NEWS RELEASE

September 10, 2008
PR-08/16
For additional information:
Jason Hammersla
202-289-6700

Council tells DOL panel: participant education essential to addressing ‘decumulation’ problem

“Once an individual has accumulated retirement savings, he or she faces another set of challenges in determining how to spend those savings,” Klausner said. “Attention to this issue is essential to ensure that retirement savings lead to retirement security.”

Klausner’s testimony identified the key shifts that have contributed to the decumulation problem: the decline in the number of defined benefit plans and the rise of defined contribution arrangements, the increased selection of lump sum distribution options by participants, and significant advances in life expectancy. “The combination of these three factors creates a clear public policy challenge,” Klausner said. “Imprudent management of savings in defined contribution plans and IRAs could result in retirees outliving their private retirement savings.”

Klausner also suggested a number of improvements for DOL to undertake, chiefly in the area of beneficiary education. “The most important thing that can be done is to educate Americans about the decumulation challenge,” Klausner said. This includes informing beneficiaries of average life expectancies, economic factors like market volatility and inflation, possible Social Security benefits, annuity and payment options, health and long-term care needs and more. This education could be provided in the school setting as well as in the workplace.

“The more that individuals understand the risks and challenges involved in the decumulation phase, the more prepared they will be to address these challenges successfully. The Department can play a critical role in this education process,” Klausner said.

“In addition to helping with education, it would be extremely helpful if the Department could continue working on establishing a legal environment in which employers can undertake innovation and broaden the decumulation tools available to their employees without triggering increased liabilities or burdens,” she added.

Klausner’s full testimony is available on the Council Web site. To arrange an interview with Council policy staff, 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.