NEWS RELEASE

July 10, 2007
PR-07/16
For additional information:
202-289-6700
Jason Hammersla
202-289-6700

Council testifies before DOL advisory panel on need for expanded financial literacy

She continued, "The Council views financial literacy as encompassing all stages of planning for and living in retirement, and should focus on both accumulating sufficient assets for income and health needs (including the possibility of requiring long-term care) as well as managing those assets in retirement so that they last as long as the individual lives."

Raising financial literacy rates is a long-term goal of the Council, Kahn noted. Specifically, the Council’s long-term strategic plan seeks to assure that by 2014, virtually all households should have access to some form of investment education and advice and 75 percent of households should have calculated the amount of retirement savings needed to maintain their standard of living throughout retirement, as well as the savings rate necessary to achieve this target. Some of the policy means the Council recommends to achieve this goal include:

• Making proficiency in certain financial concepts a high school and college graduation requirement;

• Increasing the number of workers who have calculated how much they need to save to reach their retirement goals. Over the last five years, this number has remained virtually stagnant with 43 percent reporting that they had made the calculation in 2007’s Employee Benefit Research Institute’s Retirement Confidence Survey;

• Including in the Social Security Administration’s annual workers’ statement information on how to calculate a rough estimate of the amount one needs to save in order to, when combined with one’s projected Social Security benefit, provide a replacement level income of at least 70 percent of one’s pre-retirement earnings; and

• Expanding public sector and private foundation development of educational tools that can be used by employers, governments, and other stakeholders in educating workers about saving, investment and income management principles.

Said Kahn, "Individuals must also understand how to appropriately invest that money to reach their savings targets. In this regard, Congress was very helpful in directing the Department of Labor to provide participants with on-line information regarding investing and diversification. But workers must have access to investment advice as well. Last year’s Pension Protection Act took an important step toward allowing investment advice in the workplace and we look forward to continuing to work with the Department of Labor as it issues regulations in this area."

Kahn concluded, "Individuals assuming more responsibility for ensuring personal financial security does not mean a critical role evaporates for employers and the government. To the contrary, the personal financial security challenge is so significant that the government needs to do more as well as to facilitate voluntary participation in this effort by employers. Employers and the government must take up the task of helping provide the financial literacy tools that individuals need to successfully assume their financial responsibilities."

Melissa Kahn’s full testimony is available on the Council Web site. To arrange an interview on this topic, please contact Jason Hammersla, Council director of communications, at jhammersla@abcstaff.org or by phone at (202) 289-6700.

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.