ERISA permits distribution of pension benefits only to certain persons and at certain times. A vested participant does not normally have an immediate right to her accumulated saving, nor can she direct its payment to someone else. Pension plans are designed to provide workers with a secure source of retirement income, not to facilitate general purpose savings. Therefore, access to pension savings is restricted, either by the terms of the plan or by ERISA itself. ERISA’s rules governing pension plan distributions address three issues. First, the timing of distributions is restricted. Second, the anti-alienation rule generally limits the recipients of distributions to the participant and her beneficiaries, although a spouse, former spouse, or dependent child of the participant may enforce certain state domestic relations law claims against the pension by means of a qualified domestic relations order (QDRO). And third, the participant’s spouse is, in effect, designated primary beneficiary.

The special tax treatment accorded qualified deferred compensation implicates traditional tax policy concerns about equity, efficiency, and administrability. Consequently, the Code imposes tax controls on qualified plans that are distinct from and apply in addition to ERISA’s pension content controls. The favorable tax treatment of qualified plans provides an inducement to saving, and the tax controls seek to structure the incentive so that it induces retirement savings that would not otherwise occur. The central mechanism for channeling public assistance into additional savings, the nondiscrimination rules, are highly sensitive to workforce composition, income tax rates, and the availability of other tax-sheltered savings opportunities. Another set of controls indirectly limit the amount of the tax subsidy: caps on qualified plan savings, advance funding limits, and distribution timing constraints. In combination, the tax controls seek to properly target and control the tax subsidy. Against that framework, the chapter concludes by examining a number of proposals that would reform or replace the nondiscrimination rules, including some observations on the future of the (semi-) private pension system.