 1974, the Employee Retirement Income Security Act (ERISA). Late in 2015 the Department of Labor offered guidance on how states developing retirement savings plans for employees at companies that lack pension benefits could work within ERISA. This represents another shift: Those plans have been driven by state officials, such as California State Senator Kevin de León (No. 6), Washington State Senator Mark Mullet (No. 17) and Oregon Treasurer Ted Wheeler (No. 20). And they’re savings plans, not defined benefit plans.
But for all the hope these plans provide, decision makers in states and cities saddled with underfunded public pension plans dominate the top of the ranking. And that’s not good. Illinois Governor Bruce Rauner (No. 1), New Jersey Governor and GOP presidential candidate Chris Christie (No. 3), Puerto Rican Governor Alejandro García Padilla (No. 7) and Chicago Mayor Rahm Emanuel (No. 9) are all sinking in fiscal quicksand. Rauner was elected in 2014 on the promise to fix Illinois’ pension mess, but the courts will probably block change that involves a reduction in benefits. And these plans are unlikely to be bailed out by the markets. As hedge funder Raymond Dalio of Bridgewater Associates (No. 19) warns, the longer-term view looks grim: an aging economic recovery and the prospect of lower returns over the next decade. Dalio offers some paths to stability, but solutions are neither easy nor fast. Profiles of Dalio and other members of the Pension 40 who don’t make the top ten can be found here.
The Pension 40 was completed under the direction of Senior Contributing Editor Robert Teitelman. Individual profiles were written by Editor Michael Peltz; Associate Editor Kaitlin Ugolik; Content Editor Anne Szustek; Senior Writers Frances Denmark, Imogen Rose-Smith and Julie Segal; and Research Staff Writers Jess Delaney and Georgina Hurst.