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Organization: U.S. Rep. Howard P. "Buck" McKeon
Date: February 24, 2009
McKeon Urges Closer Look at Workers' Retirement Security
Cautions Against Scare Tactics that Could Jeopardize Workers' Long-Term Savings
WASHINGTON, D.C. — The U.S. House Education and Labor Committee today held a hearing on "Strengthening Worker Retirement Security," at least the third such hearing since last fall examining how turmoil in the financial markets has impacted retirement plans. Led by Rep. Howard P. "Buck" McKeon (R-CA), Republicans on the panel have welcomed the examination of how workers and retirees are impacted by the current economic downturn — but they have cautioned that this economic crisis must not be used to foist a new, government-run retirement system on American workers. Moreover, Republicans have argued that Congress must be cautious not to undermine confidence in America's retirement savings infrastructure, which could scare workers out of the system and further weaken the plans that millions of Americans rely on for their retirement.
"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."
The panel heard testimony from Paul Schott Stevens, President and CEO of the Investment Company Institute, arguing that while reform is necessary, Congress must be careful not to overreach in a way that could actually harm workers in the long-term.
"This bear market is wider, deeper, more complex, and more unsettling than any downturn in generations, and has had a significant impact on retirement savings accounts. Average defined contribution account balances, according to one report, fell 27 percent in 2008. This downturn is especially hard on those close to retirement," said Stevens.
"But this 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. … Working Americans, too, strongly support the 401(k) system, and reject the notion that it requires an 'extreme makeover.' Nonetheless, it is important that we continue to improve 401(k) plans," Stevens continued.
In 2006, Republicans oversaw the most comprehensive reform of federal pension laws in decades with the Pension Protection Act. That law put in place strong new rules to ensure workers can count on the benefits they have been promised. From improved disclosure to requirements that make pension plans more financially sound, the Pension Protection Act was transformative for the nation's retirement system. At the same time, the legislation recognized that many more workers are now benefiting from defined-contribution plans like 401(k) plans, and it took important steps like easing automatic enrollment to ensure more workers can participate in such plans.
Going forward, McKeon noted, 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.
