This article analyzes current U.S. pension law and policy in light of the Enron implosion and considers the implications of this analysis for privatizing Social Security. The article begins by addressing the major shift in retirement funding risk from professionally managed plans to ordinary workers, beginning with the substitution of defined contributions plans for defined benefit plans, and continuing with the growing predominance of 401(k) plans. The article then examines the central problem of the Enron catastrophe: the heavy concentration of 401(k) plans in employer stock. From this context, the article then considers the essential premise of Social Security privatization - namely, that individuals should control their own retirement assets. The article concludes with policy recommendations based on this analysis to prevent the sort of financial devastation that Enron (and others) has brought.


Law and Economics

Date of this Version

March 2004