June 22, 2010 Helping older Americans find a way
to make their retirement more secure with a lifetime income was the goal
of a hearing of the Special Committee on Aging. Chairman Herb Kohl
(D-WI) brought together expert witnesses from government, industry and
the non-profit sectors to take a close look at the decisions seniors
must make in a defined contribution world to ensure they can have a
secure retirement after a lifetime of hard work.
So far, the focus of most of our education efforts
have been on encouraging people to save, but we have done little to help
the average retiree make the difficult choices about how to make their
savings last, said Sen. Kohl at the June 16 hearing.
With Americans living longer, the stakes are high
for not adequately managing ones savings.
Assistant Secretary of Labor for the Employee
Benefits Security Administration Phyllis Borzi and Deputy Assistant
Secretary for Retirement and Health Policy at the Treasury Department
Mark Iwry presented their early analysis of responses they have received
to their joint Request for Information (RFI) to determine how the
agencies might enhance Americans retirement security by facilitating
access to and the use of lifetime income arrangements.
Kohl responded to the RFI earlier this year by
sharing with the agencies
a report by the U.S. Government Accountability Office (GAO)
examining the options retired Americans have for converting retirement
savings into postretirement income. GAO also studied how pensions,
annuities, and other retirement savings products are regulated.
Kohl also sent DOL and Treasury a bill he sponsored
alongside Senators Jeff Bingaman (D-NM) and Johnny Isakson (R-GA) to
help Americans translate their retirement savings into retirement
income. The
Lifetime Income Disclosure Act (S. 2832) would require 401(k) plan
sponsors to inform participating workers of the projected monthly income
they could expect at retirement based on their current account balance.
The measure is patterned on the Social Security
Administrations annual statements, which are mailed annually to working
Americans to inform them of estimated monthly benefits based on their
current earnings. Congress mandated annual Social Security statements in
1989, and they have proven to be very useful to workers in preparing for
retirement, according to Kohl.
By providing similar information for 401(k) plans,
the Lifetime Income Disclosure Act would give American workers a more
complete snapshot of their projected income in retirement, he says.
Annuity Products
Much of the hearing focused on annuity
products. Kohl stressed that while annuities may be the right fit for
some retirees, they can also be highly complex and, in the retail
market, they have often been associated with aggressive sales
tactics. In 2007, the Aging Committee began examining some of the
questionable practices used by so-called senior financial investment
specialists in order to gain access to the retirement savings of older
Americans.
Many seniors targeted by unscrupulous salesmen have
lost their life savings because they were steered toward investment
instruments that were unsuitable for them, given their retirement needs
and life expectancy, says a news release from the committee.
In response, Kohl introduced S. 1661, the Senior
Investor Protection Act, which calls for the creation of a new grant
program to assist states in their efforts to protect seniors from
misleading financial advisor designations, which has been
included in both Senate and House versions of financial regulatory
reform.
He also worked with the National Association of
Insurance Commission on improving the suitability standards and the use
of professional titles in selling annuities. Kohl has continued his
investigation into misleading sales practices, recently sending a letter
to Bankers Life and Casualty after learning of the predatory tactics
promoted in their sales training program.
Kohl also sent a letter the day of the hearing to
GAO requesting that they conduct a review of how the current regulatory
structures ensure that institutions that sell annuities will be able to
meet the financial commitments they entail, and the types of state
guarantee funds that exist to protect purchasers of annuities, including
how they are structured, how they are monitored, and the circumstances
under which they have been used to compensate owners of annuities.
Panel Statements
Below are links to information presented by the
panelists and in writing from several organizations. Click on linked
names to read the statements.
●
Phyllis Borzi, Assistant Secretary of Labor, Employee Benefits
Security Administration, US Department of Labor, Washington, DC
●
J. Mark Iwry, Senior Advisor to the Secretary of the Treasury and
Deputy Assistant Secretary for Retirement and Health Policy, US
Department of Treasury, Washington, DC
●
Ted Beck, President and CEO, National Endowment for Financial
Education, Denver, CO
●
Kelli Hueler, Founder and CEO, Hueler Companies, Eden Prairie, MN
●
William Mullaney, President, US Business, MetLife, (representing the
American Council of Life Insurers), New York, NY
●
Lisa Mensah, Executive Director, Aspen Institute's Initiative on
Financial Security, Washington, DC
Sen. Kohl calls committee hearing October 21 on
401(k) reforms suggested by GOA report he requested