Retirement Security: Challenges Confronting Pension Plan Sponsors, Workers, and Retirees
Alex Brill | Testimony before the House Committee on Education and the Workforce Subcommittee on Health, Employment, Labor, and Pensions
Sound retirement security policy for future retirees requires planning. Ensuring the goal of adequate asset accumulation at retirement necessitates sufficient savings throughout an individual’s career. To that end, workers need to be engaged; employers need to be responsible; and policymakers must ensure that pension law, tax law, and the Social Security system operate in a manner that promotes opportunities for private saving, appropriate retirement asset management, and sustainability and predictability. Together, these programs should complement the goal to strengthen the financial security of our workforce.
Pension issues represent a policy area of great concern and with serious long-term consequences. In my view, funding challenges facing defined benefit (DB) plans and inadequate asset accumulation and risk management within defined contribution (DC) plans are under-appreciated long-term risks facing future retirees. These risks are both macroeconomic and microeconomic in nature. From a macroeconomic perspective, inadequate national savings reduces investment, a key determinant to future economic growth and prosperity. At a microeconomic and organizational level, inadequate funding of DB plans poses risks to employers; retirees; and the government backstop, the Pension Benefit Guaranty Corporation.