The National Institute on Retirement Security (NIRS) is calling for pension coverage expansion among private-sector employees in a new research issue brief.
The research, “Policy Ideas for Boosting Defined Benefit Pensions in The Private Sector,” responds to a request by the U.S. Senate Health, Education, Labor, and Pensions (HELP) Committee on information in growing pension plan coverage for private-sector employees.
It is authored by Tyler Bond, NIRS research director; Dan Doonan, NIRS executive director; Michael Kreps, Groom Law Group principal; John Lowell, October Three Consulting partner; Jonathan Price, Segal senior vice president and national retirement practice leader; and Zorast Wadia, Milliman principal and consulting actuary.
The brief highlights two key issues within private-sector plans: First, it says that plans should provide retirement adequacy for “the large majority of Americans lacking pensions” regardless of demographic profile and income. Second, NIRS’ research states that defined benefit (DB) pension plans should provide affordability and sustainability for employers.
NIRS’ research links the decline of pension plans to the current retirement insecurity among middle-class workers, noting that without DB strategies, these participants have little access in guaranteed income for retirement. Without a definite stream of income, most workers head into retirement with little reliability and increasing fears of outliving savings.
Thus, it offers the following recommendations for Congress to consider in broadening pension coverage:
- Lower the per-person rate of Pension Benefit Guaranty Corporation (PBGC) premiums for single-employer pension plans.
- Reduce the variable rate PBGC premium.
- Formally acknowledge in statute risk-sharing plans.
- Permit greater flexibility in the use of funding surpluses in DB plans.
- Allow pre-tax employee contributions in private-sector pensions similar to state and local government pension plans.
- Formally acknowledge in statute that retirement benefits should be fungible for each individual and allow transfers from defined contribution plans to pension plans (and conversely) in the vein of Revenue Ruling 2012-4.
NIRS also acknowledges expanding access to small employers, who face multiple barriers in providing retirement plan benefits.
“We remain encouraged that the Senate HELP Committee is taking action to address the retirement savings crisis facing middle class Americans,” Doonan said in a statement. “The recommendations set forth in this issue brief offer pragmatic ways to ensure more working Americans will have access to a pension that delivers adequate retirement income that won’t run out. As importantly, these policy solutions will help ensure pension costs are sustainable and predictable for employers. American workers and employers deserve a sustainable, win-win solution, and there indeed is a way to get there.”
The research comes after a February Senate hearing questioned the efficiency of defined contribution (DC) plans, and whether employers and employees would be best suited with DB plan coverage.
During the hearing, Doonan testified in support of pension plans, adding that Americans today face a worrying retirement savings gap and actively want to participate in pensions. He also argued that DB plans are the most economical tool in providing retirement income, offer workforce advantages to employers, are user-friendly for workers and have little leakage.
“I believe that if companies give pensions a fresh look, they will discover that win-win solutions are possible,” Doonan said.
SEE ALSO:
- NIRS Finds High Turnover in Workforces Shifting from DB to DC Plans
- DB vs. DC: Wednesday Senate Hearing Dives Deep Into ‘Retirement Crisis’
- Senate Committee Agrees that Social Security is Essential—Not Much Else
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
