Portman, who earlier this year was honored as one of PLANSPONSOR ‘s 15 Legends in the retirement plan industry, reported that surveys estimate that roughly 63% of Americans are more concerned about having enough money for retirement than they are about their health care or their employment. Furthermore, he said that up to 60% of Baby Boomers are unprepared for retirement and are likely to face either extended employment or severely limited resources after leaving their companies.
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Despite those significant statistics, he said there has not been sufficient political discussion about what can be done to correct it. Although the upcoming presidential election has prompted candidates to focus on Social Security solvency, retirement security also depends on personal savings and workplace retirement plans, which have not received much attention.
There have been few new ideas since the Pension Protection Act (PPA), said Portman, and there is a rising need for innovative and proactive, rather than defensive, efforts. Because the PPA has not had a real chance to take effect, he commented, expanding coverage and knowing who is covered, is difficult. Approximately 75 million people do not have employer-based retirement coverage, and, although automatic enrollment has lead to participation rates upward of 90%, many people still lack adequate coverage.
The tax-advantaged status of retirement savings programs is under increased scrutiny in Washington.
Social Security, Medicare, and Medicaid are growing faster than inflation and there is interest in spending more on health care and other such services, Portman noted.
The tax relief packages that President Bush set up in 2001 and 2003 -such as those that benefit families with young children-are due to expire next year, but their popularity will likely lead to their renewal. As a result, there will need to be an increase in taxes elsewhere or a reallocation of existing revenue to offset those costs.
Even in Congress, where attempts at increased disclosure -such as the bill put forth by U.S. Representative George Miller (D-California)-are being considered, efforts are often disconnected.
Portman said he does not predict the Miller bill will move forward this year. Considering the appropriate level of disclosure requirements, he noted that Congress tends to raise the number of mandates in a well-meant attempt at advancing transparency.
What those in Congress do not always realize, he said, is that such extensive prerequisites are as likely to discourage companies from offering retirement benefits, as they are to inform plan sponsors and participants.
"Given the revenue that the government currently devotes to retirement," said Portman, "and given the fact that defined contribution plans are now the dominant plans - taking over from the more traditional defined benefit plans - there are some questions that are going to be asked of our system."
Plan sponsors and participants will want to make sure that plans are managed efficiently. They will try to provide adequate preparation for participants so that the employees are properly diversified with the right types of investments. Plan sponsors will also want to ensure that all fiduciary responsibilities are being fulfilled, he said. Finally, whatever sponsors tell participants, increased clarity will require documentation and data to back up any claims sponsors or service providers make.
In regards to the retirement security public policy front, Portman said, "I see reason for hope, [but] I see also reason for concern." Portman urged vendors, sponsors, and advisers to get more involved in public policy.
Plans should be subject to regular scrutiny and adaptation, and all parties involved should make sure they and their clients are engaged in the process.
Summarizing his position, Portman quoted Bob Dylan, saying, "The times, they are a changin'," but noted, "There's still more work to be done."