SURVEY SAYS – What Should the Obama Administration Focus On?

January 9, 2008 ( - As a Survey Says bonus question this week, I asked readers to weigh in on the big retirement issues that the Obama administration needs to focus on.

“Shoring up Social Security” was deemed “most important”, but barely made the “most likely” list.   That list was topped by “better fee disclosure” – which was, of the items ranked, the lowest ranked on the “most important” list.

Still, the importance of the focus on Social Security was made clear by the reality that more than half ( 57.3% ) of this week’s respondents labeled it as such – more than twice as many as identified “encouraging more employers to sponsor workplace plans”, which was cited as most important by a quarter of the respondents.

Also on that list (respondents could choose more than one, though not everyone did – after all, I asked folks to prioritize):

20.1% – Relief on pension funding

16.3% – Increasing contribution/deferral limits

13.0% – Expanding access for savings via payroll deduction IRAs

  4.1% – Better fee disclosure    

Second-Most Important

Social Security fared reasonably well on the list deemed second-most important, but it came in third there, nonetheless.   As for the list of second-most important, that was:

32.7% – Increasing contribution/deferral limits

31.0% – Encouraging more employers to sponsor workplace plans

25.6% – Shoring up Social Security

23.1% – Relief on pension funding

20.4% – Expanding access for savings via payroll deduction IRAs

14.6% – Better fee disclosure

And yes, you’ll notice that better fee disclosure also lagged significantly on this prioritization list as well.

That's ironic in some ways - or perhaps not - because "better fee disclosure" was a solid favorite in the "most likely" category.   In fact, nearly half indicated ( 47.9% ) felt it was the most likely point of focus.  

After that, the next three ran neck-and-neck; 26.5% chose "increasing contribution/deferral limits", about 26% were putting their bets on "encouraging more employers to sponsor workplace plans", and nearly as many ( 25.9% ) opted for "expanding access for savings via payroll deduction IRAs" - which was, after all, one of the few things the President-elect spoke specifically to during the campaign (see  Political Partings ).

Just 15.4% cited "relief on pension funding", and an even smaller 4.9% thought the focus would be on Social Security.

Most Dangerous

I also asked readers to speak to which retirement issue would be the "most dangerous."   Now, admittedly I didn't make any attempt to qualify how that definition should be applied.   Still, "relief on pension funding" topped that list, cited by 40% - well ahead of the 25.9% that picked "expanding access for savings via payroll deduction IRAs" (for those of you wondering how THAT could be dangerous, you might find this interesting:  IMHO: "Diss" Ingenuous ).

The rest of the "most dangerous" list was:

18.8% - Better fee disclosure

11.0% - Shoring up Social Security

6.9% - Encouraging more employers to sponsor workplace plans

4.1% - Increasing contribution/deferral limits

Now, despite my best efforts to provide a respectable starter list (and the flexibility to add other choices), one reader noted, "You need a category for least likely - shoring up Social Security and increasing contribution limits would both fall under that category."

"I would like to be left alone for awhile; we're not yet finished with the EGTRRA restatements," offered another.  "Whatever... it all equates to more work," noted another.  

But this week's Editor's Choice goes to the reader who asked a question that should give all of us pause; "I'd like to get the question answered: why is it the employer's responsibility to provide for the employee's retirement?"

And if you'd like to respond or comment to that comment (and I'd love to hear from you):

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Button-up the PPA. Get the IRS and the DOL on the same page. What happened to the idea of Pension Reform, meaning less government regulations.
Stop the testing and making contributors take money back!
We need relief on pension funding but after the abortive PPA, I think allowing Congress to react again without thought is another prescription for disaster
whatever... it all equates to more work.
Address employers' suspension of company matches. The three-legged stool is becoming two-legged.
During the campaign, the President Elect spoke of limiting income taxes for retirees making less than 50,000 a year. I have not heard anything more on this and it is something that needs to be done to assure a more quality life style for retirees.
Employee investment education, especially given the recent decline in the stock market and the fact that too many 'older' investors are still invested highly in equities.
Coverage and healthcare ... where healthcare costs are headed they could be the biggest retirement issue even for those of us who think we are "on track".
Shoring up Social Security could also be the most dangerous. Social Security is our skeleton in the closet and we need to fess up and own it by properly funding it. Set the same standard to the government provided retirement plan as that of sponsor provided retirement plans.
You need a category for least likely - shoring up Social Security and increasing contribution limits would both fall under that category.
These are all tactics and very short-term, narrow-focused ones, at that. We need to start with a some definitions, goals and a strategy. One of the first things to define is "what constitures a comfortable retirement"? Should we sponsor programs which encourage otherwise capable and productive individuals to be "put out to pasture" merely due to attainment of an arbitrary age? What is the role of government, business and the individual in securing assets towards a time when they no longer can be as productive due to age or disability? Answering these and other similar questions should be role of leaders of a country.
Do away with 401k non-discrimination testing as work force shrinks & cash flow becomes acute
I also expect there will be relief on pension funding.
Medicare is an imminent crisis, and needs to be addressed imediately, even before Social Security. How? Dunno.
The administration needs to focus on the long-term goals of retirement savings and not loosen various restrictions due to pressure from the community at large. Most people clamoring for more access to their money do not understand those restrictions are there to help them and not hurt them. Increasing access will only lead to broader problems as these people begin to retire and their Social Security benefits are cut due to the lack of proper funding for the program. If anything, they should focus on more ways to force people to prepare themselves, such as mandating Automatic Enrollment for retirement plans, and not allowing individuals to opt out.
Fulfilling retirement is simply "staying busy". Focus more on post-retirement plans. Like me, despite accomplishing the American Dream, you may have to work at age eighty-four, due to circumstances beyond your control. Fortunately, I am in good health, and working 50+ hours weekly keeps me busily involved in life, and goes a long way toward helping solve money problems. I have many senior friends who are financially solvent, but bored and depressed due to lack of productive activities.
As an actuary, I am quite concerned in how I will explain to clients the requirement to fund their plan. I envision some level of funding relief, although I fear how this will impact the future of the plans.
The administration should consider restructuring or merging governmental authority over retirement issues and qualified plans into one agency. Inefficiencies are an inevitable by-product of the current, bi-(tri-?/quad-?) furcated system. The three legged stool has collapsed and needs to be redesigned. We're doing nothing to identify root causes or propose solutions. The current structure
The government needs to demonstrate fiscal responsilbility in funding benefits for both retirement and health care. That demonstration must take place on a National and Local basis.
Raise RMD age
I wanted to check Most likely and Most Dangerous for the same item, but the survey would not let me. The same thing applies to the ability to choose the same item for Most Important and Most Likely.
Retirement plans need to be re-engineered. There are inherent problems with the current systems and most ideas are just fixes for a small part of the problem. I have no idea what the solution should be, but I do know the paths we keep going down are dead-ends. And the concept of 401k's only works for over minimum wage jobs--and the lowest wage earners need a solution that works for them too.
I think contribution/deferral limits are fine the way they are - most people cannot reach those limits anyway. I think the best way to help people save is to give them more, easier methods of saving directly from their paycheck.
I believe that the biggest priority will be the complete reform of Social Security in moving it from a 'pay as you go system' to a national system that combines defined benefit and defined contribution features to encourage personal savings for retirement along with annuity features. I believe that although sorely needed, it will happen when genetically engineering monkeys will be used to perform simple administrative tasks in the workplace.
I'd like to get the question answered: why is it the employer's responsibility to provide for the employee's retirement?
Increasing contribution/deferral limits is a nice gesture, but won't help the majority of Americans who either don't max out their savings now or worse yet, don't work for an employer who sponsors a plan. (If they're even lucky enough to be working.) Helping small employers implements IRA type savings plans at least gives more people access to some type of savings. Let's face it, it's easier to save money when you don't get your hands on it to start with.
Of the options listed, it would seem that at least three, maybe four, could be characterized as employer driven i.e. access-encourage-increase-disclosure. Since the new administration's mantra is about change maybe they can focus on the foundations of Social Security and funding and stay out of the administration. As fond as they are of the sloganesque perhaps they could make use of the great line from the Outlaw Josie Wales movie, "...we shall endeavor to persevere..." But recall that the old chief goes on to say, "It sounded really nice and they gave us this piece of rock candy. It's not for eating it's for looking through."
Less red tape for plan sponsors. Any fee disclosure or other disclosure rules need to be reasonable and not an undue burden on plan sponsors. The new administration should publically show support for Employee Stock Ownership Plans (ESOPs).
My feeling is that people can't afford to save any more than they already do. At least the people I know. Therefore, increasing deferral limits or allowing payroll deduction IRAs will only help people save who probably already save after-tax, outside of a qualified plan, for the future anyway, not the people who really need help saving. I'd rather see Social Security become something that can be relied on (yes, I know that was not the intent, but it's sort of the reality) before seeing any additional limit increases on personal savings.
DB / Pension Plans need to be heavily incented. DC plans alone are not the answer.
I would like to be left alone for awhile; we're not yet finished with the EGTRRA restatements. You think there's any possibility that the compensation I've already deferred can be classified as "not subject to Obama's tax hikes"? Sure it would mean yet another "bucket" of money and "box" on the 1099-R, but the beauty of deferring is gone if I have to pay higher taxes later.
The cost of retiree medical. No one can retire early anymore because of the huge cost of medical, especially if they support a younger spouse.
The growing disparity between public sector and private sector defined benefit retirement benefits. Underfunded public sector retirement plans are as big a problem as Social Security. While most of these issues are looming at the state and municipal level, the only way to fix the problem seems to be raising state and local taxes. These tax increases will potentially impede upon the ability of the federal government to raise taxes and fees to pay for other initiatives. Underfunded private sector pension plans are concerning as well. The dilemma across both sectors is that plans tend to become more underfunded in periods of economic strife (like now). Thus, initiatives to remedy the underfunded status tend to happen when governments and corporations can least afford it (thus the need for relief with respect to pension funding). At the end of the day, the consumer is being passed the bill through higher taxes and higher costs for products and services. The consumer can't afford it right now so it will be interesting to see how this plays out and what, if any, remedies are considered in this area.