Congress Considers Market Impact on Retirement Security

While participants (and their plan sponsors and advisers) nervously contemplated the impact of the market tumult on their retirement savings, Congress held a hearing on the subject.

Aptly titled “The Impact of the Financial Crisis on Workers’ Retirement Security,” the hearing, convened by the U.S. House Committee on Education and Labor, included testimony from a number of experts. Committee Chairman George Miller (D-California) linked the decision to have the hearing to Speaker of the House Nancy Pelosi’s announcement following the passage of the $700 billion financial services bill that there would be a “series of hearings” to investigate the causes of the current financial crisis and identify next steps to protect homeowners and workers.

He cited a survey by the AARP that noted one in three workers has considered delaying retirement, and one in five middle-aged workers “stopped contributing to their retirement plans in the last year because they had trouble making ends meet.’ Of course, 78% of respondents to that survey—reflecting the perspectives of 1,628 individuals who were at least 45 years old, interviewed between September 3 and September 12—had not stopped saving, and 85% said they hadn’t prematurely withdrawn money from those retirement savings accounts. A similar survey by AARP earlier this year also indicated that about a quarter of workers had cut back on retirement savings—while nearly as many increased contributions—a question that didn’t appear in the latest survey (see “IMHO: The Rest of the Story“).

“Unlike Wall Street executives, American families don’t have a golden parachute to fall back on,’ said Miller. “It’s clear that Americans’ retirement security may be one of the greatest casualties of this financial crisis.’

Miller concluded with a prediction: “I expect that we will be back here repeatedly until we can ensure greater security for the retirement of hard-working Americans.’

Congressman Howard P. “Buck’ McKeon (R-California), the panel’s senior Republican, acknowledged that “today’s hearing is an important first step in examining how the ups and downs of the financial markets impact workers’ retirement security.’ He went on to caution that “while I commend Chairman Miller for holding today’s hearing, it is critical that Congressional oversight in this area not be limited to pre-election political theater. Members on both sides of the aisle should be permitted to examine these issues when Congress is in session, and with a full opportunity to explore the causes of the current financial crisis, the impact on workers and families, and what can be done to prevent such a catastrophe in the future.’

What the Experts Have to Say

The hearing included the perspectives of several experts. Here are links to more about the individual testimonies:

Jerry Bramlett, president and CEO of BenefitStreet, Inc.

Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research

Peter Orszag, director of the Congressional Budget Office (CBO)

Jack VanDerhei, research director of the Employee Benefit Research Institute

Christian Weller, associate professor of public policy at the University of Massachusetts-Boston

More links, including a Webcast of the testimony, are available here.