At the height of the Great Depression, US President Franklin Roosevelt requested legislation to aid Americans in times of economic need. On August 14, 1935, Roosevelt signed the Social Security Act into law. The original Act provided benefits to workers upon retirement at age 65, and based the amount on tax contributions made during one's time as an active employee.
Per an analysis in the Monthly Labor Review, tax changes that developed [PDF] after the Social Security Act went into effect spurred the creation of private pension plans. In response, President John Kennedy established [PDF] the Committee on Corporate Pension Funds in March 1962 to research the effects of private pension plans on the financial stability of the economy. While the Committee investigated the topic, the Studebaker-Packard Corporation failed in 1964.
Intense competition between auto manufacturers led to Studebaker's demise. When the company folded, the inadequately funded pension plan did not have enough assets to finance the benefits owed to over 7,000 employees. According to an article in the Journal of Sociology and Social Welfare, Studebaker's bankruptcy highlighted the need for federal legislation to amend pension plan abuses and protect workers from corporate bankruptcy. Although the Committee presented their findings to President Lyndon Johnson in January 1965, Congress failed to pass any pension plan legislation.
A Congressional Research Service report published in May 2009 identified [PDF] the struggles in Congress during the 1970s to fix the pension system. Initially, the US House of Representatives and the US Senate pitched legislation within their respective labor committees. The Senate Finance Committee and the House Ways and Means Committee stepped in to assist legislative development. On September 2, 1974, President Gerald Ford signed the Employee Retirement Income Security Act (ERISA) into law.
Under ERISA, an employer is not required to set up pension plans. However, should it start one, it is held to certain specific minimum standards. Plan participants must be provided with information about the plan's features and funding. The Department of Labor, tasked with many of ERISA's enforcement responsibilities, sets standards for plan participation, including vesting, benefit accrual and funding.
Additional legislation passed since 1974 has added to ERISA's responsibilities. The Retirement Equity Act of 1984 [PDF] authorized spousal rights to benefits. The Pension Protection Act of 2006 [PDF] expanded advice for employees who participate in pension plans through 401(k)-type plans and individual retirement accounts.