Several organizations spoke favorably about the retirement accounts.
“Employer-sponsored retirement savings plans are an indispensable building block of our nation’s retirement system,” said Randolf H. Hardock, managing partner at Davis & Harman LLP, who testified at the hearing on behalf of the American Benefits Council.
“Retirement plans, like those sponsored and administered by the Council’s members, successfully assist tens of millions of families in accumulating retirement savings, and will provide trillions of dollars in retirement income and a more financially secure retirement,” Hardock said.
Jack VanDerhei, research director of the Employee Benefit Research Institute (EBRI), spoke to the Committee about the concept of measuring retirement security. He cited EBRI research that found 43.3% to 44.3% of Baby Boomers and Gen Xers in 2012 are projected to have inadequate retirement income for basic retirement expenses plus uninsured health care costs, a drop of 5% to 8% from the Institute’s 2003 analysis. VanDerhei attributed the improvement to the increase in the number of employers using automatic enrollment for their 401(k) plans.
David C. John, senior research fellow for Retirement Security and Financial Institutions at The Heritage Foundation and deputy director of the Retirement Security Project (RSP), provided several suggestions to help Americans improve their retirement savings.
An automatic IRA is not the only path to expand retirement savings for workers, John pointed out, but called it a good start. “Employer-sponsored retirement plans, including 401(k)-type retirement savings accounts, are the best way for individuals to build retirement security,” John said.
John and Hardock both stated that automatic enrollment and automatic escalation are effective ways to boost plan participation by making it easier to save. John noted the need to extend the benefits of automatic saving to a much wider section of the population by combining several key elements of the current system: payroll deposit saving, automatic enrollment, low-cost, diversified default investments and IRAs.
Judy A. Miller, director of retirement policy for the American Society of Pension Professionals and Actuaries (ASPPA), cited data showing workplace savings as the key to promoting retirement security. More than 70% of workers earning $30,000 to $50,000 per year will participate in a plan at work, Miller pointed out, while fewer than 5% will save on their own through an IRA.
She used data from the Bureau of Labor Statistics showing 78% of all full-time workers with access to a workplace retirement plan, and 84% of those workers participating.