New EBRI Research: Continued Employer Retirement Plan Cutbacks Could Require More Savings by Today's Workers

7/8/2004

From: Jim Jaffe of the Employee Benefit Research Institute, 202-775-6353 or jaffe@ebri.org

WASHINGTON, July 8 -- A new study that projects the impact of continued employer retrenchment of "traditional" pension benefits suggests that American workers may have to save significantly more to assure themselves of adequate future retirement income. Speakers at a May policy forum sponsored by the nonpartisan Employee Benefit Research Institute (EBRI) agreed that these trends would continue absent a current (and unanticipated) government policy to reverse them.

The July 2004 issue of EBRI Notes summarizes the May 6 forum, where a series of expert speakers reflected on the implications of new projections showing what would happen if all current defined benefit and cash balance pension plans were frozen, throwing significantly greater responsibility for retirement planning on future retirees. The projections, which were contained in the May 2003 EBRI Issue Brief, quantified the added burden for various groups segmented by age, income, and marital status (both publications are available on EBRI's Web site at http://www.ebri.org ).

While several speakers were critical of the trend away from defined benefit retirement plans, and pointed out that pensions tend to offer greater economic security for workers than defined contribution plans such as 401(k)s, nearly all saw continued movement in this direction as inevitable unless new policies were implemented to induce a change in direction. But there were few specific recommendations on what the new policies should be and little confidence that they would become a national priority in the immediate future.

"There are complex business, regulatory, and financial factors behind the trend away from pension plans, and the changes that employers are making increasingly put more and more responsibility for retirement planning on workers," said EBRI Chairman and CEO Dallas Salisbury. "Tomorrow's retirees may confront some tough times if today's workers fail to respond and prepare. This research is helping quantify who will be affected, by how much, and what the implications are."