 |
NEWS RELEASE
July 21, 2009
Companies taking steps to weather economic challenges, maintain successful employer-sponsored retirement system
WASHINGTON, D.C. — "While the recent economic downturn has presented challenges to workers and businesses, the employer-sponsored retirement benefits system remains vital to providing financial security to millions of Americans," said James Delaplane, a partner in the law firm of Davis & Harman LLP, testifying before the U.S. Department of Labor ERISA Advisory Council today on behalf of the American Benefits Council. "The core success of the current system is reflected in the consistent value employees place on retirement benefits and the commitment shared by employer plan sponsors. While Council members share widespread concerns about the current recession, its impact on workers and particularly the struggles of those closest to retirement, we do not see a need for radical, structural reform of the employer system," Delaplane said. In the ERISA Advisory Council hearing of the working group on Approaches for Retirement Security in the United States, Delaplane discussed a number of critical issues and recommendations for improvements to the employer-sponsored retirement system. Defined contribution plan policy: "The 401(k) system today is not the bare-bones supplemental savings system that came into being in the early 1980's. At least 95 percent of employers make either matching or profit-sharing contributions into defined contribution plans, and many design enhancements and policy improvements have been adopted to improve retirement outcomes for participants," Delaplane said. His testimony included Council recommendations for expanded fiduciary safe harbors to assist sponsors in meeting their legal obligations and new incentives for automatic enrollment and escalation features. Defined benefit plans: "Recent market and economic conditions have increased the funding challenges for defined benefit plan sponsors but have also highlighted many advantages these plans offer participants from a retirement income security perspective. We feel strongly that policymakers must not give up on this important plan design," Delaplane said. The Council has recommended a number of short-term, temporary relief measures to remedy the unfortunate confluence of the market downturn and the new funding regime instituted by the Pension Protection Act of 2006, which has imposed unanticipated and extremely large funding requirements on many defined benefit plan sponsors. At the same time, the Council encourages permanent reform to help keep the defined benefit plan design a vital and viable choice for employers into the future. Delaplane's testimony relayed the Council's view that this reform should encompass predictability in the funding rules, hybrid plan certainty and favorable treatment for defined benefit plan accruals under nondiscrimination safe harbors. Encouraging workplace savings arrangements: In addition to recommendations for reform of existing defined contribution and defined benefit plan rules to encourage more adoption and better utilization of these plans, Delaplane outlined Council recommendations for new simplified retirement plan designs, new tax incentives for both employers and individual savers, expansion of workplace IRAs, improved promotion of retirement arrangements to small employers and expanded financial education and literacy efforts. "The Council has embarked upon a comprehensive policy agenda to broaden workplace retirement plan coverage. However, in seeking to expand coverage, we must not take steps that could undermine the system or and do not believe that a single policy response or mandate will address the system's shortcomings," Delaplane said. "A system that offers a range of retirement plan designs - from simple arrangements with low contribution limits and relatively modest compliance requirements to more complex designs with higher contribution limits and rigorous compliance requirements - will be ideally suited to robust workplace coverage and financial security in retirement for millions of Americans." For more information, or to arrange an interview with Council staff, please contact Jason Hammersla, Council director of communications, at jhammersla@abcstaff.org or by phone at 202-289-6700 (office) or (202) 253-5458 (cell).
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.
|
