July 12, 2012 (PLANSPONSOR.com) - The defined contribution (DC) retirement plan industry has a “self-esteem problem” that must be addressed, one industry expert contends.
Brian Graff, executive director and CEO of the American Society of Pension Professionals & Actuaries, told the audience at the ASPPA’s Northeast Area Benefits Conference that the industry is constantly discussing the “crisis”—employees not saving enough for retirement. It would be more productive, however, to speak more positively and dispel the myths that exist in the industry.
“There’s definitely a tendency to attack the system,” he said.
Graff cited several common myths, such as the misconception that less than half of American workers are covered by a retirement plan. In reality, Graff said, there is an 80% retirement plan take-up rate for full-time workers.
Another myth is that the average account balances in 401(k) plans are minimal. But according to research from the Employee Benefits Research Institute (EBRI), the estimated average account balance for 401(k) participants (ages 55 to 64) with at least 30 years of tenure was almost $300,000 as of March 2012, Graff noted.
EBRI’s research also indicates that workers will not save for retirement without a workplace plan. The participation rate for no employer plan (IRA only) was 4.6%, while the participation rate for those covered by an employer plan was 71.5%.
This research underscores the effectiveness of 401(k) plans, Graff said. “This is a great system,” he added.