Part 2 Assignment 3

1) Lindbloom describes the concepts of incrementalism for policy making. Briefly describe a policy issue or area that you believe can be described largely by incrementalism. In other words, the policy issue that you describe should have progressed over time in an incremental fashion that is similar to the process Lindbloom describes.

One important issue to many American's is protecting their financial security in retirement. One way to help foster financial security is for individuals to invest in retirement plans through their employer. Many people hope to retire and live in the same manner as they did while they were working. Retirement policy has changed over time mostly in a series of small steps. The policies are built out from the current situation and changes are made by degrees. Many changes to retirement policy comes from what the existing market is like and responding to the current situation. In the existing market, 401(k) plans are the focus and in the past the focus was on defined benefit pension plans (i.e. traditional pension plan).

The PWBA, IRS, and PBGC are the federal governmental agencies primarily responsible for overseeing the employee benefits market. They are constantly monitoring the market, making corrections and enforcing the law to make sure the financial security of Americans is protected. Retirement policy has at times involved sweeping reforms, like when ERISA was introduced. But, by and large, changes to current laws and regulations are made slowly. Some believed the changes to retirement policy made by the Pension Protection Act of 2006 (PPA) were sweeping reforms. If you look at the pieces of the legislation individually, they were really just reactions or improvements to already existing laws and policies. However, the PPA also involved a very comprehensive change, so it also has some pieces of the rational-comprehensive model.

EGTRRA increased how much you could contribute to 401(k) plans and allowed for greater portability between benefit plans. Many of these changes were made permanent by the PPA. Changes made by the PPA to encourgage participant education and the changes regarding the rules relating to the provision of investment advice to participants strengthened already existing laws. The PPA also introduced new, stricter funding requirements for defined benefit plans in response to failures by employers to meet the minimum funding rules.

The following measures were added to increase retirement savings: improvements to automatic enrollment, allowing direct rollovers from retirement plans to ROTH IRAs, other portability measures, tax refunds to IRAs, savers credit, increased contribution and benefit limits (started by EGTTRA), and age 50 catch-up and contributions (also started by EGTTRA). The industry had created cash balance plans (a special kind of defined benefit plan) and the PPA legitimized this plan arrangement. The PPA also introduced a DB(K) plan (combines benefits of 401 (K) and pension plan) for small empolyers, which is something the industry studied for a couple of years before the law was enacted. Many of these changes represent changes to the status quo and respresent small changes to improve the already existing system.