March 13, 2015
- Senate Committee Kicks Off Series of Retirement Security Hearings
- Council Elects New Officers and Board Members, Reports Record Membership Growth
Senate Committee Kicks Off Series of Retirement Security Hearings
On March 12, the U.S. Senate Special Committee on Aging held the first hearing in a new series on retirement security. The hearing, Bridging the Gap: How Prepared are Americans for Retirement?, discussed the various causes of financial insecurity during retirement, including increased longevity, lack of access to employer-sponsored retirement plans and increased health care costs.
In her opening statement, Chairwoman Susan Collins (R-ME) said that the purpose of the series on retirement was to better understand the scope of the retirement security problem, to identify the contributing factors to its rise and to develop “practical ideas we should consider to address the growing gap” between the amount Americans are saving and what will actually be needed during retirement. She emphasized the need for both public and congressional attention to retirement savings and noted that the measure she recently introduced along with Senator Bill Nelson (D-FL), the Retirement Savings Act of 2015 (S. 266), would help encourage more Americans to save for retirement (see the January 30 Benefits Byte).
Ranking Democratic member Claire McCaskill (D-MO) said in her opening statement that retirement security would be the top priority of the committee and emphasized the need for automatic enrollment to encourage low-to-moderate income workers to save. She also voiced her support for S. 266 as a bipartisan measure that would help workers without access to employer-sponsored retirement plans.
The committee heard testimony from the following witnesses:
- Jean Chatzky, financial journalist and editor for NBC’s Today Show, discussed various sources of financial insecurity in retirement, including increased longevity, the cost of health care, the “delayed adult lifecycle” causing children’s college costs and retirement to become “uncomfortably close,” supporting adult children and elderly parents simultaneously and debt. Her testimony offered some solutions, such as increasing auto-enrollment and auto-escalation, implementing S. 266 to expand access, emphasizing separate emergency savings to prevent retirement savings leakage and providing education on the importance of delaying Social Security benefits as long as possible.
- Alicia Munnell, director of the Center for Retirement Research at Boston College, offered research suggesting that while Americans have maintained the same proportion of savings to income for decades, they needed to be saving much more. She argued that these habits have contributed to a rising number of Americans who won’t be able to maintain the same standard of living after retirement. She stressed that having automatic systems in place is the best way to help Americans be prepared for retirement.
- Michal Grinstein-Weiss, associate professor and associate director at the Washington University Center for Social Development’s Brown School of Social Work, focused on the savings barriers for low-to-moderate income workers, such as less access to employer-sponsored retirement plans. She also voiced support for S. 266, as well as for the recently enacted Illinois Secure Choice Savings Program Act, the first state-mandated retirement plan initiative signed into law (see the January 7 Benefits Byte). She also encouraged the use of automated savings programs as a way to encourage savings.
- Rob Carmichael, senior vice president of human resources, training, IT and facilities at the Maine Savings Federal Credit Union, described the steps his organization has taken to support their employees and credit union members with financial management and education, including offering a free financial advisor and encouraging participation in their 401(k) plan.
In the question-and-answer session, Collins noted that many Americans sacrifice Social Security benefits by starting to take benefits at age 62 instead of waiting to age 70 and asked what can be done to make sure those nearing retirement age stay in the workforce as long as possible. Chatzky responded that greater education on Social Security benefits is needed and that informing participants of the actual dollar amounts they would sacrifice would help. Munnell also commented on the confusion caused by the Social Security Administration’s emphasis that full retirement age is 66, which leads people to believe that is the age where benefits have peaked, but in fact they peak at age 70.
Many senators, including McCaskill, Tim Scott (R-SC) and Thom Tillis (R-NC), discussed the need for further financial literacy, especially starting at a young age. The witnesses responded with a range of suggestions. Chatzky and Grinstein-Weiss both agreed that financial literacy needed to be included as early as possible. Munnell, however, stated that education has a limited ability to affect savings and stressed that people save when it is automatic with a system already in place.
Sen. Elizabeth Warren (D-MA) discussed how Americans’ retirement savings are being “eaten away” by high fees and broker “kick-backs” and asked how they can work to fix this issue. Munnell discussed how the fiduciary standard currently does not apply to Individual Retirement Accounts (IRAs) under ERISA and voiced support for the U.S. Department of Labor’s effort to change this with an updated “conflict of interest” rule (see the February 23 Benefits Byte), but she asserted that even with 401(k) plans that are covered under the fiduciary standard, there are many products with high fees that hurt future retirement savings.
In response to a question from Sen. Tim Kaine (D-VA) on whether there were resources comparing retirement systems across countries, Munnell recommended that the Organisation for Economic Co-operation and Development (OECD) provided a lot of resources on the different retirement systems among developed countries. The Council serves as a private sector advisor to OECD’s Pension and Insurance Committee. Earlier this week the Council hosted a Benefits Passport webinar on the OECD’s Pension Outlook 2014 report and also released a new Benefits Passport document comparing several multinational retirement system indexes.
Sen. Sheldon Whitehouse (D-RI) discussed how peoples’ decisions are highly influenced by the “default” option and noted that his legislation, the Automatic IRA Act of 2015 (S. 245), would help expand automatic enrollment in IRAs for employees who currently do not have access to an employer-sponsored retirement plan and asked whether the witnesses believed the idea had merit. The witnesses responded positively and Munnell noted the various state initiatives that have recently been introduced that aim to achieve similar results. A chart available on the Council website summarizes the leading proposals to expand retirement plan coverage and the Council recently released a new Benefits Blueprint outlining the latest state retirement plan initiatives, in conjunction with a February 26 Benefits Briefing webinar (see the February 26 Benefits Byte).
The Council’s latest public policy strategic plan, A 2020 Vision, provided several recommendations to help promote financial education. A 2020 Vision also made several recommendations that are provisions in S. 266, the Collins-Nelson legislation, including establishing an alternative automatic escalation safe harbor for retirement plans with higher default rates, changing the multiple employer plan rules to facilitate groupings of unrelated employers and expanding and improving the Saver’s Credit.
Council Elects New Officers and Board Members, Reports Record Membership Growth
At its Winter Board of Directors meeting on March 2 and 3, the Council’s board elected a new slate of officers, three new members of its Executive Board of Directors and new members of the Policy Board of Directors. Officers serve for one-year terms and then are eligible for election to other officer roles. Executive Board members, who are responsible for the Council’s governance, serve three-year terms. Officers and Executive Board members also serve on the Policy Board of Directors which is responsible for adopting the Council’s strategic public policy positions and directing the organization’s advocacy.
Elected to serve as Chair of the Board is Jay Kirschbaum, Senior Vice President and National Practice Leader for Willis North America’s Benefits Legal & Research Group. He succeeds Janet Boyd, Director of Government Relations, Tax and Benefits for The Dow Chemical Company, who assumes the post of Past Chair and remains an officer.
Joining Kirschbaum and Boyd among the Council’s board leadership are:
- Vice Chair Bob Holcomb, Vice President, Legislative and Regulatory Affairs, Empower Retirement
- Vice Chair Kate Ranalli, H.R. Rewards Technical Director, AstraZeneca
- Treasurer Allison Klausner, Assistant General Counsel, Benefits, Honeywell
- Secretary Jeff Mains, Assistant Vice President, Health Plans, AT&T
Newly elected members of the Council’s Executive Board are:
- Alan Glickstein, Senior Benefits Consultant and Actuary, Towers Watson
- Randy Moon, Senior Vice President, Learning and Organizational Effectiveness, Lowe’s Companies, Inc.
- Fred Thiele, Senior Director, Global Benefits, Microsoft Corporation
They join the following individuals who also serve on the Executive Board:
- Margery Brittain, Executive Vice President, Global Compensation & Benefits, MetLife
- Pablo Brizi, Group Vice President - Human Resources, Bloomin’ Brands, Inc.
- Preston Crabill, Director, Strategic Benefit Planning and U.S. Benefit Compliance General Motors
- Camille Donald, Assistant Vice President & Counsel, MassMutual
- Cindy Donohoe, Vice President of Benefits, BAE Systems
- John Ehrhardt, Principal & Consulting Actuary, Milliman
- Tresia Franklin, Director, Rewards and Employee Relations, Hallmark Cards, Inc.
- Vince Kerr, President, Care Solutions, UnitedHealthCare and Chief Clinical Officer for National Accounts, UnitedHealth Group
- Marianne McManus, Director of Benefits, IBM
- Boon Ooi, Vice President, Compensation and Benefits, Ryder System, Inc.
- Mark Poerio, Partner, Paul Hastings LLP
- Cliff York, Head of Retirement Plans, Western Hemisphere, BP America Inc.
Also elected to the Policy Board of Directors at this meeting were the following:
- Kathleen Emberger, Counsel, Cleary Gottlieb Steen & Hamilton LLP
- Vicki Guirato, Director of Benefits, McDonalds Corporation
- Aileen Guiney, Target Corporation
- Robert Imes, Vice President for Health Policy, Health Care Services Corporation
- Richard Linton, President, Large Institutional Corporate and Individual Markets,
- Voya Financial
- Karen Macke, Senior Vice President, Compensation, Benefits & HR Operations, Nationwide
- Julie Otto, Global Benefits Manager, 3M Company
- Christopher Rillo, Partner, Maynard Cooper & Gale LLP
- Dena Regan, Director of Global Benefits, Avaya
- Ben Sheppard, Vice President of Plan Sponsor Services, Schwab Retirement Plan Services
In a press release announcing the new Board, Council President James A. Klein said “We appreciate the dedication and commitment of our board and officers in support of our mission. It is a privilege for our Board leadership and our staff to work on behalf of our nearly 400 member organizations and the nearly 7,000 benefits professionals within those organizations who rely upon us.”
A the Board meeting, the Council reported for the sixth year in a row that the organization had concluded 2014 with a record high number of member companies: 392. This represents a 43% increase from 274 member companies at the end of 2008. Also, over the past few years the number of people within the member companies who are receiving our communications or otherwise using our services has more than doubled from approximately 3,300 to over 6,800. All Council members companies are encouraged to ensure that the broadest reach of individuals whose responsibilities involve benefits or compensation, either domestic or global, avail themselves of Council services and resources.
For more information on the Council’s governance and membership, contact James A. Klein, president, at (202) 289-6700.