Pension Rights Center Informs Senate Committee on Solutions to Retirement Crisis

Pension Rights Center Informs Senate Committee on Solutions to Retirement Crisis

The Pension Rights Center submitted a statement today from its Executive Director Karen Friedman telling the Senate, Health, Education, Labor and Pension Committee that “too many Americans are and will be facing an inadequately funded retirement with all the hardships that entails.”

PRC, a nonpartisan, consumer organization that works to protect and promote the retirement rights of workers, retirees and their families, submitted the statement for the committee’s February 28 hearing titled “Taking a Serious Look at the Retirement Crisis in America: What Can We Do to Expand Defined Benefit Plans for Workers.”

Among PRC’s ideas to address the crisis, Friedman suggested that Congress consider:

· Redeploying some of the billions of dollars in tax subsidies for retirement plans from high-income taxpayers to low- and middle-income retirement savers.

· Promoting defined benefit plans and secure hybrid plans, which reduce financial risk for plan sponsors while retaining defined benefit plan features.

· Creating new protections for pension plan participants and retirees when a plan sponsor transfers liabilities to an insurance company.

· Safeguarding plan participants and beneficiaries by providing increased protections for spouses in 401(k)s and ensuring that people get conflict-free retirement investment advice, among other recommendations.

· Exploring new structures to expand coverage for the future.

The nation’s retirement story is grim and justifies both incremental and bold action, Friedman said in the statement. The gap between what workers have saved and should have already saved is some $10.2 trillion. Balances of 401(k)-type savings plans, the most prominent employment-based retirement savings vehicle, are woefully inadequate—half of households have an account balance of $87,000 or less and those nearing retirement on average have amassed only about twice that amount for retirements that may last 30 to 40 years or more.

The problem stems in large part from the demise of the guaranteed-income-providing defined benefit pension plan, which once covered about 50 percent of the US workforce but now covers less than 10 percent.

Today, many workers have no retirement plan at work and for those who do, most are offered 401(k)-type savings plans that were originally designed to supplement defined benefit pensions. These 401(k) plans have proven inadequate to assure retirement security for many workers in that they shift the risk and responsibility of retirement saving, investing and conservation of assets from employer to employee.

For more information, contact Kate Pixley at kpixley@pensionrights.org