When a person -- or a committee of people, or a group of committees -- ignores the big picture by micromanaging the details, we use cute, sardonic clich?s to describe them.
"They cannot see the forest for the trees," we often say.
In the case of the nation's growing retirement savings crisis, Congress has responded to the problem of deforestation by chopping down trees -- literally. Last year, President Bush signed into law the Pension Protection Act of 2006, an ambitious collection of changes to pension and retirement savings plans nearly 1,000 pages long that will require even more pages of government regulations to implement it.
In the name of safeguarding 401(k) plans, lawmakers now are sharpening their focus on plan fees. To be sure, fees are an important part of the decision-making process for 401(k) plan participants and everyone agrees they should be plainly disclosed on benefit statements. It is entirely unacceptable that participants' costs should be hidden in any way. But legislation has been introduced by Representative George Miller, D-Calif., who chairs a congressional committee with jurisdiction over pension policy, that would add extensive new requirements to the substantial disclosure burdens that both employers and service providers face.
Asking workers to interpret complex fee structures in the name of financial security is like asking car buyers to select the kind of bolts for their vehicle in the name of automobile safety. A consumer wants a car that operates safely. Likewise, the overall return on a particular investment choice -- taking into account any fees -- is the relevant issue for a plan participant, not the intricacies of the myriad elements that comprise the fees.
Simpler, clearer benefit statements are a good start. Requiring volumes of new reporting that is impractical to collect and use only makes the retirement savings challenge more daunting. But more important than providing the statements, we have to make sure employees read and understand them.
The non-partisan Employee Benefit Research Institute's "2007 Retirement Confidence Survey" suggests workers are slow to adapt to a changing retirement system, that they overestimate the extent of their long-term care coverage and that they are counting on benefits that simply won't be there.
As we move toward a benefits system in which individuals are more responsible for their income security (in part due to public policies that make traditional benefit plans more difficult to sponsor), education in financial literacy needs to be a top priority. Proficiency in certain financial concepts should be a standard high school and college graduation requirement. The Social Security Administration's annual workers' statement information should include a rough estimate of the amount one needs to provide an adequate post-retirement income. Public sector and private foundations should team up to develop educational tools that can be used by employers, governments, and other stakeholders in educating workers about saving, investment and income management principles. These are solutions that can be implemented now, without controversy or contentiousness.
Another common clich? to describe people who focus on small details while ignoring bigger problems, is that they are "rearranging deck chairs on the Titanic." Despite the economy's waves and storms, the U.S. retirement system is not a sinking ship. But to make sure retirees have a safe journey, we should at least make sure they know how to swim.
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From the April 2008 issue of Benefits Selling Magazine • Subscribe!
