Secretary of Labor Hilda L. Solis
Remarks as Prepared for Delivery
Retirement USA Re-Envisioning Retirement Security Conference
October 21, 2009
Thank you for inviting me to participate in this event it is truly an honor to be here.
Thank you, Karen, for the warm introduction.
I want to thank both Karen Ferguson and Karen Friedman of the Pension Rights Center for their work to protect and promote the retirement security of American workers, retirees and their families.
I also want to thank Ana Berger, Barbara Kennelly, and Rich Trumka for their dedication and commitment to America's workers.
Lastly, I want to recognize someone many of you already know Phyllis Borzi. Phyllis has worked to protect and promote the benefits of America's workers throughout her career and is my new Assistant Secretary for Employee Benefits Security. I'm very excited to have her on my team.
Now, it is no secret that we are facing enormous economic challenges today. The unemployment rate is close to 10%, and families across this country are struggling to make ends meet. They have mounting bills, families to feed, tuition to pay, and retirements to plan for. This is why it is even more important that we have an active Department of Labor advocating for the needs of working people. Their worries, fears, and problems are the single most important focus of the Department of Labor.
As you know, September 2, 2009 marked the 35th anniversary of the enactment of the Employee Retirement Income Security Act of 1974. As we look back on the last three and a half decades of ERISA, we see some remarkable successes and some clear areas where improvement is necessary. The private pension system in this country has provided unprecedented retirement security for millions of American workers but millions of others are still left out. ERISA added critically important protections for workers and their families but the system has also let down too many workers over the years. Some of its protections have been eroded by the courts, by Congress and by regulation that has too often focused on making things easier for employers at the expense of protecting workers.
Today, American workers are at risk:
- They're at risk that their pension and health plans won't be there when they need them most, and
- They're at risk because they have been put in charge of investing their own pension assets, and they bear the risk that their investment choices will provide inadequate retirement savings for them.
Today, only half of the defined benefit plans that existed in 1975 are still around, while the number of defined contribution plans has grown by more than 300%. This dramatic transformation of the retirement plan landscape has left more workers and their families at risk than ever before. It's time to think of new ways to encourage employers to provide pensions for their workers, and new types of pensions that do not put the full investment responsibility on workers.
Employers are increasingly freezing and terminating the defined benefit pension plans that have been a major source of security in this country. The increasing volatility of these contribution obligations has encouraged many to abandon the defined benefit system entirely.
401(k) plans have increased savings for some, but these were never meant to be more than supplemental plans, and the recession has decimated too many accounts. The fact is that, even with reforms, 401(k) plans will never be universal, secure or adequate.
Some advocate giving up on the employment-based retirement system entirely and have turned to individual savings approaches. Individual savings are important, but I'm skeptical that in the long run they will be more successful than the employment-based system for ordinary, hard working Americans.
Within the Department, the key agency for pensions and health benefits is the Employee Benefits Security Administration. As I stated earlier, I am thrilled that Phyllis Borzi is leading my EBSA team. Those of you who know her, know that she has been a tireless advocate for workers. But Phyllis has also earned the respect of many in the business community because she listens to all points of view. She is fair and honest, and is an experienced consensus builder. Work closely with her and you will find her a creative and strategic thinker who will be a loyal ally.
The Administration is strongly committed to making the system work better for employers and employees. At the Department of Labor, we are committed to strengthening our enforcement efforts and improving our participant education and outreach. For many years, we have gone after employers who fail to forward participant contributions to 401(k) and health plans. More recently we have targeted service providers who charge unreasonable compensation to plans or whose conflicts of interests and self-dealing compromise the interests of plan participants.
This year for the first time we will focus on investigating and prosecuting criminal violations in contributory plans, such as 401(k) and health plans. We are very proud of the exceptional work that has been done by our EBSA staff in connection with the COBRA subsidy in the Recovery Act. As you know, individuals who lose their jobs are eligible for a new 65% government subsidy.
In the few weeks after the Recovery Act was passed, EBSA created an appeals procedure so that individuals, whose subsidy application was turned down by their employers, could appeal. Since the program began in mid-May, we have received and processed over 10,000 appeals, and more than 96% have been completed within the 14-day statutory deadline.
This is a wonderful example of a government program that worked and it worked because of the tireless dedication of our EBSA staff.
We are also committed to expanding participant protections. Among our priorities are:
- Improving 401(k) plans by improving fee transparency,
- Rooting out conflicts of interest,
- Increasing access to sound unbiased investment advice, and
- Trying to increase pension plan participation rates.
We are also supporting the expansion of the Saver's Credit and making it refundable.
In the near future, we will be issuing a Request for Information, asking the stakeholders in the retirement plan community on how best to encourage employers to offer plan participants a lifetime income stream rather than just a lump sum distribution. Through this dialogue we also hope to educate participants on the value of selecting a lifetime income stream or annuity product when they retire, so that they will not outlive their retirement benefits. Our goal in issuing this RFI is to determine what steps the Department might take, by regulation or otherwise, to enhance participant's retirement security by encouraging access to and use of lifetime income products. Please take this opportunity to weigh in once this RFI is issued the people in this room have much expertise and creativity and this is your opportunity to help shape our future policies.
We are also committed to supporting comprehensive health care reform, which is an important component of retirement security. Particularly for retirees and their families, employer-sponsored health care is rapidly disappearing. Outside the unionized and public employee settings, individuals retiring before Medicare-eligibility age are all too often left on their own to find coverage, and what they can find is often too limited and too expensive.
Now as we're closer to reform than ever before the insurance industry is rolling out the big guns and breaking open their massive war chest for one last fight to save the status quo. They're filling the airwaves with deceptive and dishonest ads. They're flooding Capitol Hill with lobbyists and campaign contributions. And they're funding studies designed to mislead the American people. Despite the insurance companies' misleading claims, the non-partisan Congressional Budget Office found that reforms will lower premiums in a new insurance exchange while offering consumer protections. So, while we welcome a healthy debate and the opportunity to defend our proposals, we will not abide those who would bend the truth or break it.
We must have comprehensive reform this year and, with your support, we can achieve that goal. We applaud Retirement USA for looking into ways of moving the system toward universality, security, and adequacy for the future, and we look forward to being part of this important dialogue.
These are big goals and may take some time but the task is something that must be undertaken. Today, too many workers aren't covered by pension plans, and too many people don't have adequacy or security in retirement. We need to work short-term to improve the current system, and we appreciate the work you're starting to meet these goals in a way that is fair to employees and is affordable for employers.
Phyllis and I look forward to working with you on these issues together we can make a difference and the time to begin is now. When it comes to the cost of health care, this much is clear the status quo is unsustainable for families, businesses, and government. Even families with health insurance are getting crushed by the rising costs my own father, who had a stroke last year has seen his prescription drug costs skyrocket to $500.
Every family has a story. We can and we must turn this around for our parents and our children and grandchildren - we must change this! I know that working together we can make that happen.
Thank you for your support and for the work you are doing. I look forward to working with many of you in the future.