Marriage, Property and [In]Equality: Remedying ERISA\u27s Disparate Impact on Spousal Wealth

Congress is considering pension reform in the wake of the tremendous loss in market value of retirement plans during the current recession. This article suggests that this is a historic moment to remedy a previously unidentified, unintended but profound gender disparity embedded in the federal law governing retirement plans in this country. It explores the common perception that while contemporary law and policy aim to facilitate equality within marriage, including in the area of property ownership, embracing equitable distribution in reallocating property upon divorce, the Employment Retirement Income Security Act’s (ERISA) structuring of retirement asset accumulation runs counter to this trend and in fact incentivizes the concentration of wealth in the hands of husbands rather than wives within intact marriages. It suggests that in order to remedy this inconsistency and facilitate equality within intact marriages, Congress should amend ERISA to confer an immediate ownership interest in one-half of the assets in each spouse as they are earned and contributed by one spouse, akin to a community property theory of ownership. Each half should then be allocated to a separate account, one in each spouses’s name. While this second step may be somewhat inconsistent with the view of marriage as a partnership, it minimizes the risk that one spouse will dominate investment decisions with regard to the assets. In the alternative, ERISA should at least provide that each spouse’s defined contribution plan be held in a joint account as a default rule. A less fundamental but equally important additional reform would be to allow married couples to equalize ownership by transferring unlimited amounts between their accounts without triggering income taxation and the 10% early withdrawal penalty. This would be akin to the existing unlimited marital deduction as applied to transfers under the current federal gift tax. The article concludes that, with these amendments, Congress could align federal pension law with the overall movement toward gender equality in marital property law