“The program’s conclusion that there will be no more retirement is not only incorrect, it is dangerous,” cautioned the Profit Sharing/401(k) Council (PSCA) in a press release responding to the May 16 airing of Frontline’s “Can You Afford to Retire”. “If people believe that they will have to work until they die, they will stop saving for retirement,” PSCA noted. Significantly, from the standpoint of plan sponsors, PSCA says “The program also once again supports the adage that, for employers working hard to provide benefits to workers, no good deed goes unpunished.”
The program, which included excerpts from an interview with PSCA President David Wray, was based on a premise that hardly seems assailable these days – that, as introduction on the PBS Web site says, “The baby boomer generation is headed for a shock as it hits retirement: many of them will be long on life expectancy but short on savings” (see PBS Documentary Says Boomers are in for a Surprise ).
However, PSCA took issue with several of the positions put forth in the documentary. Specifically cited in a response posted on the organization’s Web site were:
- The notion that defined benefit pensions are inherently superior to defined contribution offerings.
- The possibility that assets in retirement plans may be subject to creditors in bankruptcy, “something the program puts in doubt,” according to PSCA.
PSCA’s response also highlighted background around some of the examples used in the documentary that places them in a different light.
First, there was the comparison of defined benefit and defined contribution approaches by the Nebraska state pension system, where workers have traditionally had a choice of DB or DC (see Taking It Personal ). PSCA notes "The discussion of the Nebraska state system, which was used to indict the defined contribution system, did not disclose that the comparisons used were based upon an assumed tenure of 30 years. While it may be typical for government employees in Nebraska to work 30 years for the same employer, that is not the case in the private sector."
PSCA also took issue with conclusions about participant investment behaviors as described in the FRONTLINE documentary by pension plan provider/consultant Brooks Hamilton.
In the documentary, Hamilton cites a study that he conducted that found lower paid workers receiving a far lower return on their investments than higher paid workers, ostensibly because they made less desirable asset allocation decisions. PSCA cautions that "We don't question Mr. Hamilton's analysis of his own client's plans. However, we would point out that his study was done in 1997, a highly unusual market period. Also, we know that there is little or no difference in investment allocation or investment return based on participant income levels for the millions of participants in plans maintained by The Vanguard Group." The PSCA response also mentions that the study was based on plans of the 15 clients Hamilton advises.
The PSCA response concludes, "Contrary to the program's conclusion, we have not reached the "end of retirement." "Employees should disregard what was presented in "Can You Afford to Retire" and, if they have not already done so, join their employer's 401(k) plan today."
The PSCA response is online at http://www.psca.org/frontline.html
For more about the program and a preview, go to http://www.pbs.org/frontline/retirement
You can view the program online at http://www.pbs.org/wgbh/pages/frontline/retirement/view/