September 20, 2012
For additional information:
Jason Hammersla
202-422-4652 (cell)

Employer plans the ‘heart’ of modern pension system, play integral role in U.S. retirement policy, economy

WASHINGTON, DC — “As the Senate Health, Education, Labor and Pensions (HELP) Committee engages in an important discussion about pension modernization today, we urge them to be mindful of the central role employers play in the nation’s retirement system,” American Benefits Council President James A. Klein said today.

The American Benefits Council represents companies that collectively sponsor or administer health and retirement benefit plans — including both traditional pension plans and defined contribution arrangements such as 401(k) plans – covering more than 100 million Americans. “We welcome a discussion of new ideas and approaches for improving retirement preparedness. Committee Chairman Tom Harkin and Ranking Member Mike Enzi have shown great leadership on pension issues, and we look forward to a vibrant and constructive dialogue on the important pension issues facing this country,” Klein said.

“Employer plan sponsors are the heart of our nation’s retirement system, upon which tens of millions of retirees and their families have depended for decades,” Klein said. “These plans provide Americans at all income levels with opportunities to save for retirement and represent trillions of dollars of economic investment. Therefore, we caution lawmakers against the introduction of mandates and programs that could disrupt this successful, voluntary system.”

Above all, the Council strongly supports the current tax incentives for retirement plan contributions. “Some have suggested fundamental changes to the tax treatment of retirement plans, and 401(k) plans in particular, but such proposals are seriously flawed and could be fraught with unintended consequences — especially for those with lower incomes, who find it the most difficult to save,” Klein said.

To forge a retirement system for the future, the Council suggests a number of improvements to manage risks, reduce costs, eliminate administrative burdens and improve coverage:

  • Promote financial and investment education. Retirement plan participants need access to tools that will enable them to save enough money for retirement, invest that money prudently, and avoid outliving their assets.
  • Encourage electronic communication and disclosure. Today, millions of dollars and man-hours are spent preparing paper documents that are rarely read. Participants of all ages and incomes increasingly prefer to access information online and believe that doing so makes it easier to act on the information.
  • Provide fiduciary safe harbors for employer plan sponsors. The greatest risk to employer-sponsored plans is the constant threat of ERISA litigation. Employers need clear guidelines for plan administration that insulates the fiduciaries from baseless lawsuits.
  • Facilitate flexible retirement strategies and plan designs. As the workforce evolves — working longer, adapting to family circumstances and becoming more mobile — employers will need latitude to tailor their retirement plans to their employees.
  • Continue to stabilize funding obligations. Pension funding stabilization, enacted this summer as part of the Moving Ahead for Progress in the 21st Century (MAP-21) Act, saved jobs, promoted economic recovery and protected participants.
  • Conduct a thorough review of pension insurance premiums. Congress recently enacted a substantial increase in premiums paid by employers to the Pension Benefit Guaranty Corporation (PBGC). Many critical issues remain to be reviewed in the coming year, including the actual financial condition of the PBGC, the ability of the PBGC to continue to pay benefits for the foreseeable future and the adverse effects of premium increases on jobs, plans, and the PBGC. Congress must be wary of some of the proposals advanced by the PBGC, whose governance and actuarial methodologies have recently been called into question by its own Inspector General. In an environment where traditional defined benefit plans are endangered, public policy should endeavor to preserve existing plans and encourage new plan formation, rather than penalize it.
For more information, or to arrange an interview with Council staff on retirement policy, please contact Jason Hammersla, Council director, communications, at 202-289-6700.

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The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.