The government should remove obstacles that keep employers from offering 401(k) plans, said Paul Schott Stevens.
The retirement savings industry is a major focus for mutual fund firms, Paul Schott Stevens, Investment Company Institute president and chief executive, said yesterday at the ICI’s 50th annual general membership meeting in Washington..
The meeting, which runs through tomorrow, is attended by more than 1,200 members.
The most important issue for shareholders is financial security in retirement, said Stevens.in his opening remarks.
The introduction of the 401 (k) plan in 1981 was a significant event for the retirement industry as it created a system in which today 50 million workers have some $3 trillion in assets invested. From 1999 to 2006, the average account balance of a 401(k) plan grew 80% to $121,000 from $67,800.
System-wide, assets increased 55% during the same time period, according to the ICI.
Half of those assets are invested in mutual funds, where participants pay about 71 cents per year on every $100 invested, Mr. Stevens said.
The 401(k) plan is one part of retirement planning, but the system has also developed in parallel to the declining role of defined benefit plans and the potential shortfall facing Social Security.
“Another important contribution is personal savings,” Mr. Stevens said.
“But it’s hard for a lot of working people to do. It makes it even more crucial that we continue refining and improving the employer-based retirement system.”
That said, Mr. Stevens said government policymakers should look at the obstacles that keep employers from offering 401(k) plans and try to remove them.
“Any employer thinking about offering a 401 (k) plan today encounters a profusion of regulatory requirements, head-scratching complexities and sobering legal liabilities,” Mr. Stevens said.
Fifty-six percent of small private sector employers do not offer a pension plan because of the complexities involved, he said, and 30% of those workers who have access to 401(k) plans don’t take advantage of it.
To get more employers to offer plans, they need more concise information, Mr. Steven said.
“The Labor Department has proposed some good standards,” he said. The DOL is also working on improving information to plan participants.
The industry needs to collaborate, Mr. Stevens added.
“I hope that the various industries involved will resist the temptation to lobby Congress for legislation to enshrine one approach over others,” he said.
