Testimony for the House Education and Labor Committee – The Impact of the Financial Crisis on Workers Retirement Security, October 7, 2008. Additional Statement for the Record, Jack VanDerhei, Employee Benefit Research Institute (EBRI)
“Background The ability of future cohorts of retirees to have broadly defined levels of retirement security has been the focus of several congressional hearings as well as countless public policy analyses in the past. In recent years, there have been several reasons to revisit earlier studies and conclusions. Perhaps foremost among these is the long-term evolution away from traditional defined benefit pension plans to individual-account defined contribution retirement plans, such as the 401(k) (at least in the private sector). In addition to transferring investment risk from the employer to employee, this evolution has also resulted in many employees increasing their exposure to longevity risk as well as being put in a situation where they may make one or more of a number of choices that would adversely impact their eventual retirement income. Moreover, those employees who remain active participants within the defined benefit plan system may have already had unexpected modifications to the type of plan sponsored by the employer. Recent legal actions and lack of legislative clarity and/or regulatory guidance may suppress future activity in this regard; however, projecting future benefit accruals may prove problematic even for those employees still participating in a traditional form of final-average defined benefit plans.”
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