There is an interesting article in the Guardian on the subject of structural and policy barriers in the United States to the elimination of poverty, which is addressed in a new book by a MacArthur award winning sociologist. I think the New Yorker has a new article out on the same topic, probably based on the same book, but I have been unwilling to use my one free, non-subscriber article access per month on it to find out.

It caught my eye because of something similar I have been thinking more and more about with regard to retirement and other benefits in American work life. A significant part of my practice is freeing up retirement, pension, 401(k), deferred compensation, employer provided group life and other benefits that are due to, but aren’t being paid to, American workers. It’s very gratifying work and, at the risk of sounding like one of those plaintiff-side personal injury lawyer ads that always trumpet the amount of money recovered for the injured over the years, I have recovered multiple millions of dollars for employees and retired employees through this work. What has really jumped out at me about this part of my practice over the years, and become very apparent recently, is the constant undercutting and underdelivering of promised retirement and other benefits to employees. It holds true across all socio-economic classes of employees – there was a day recently where I spent the entire workday on such issues on behalf of everyone from retired senior executives to upper middle managers to a group of rank and file employees. There is, in essence, a structural barrier to the payout of benefits across the board to the American workforce, and it doesn’t matter how high up the employment ladder you look.

Some of this is, consistent with the argument made in the Guardian article, structural and baked into the system. What is deferential review in the context of an ERISA case but a structural barrier against paying out benefits to employees? There are in many cases no reason for an ERISA benefits case to be analyzed as anything other than what it often is at heart, a breach of contract dispute, and yet because it involves employee benefits, a unique standard, unfavorable to employees but favorable to the plan sponsor, applies. Similarly, the use of equitable relief under ERISA to remedy gaps between what a retirement plan actually owes and what was promised, often many years before, to employees, has long been handcuffed by similar barriers to recovery, although recent developments in the case law are moving the standards on this issue in directions that substantially erode this systemic barrier to recovery of benefits.

And still yet more of it arises simply from the complexity of the system and the disjunct between the needs of employers – particularly smaller employers – to locate good outside administrators and the relative paucity of them. This dynamic leads to endless numbers of errors in the system that, barring intervention by a lawyer, often deprive employees of some substantial part of their retirement or other benefits, for a whole host of reasons. I could offer up many examples, but that would requiring turning this short blog post into a treatise.

And some of it, of course, is deliberate. Any lawyer working in this area can bore you to tears with war stories of cases where the withholding of benefits was deliberate and intended to reduce the benefit cost to the employer, or increase the fees of a vendor, or otherwise benefit someone other than the employee.

To me, I tend to think of all of this as a sort of tax on the retirement system, reducing the benefits owed to American employees across the board, for some more than others. My gut feeling is that all of this, combined, represents a 10% to 20% tax across the entire retirement universe, with employees underpaid by that much through some combination of administrative error, doctrinal barrier, and unnecessary cost.

Don’t get me wrong on this – I think, and my experience has been, that most employers and vendors in the retirement and benefit field have good intentions, but the few bad apples, when combined with the inherent barriers to full payment of employees that are baked into the system, complicates and reduces retirement and benefit payouts to the American workforce as a whole, once you look at the question with a really broad lens rather than focusing on a specific case. When you focus on specific cases, you are as (or perhaps more) likely to find a generous and well-run plan as to find one that shortchanges a group of employees – but if you look at the entire, enormous retirement benefit market as a whole in this country, I feel confident you will find that the amount of benefits that gets to employees is significantly reduced by this dynamic.