November 23, 2010
Principles for Strengthening America’s Retirement Policies
Related Studies & Resources
Business Roundtable is an association of chief executive officers of leading U.S. companies with nearly $6 trillion in annual revenues and more than 12 million employees. Member companies provide benefits to millions of American families. Retirement security is a pillar of the American Dream and Business Roundtable is committed to promoting public policies that will enhance retirement security for all Americans.
As America ages, promoting retirement security becomes an even more essential public policy goal. However, budgetary pressure on the existing retirement savings system threatens to undermine security and some policy changes to help Americans prepare for the future will, of necessity, be required in the years ahead.
Outlined below are the principles that Business Roundtable believes should govern that decision-making process.
Individuals, government, and employers each have roles in achieving retirement security. Three critical pillars – Social Security, employment-based retirement plans, and personal savings – must be sustained and enhanced if Americans are to achieve retirement security. Each individual must assume primary responsibility for their financial future, with government and employers assisting in that effort. Social Security and other government programs should continue to provide a floor of financial support in retirement. At the same time, policies should maintain the incentives for voluntary employment-based retirement plans and should continue to promote individual savings and investment.
CREATE A STRONG AND SUSTAINABLE SOCIAL SECURITY SYSTEM
The Social Security system must be reformed so that it can remain the bedrock of American's retirement security. Social Security must meet its promises to current retirees and those nearing retirement. But long-term benefits should be based on demographic and economic realities. Reforms that bring Social Security into long-term financial balance should be made as soon as possible in order to minimize disruption and allow Americans to plan appropriately. Further increases in payroll taxes will increase costs of employment and should be viewed through the lens of potential job loss and slower economic growth.
MAINTAIN STABLE TAX POLICY THAT PROMOTES LONG-TERM SAVING AND INVESTMENT
Tax rules that create incentives for employers to contribute to retirement plans and that encourage workers to save should remain a key component in America’s national retirement savings strategy. Retirement savings not only provide retirement security, they also provide long-term investment capital; fueling growth, creating jobs, and boosting economic security. Policies that promote long-term savings and investment offer the best way to sustain economic growth and improve retirement security. Current retirement savings incentives efficiently produce long-term retirement benefits for Americans that are many times greater than any temporary reduction in revenue collections. It is critical that policy changes not be influenced by short-term budgetary savings, as has often occurred in the past.
ESTABLISH A MORE FLEXIBLE REGULATORY REGIME
Government should provide a more flexible regulatory structure that fosters voluntary retirement savings. To compete in a global marketplace, employers must have flexibility to implement retirement plans that attract and retain qualified employees. Laws and regulations should safeguard retirement fund assets. They should not subject employers to costly administrative burdens, unwarranted litigation, or excessive penalties. Rules should ensure pension plans are systematically funded to ensure benefits are paid, but the current funding rules must be modified because they inadvertently impose volatile and unpredictable contribution requirements on employers. A robust and competitive marketplace of financial institutions, investment products, and services will best help Americans to plan for a secure retirement. The government should in no event mandate particular types of retirement plans or specific investment decisions or strategies for employer fiduciaries or individuals investing their own retirement savings.
PROMOTE INDIVIDUAL RESPONSIBILITY FOR RETIREMENT SECURITY
Policies should help Americans become better equipped to make long-term financial decisions. To achieve financial security in retirement, most Americans will need to make regular additions to savings. They will also need to make responsible decisions about when to retire and how to spend down their retirement savings prudently. Policies should not create disincentives to continued work or to phase into retirement. Financial literacy should be included in government policies that support world-class education and lifelong learning systems for all Americans. Employers should not be discouraged from educating workers about saving for retirement through tax-favored retirement accounts and should be allowed to help employees with investment decisions or other financial choices. Employers should not be discouraged from implementing wellness programs and all Americans should be educated about the need to consider potential health costs in retirement.