Augmenting ERISA with Market Discipline: Transforming Pension Plan Interests into Securities

Part I of this Note provides general background information about pension plans and details the problems that ERISA creates because of its dependence on trust law. Part II canvasses recent problems in pension plan governance that courts and pension plan members have faced in takeover defense and social investment contexts, demonstrating that ERISA’s use of trust law cannot respond adequately to these problems. Parts I and II draw on an analysis of ERISA presented by Professors Fischel and Langbein but argue that their proposals for changing ERISA inadequately address the problems they identify. Part III argues that the economic realities of the pension plan transaction support the conclusion that an interest in a pension plan is a security. Part IV describes the advantages that will flow from applying the securities laws to all pension plan interests and from using a market in pension plan interests as a monitoring tool. Part IV argues that the advantages of such an approach to pension interests would outweigh its costs.