Report Finds Pennsylvania Lost $8.6 Billion in 401(k) Assets
CCJ calls on citizens to tell their stories about pension losses (call 877-841-9976) and to tell policymakers to address retirement security crisis for Pennsylvania working families.
Philadelphia and Allentown, Pennsylvania - A new report finds workers and retirees in Pennsylvania lost $8.6 billion in 401(k) assets as the result of stock market declines in 2001, precipitated by the bursting of the technology stock bubble and then made worse by investor reaction to corporate financial scandals. The study, published by the Institute for Americas Future and released today by Citizens for Consumer Justice and its Campaign for Social and Health Security, points to even greater losses for 2002, as financial markets have been rocked by revelations of corporate corruption.
As Congress debates 401(k) reform this month, the study reports that only 56 percent of employees in Pennsylvania have some kind of employer-provided retirement plan, leaving 44% of workers with little or no sources of retirement income besides Social Security. For those workers who have retirement plans, the report demonstrates that security in retirement has become increasingly vulnerable to serious disruption, as retirement plans require workers to bear all the risk. Over recent decades, employers have shifted away from traditional defined benefit pension plans, which guaranteed a specified level of retirement benefits and which are insured by the Federal government, to 401(k)- style defined contribution plans.
The report finds that growing dependence on 401(k) and IRA-type plans, now the predominant form of retirement savings for most workers, has shifted the risk onto individuals to manage their own investments in the financial markets. For example, workers at Enron, WorldCom and other companies were pressured to buy company stock, and were often unequipped or literally not allowed to diversify their holdings. In this new context, the stock market decline has devastated the retirement savings of millions of workers, forcing many retirees to continue working long after they had planned to retire. The most recent Census data show that since 1989, the percentage people aged 65 and older still employed in Pennsylvanias workforce has increased by 20% percent.
Anxiety about retirement income is a driving concern for voters in this falls election. CCJ and its coalition used the new report to call on candidates to address a retirement security crisis for Pennsylvania working families and to criticize actions by policymakers that they say have jeopardized retirement income. This report helps explain the growing anger and anxiety about retirement security for many people in Pennsylvania, whose retirement savings have taken a big hit, said Lauren Townsend, Executive Director of Citizens for Consumer Justice. Most politicians claim to want to protect pensions, but many, particularly House members, have voted for legislation that would undermine retirement security for millions. We will inform the public.
According to CCJ and its coalition, recent actions by Congress threaten to worsen retirement security for millions of workers. The report is sharply critical of legislation passed by the U.S. House of Representatives that the groups said would gut equal protection regulations for middle and lower income workers in company-based 401(k) plans.
Townsend declared, The House bill frees corporations to skew pension benefits to top executives at the expense of the rest of us. She called on the Senate to reject the provision, which has been described as a high priority for the corporate lobby, as the Senate takes up their version of a pension bill this month. The House bill rolls back current law protections, allowing employers to exclude more low and moderate wage earners from retirement plans and skew benefits to higher-paid workers. ''This provision is an outrage,'' said Harvard Law professor Daniel Halperin, one of the nations leading pension experts, to the New York Times. The language in the bill, he said, is an attempt to ''basically gut'' current rules intended to ensure that companies offer roughly proportional retirement plans to highly paid and more moderately compensated workers.
The House-passed legislation also makes it easier for companies to legally declare as solvent pension plans that may actually be financially shaky, by allowing them to assume a better return on the plans investments than market conditions may justify. The bill also loosens reporting requirements for companies with pension plans that have a small number of participants. Critics fear that less disclosure will make it harder to detect problems in these plans, which could jeopardize benefits for millions of workers. ''Small plans already have substantial relief when it comes to pension plan reporting,'' said J. Mark Iwry, who oversaw employee-benefits policy and regulation at the Treasury Department from 1995 to 2001. ''Relaxing the reporting requirements still further would make it harder for regulators to monitor compliance with the rules.''
CCJ was also critical of Congressional actions on Social Security, particularly the House leaderships support for partial-privatization of the program. In a near party-line vote in 2001, the House of Representatives voted to support a White House Commission on Social Security. At its inception, the Commission was mandated by President Bush to propose specific plans that would allow private investment of Social Security money, a controversial idea opposed by most Democrats.
Citizens for Consumer Justice provided an agenda for Congressional action and called on all candidates to state their views about it. They called for policy changes that would expand pension coverage, make 401(k)s more secure, protect Social Security benefits, reject partial-privatization of Social Security, and pass a Medicare prescription drug benefit that would cover all beneficiaries while controlling the escalation of prescription drug prices.
They also pointed to what the described as the four most egregious actions by Congress that threaten the retirement security of Pennsylvania workers and retirees. According to the groups, a majority in the Congress has:
Borrowed more than two trillion from Social Security to pay for tax cuts and government spending, with no plan to pay that money back and in spite of previously made promises to leave that money alone.
Proposed to partially-privatize Social Security, with plans that would risk our promise to retirees, reduce guaranteed benefits and divert $1.5 trillion away from Social Security over ten years.
Passed legislation in the House of Representatives that weakens equal protection legislation for company retirement plans, which could skew benefits towards top executives.
Passed a prescription drug bill in the House of Representatives written by and for the drug industry with no provisions for price containment despite opposition from major senior and consumer organizations.
CCJ promised a vigorous grassroots campaign to raise the issue of retirement security and to debate a real retirement reform agenda including:
Urging Pennsylvania citizens who have lost retirement assets to call CCJs toll free number 1-877-841-9976 to tell their stories;
Encouraging citizens to become more involved by attending one of the local town hall meetings CCJ will be holding around the state in the coming month.
Others present at the press conference in Allentown were: Lauren Townsend of CCJ, Rick Bloomingdale of the Pennsylvania AFL-CIO, Darryl Skrovanek, Human Resources Director for the City of Allentown, and Dr. Christine Nelson of the Lehigh County Conference of Churches.
In Philadelphia speakers included: Pedro Rodriguez of Action Alliance for Senior Citizens, Kathy Miller of the Pennsylvania Chapter of the National Organization for Women, and Councilwoman Blondell Reynolds Brown who read a resolution passed last week by Philadelphia City Council opposing any attempt to privatize or divert funds from social security into the stock market.
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