A statement from Representative Howard P.
"Buck" McKeon (R-California) said Republicans
on the panel have welcomed the examination (see
They're Baaack….Hearings on
Retirement Security, 401(k) Resurface
) but caution that the economic crisis must not be used
to foist a new, government-run retirement system on
American workers, and that Congress must be cautious not
to undermine confidence in America's retirement
savings infrastructure, which could scare workers out of
the system.
"While our defined contribution system could
be improved, it would be a real mistake to dismantle it,
or nationalize it, as has been suggested in this
Committee in the past," said McKeon. "We have a
heavy responsibility in both the legislation we pass and
in the debates we undertake. In particular, I would make
clear that now is not the time to frighten people out of
the market. Triggering a widespread exodus from the
system would only exacerbate the market's downward
trend, while cementing these deep losses."
Paul Schott Stevens, President and CEO of the
Investment Company Institute, also warned that Congress
should not act in a way that could eventually harm
workers in the long run. "[T]his is not the time to
abandon ship, either on the 401(k) system or long-term
investing generally. We do not know how long this current
downturn will last, but history tells us that
participants who cash out of the market now will lock in
their losses and find it impossible to time their return
so as to share fully in the market recovery,"
Stevens said. He noted that working Americans support the
401(k) system and do not think it needs an extreme
makeover.
Retirement System in Peril
However, witnesses recognized that the economic
collapse has uncovered problems in our nation's
retirement systems that must be addressed.
"The events of the last two years shown how exposed
workers' retirement income is to market risk," said Dean
Baker, co-director of the Center for Economic and Policy
Research, according to a statement on the Committee's Web
site. "The collapse of the housing bubble has called
attention to the fact that the value of not only their
pensions, but also their homes, fluctuate with the
market, while their homes are an even more important
asset for most workers."
Alicia Munnell, director of the Center for
Retirement Research at Boston University, pointed out
that 401(k) plans have become the primary source of
retirement for most workers, and they were not designed
to be. "Evidence indicates that people make mistakes at
every step along the way. They don't join the plan; they
don't contribute enough; they don't diversify their
holdings; they over invest in company stock; they take
out money when they switch jobs; and they don't annuitize
at retirement," she said, according to the
statement.
The McKeon statement said Republicans will continue
to focus on reforming and strengthening the private
sector-based retirement system, making it easier for
workers to save, and encouraging employers to participate
in the system.
Meanwhile, Committee Chairman Representative George
Miller (D-California) said: "As we work to preserve and
strengthen 401(k)s and the other legs of the retirement
savings stool, we must also tackle these difficult
questions about the state of our nation's retirement
system as a whole and look to see whether we need to
create a retirement system that works for all Americans,
not just the fortunate few."