Replacement refs and 401(k)s: Interesting perspectives

At the risk of dragging the issue just a little further than we might normally do, may I just briefly bring your attention to one last opinion related to the now-resolved NFL referees' lockout and its strange interconnection to the world of retirement planning.

As we learned, the issue at the heart of the labor dispute came down to the refs' retirement benefits, and their lack of interest in moving from a long-established and comfortable pension plan into the more tumultuous world of the 401(k), as had been offered as an alternative by the NFL.

In the end, the referees got what they wanted, and the switch in benefits did not happen.

A blog today on Time magazine's website offers the singing praises of this move, but they may not be what you want to hear, especially as you try to convince plan sponsors and participants of the ongoing value of the 401(k) as a better-than-nothing retirement vehicle.

Financial writer Dan Kadlec puts forward the notion that - and you have to follow the chain of events here closely - Monday's fouled-up calls by replacement refs ultimately led to a stronger case for defined benefits as the proper retirement solution for American workers.

It's a stretch, but he might have a point. The whole reason the much-despised replacement referees were on the field was that tricky dispute between the officials' union and the NFL.

The league, like so many other American employers large (General Motors) and small, hoped to drop its pension program as a cost-saving measure and move the refs into a seemingly less-attractive 401(k) plan.

As Kadlec puts it, their victory spoke to the frustration that many American workers - and, no doubt, those of you who have been trying to make the 401(k) seem like a perfect retirement solution, though it's becoming abundantly clear that the 401(k) alone is not the be-all, end-all of personal financial planning.

"A ton of data is now in hand showing that 401(k) plans have been a bust as a primary retirement security vehicle," he says. "Too many people don’t contribute enough, don’t diversify and don’t repay loans from the plans; too many take early distributions and try to time the market. Most with only a 401(k) plan have not saved anything close to what they’ll need to live for 20 or 30 years in retirement.

"The NFL refs have seen this and told the owners, No thanks. Their position was: Fund our traditional pension or keep watching as the replacements destroy your season. It was a power play rooted in the disgust that millions of workers have for their failed 401(k) plans—a disgust so broad and well understood that it’s beginning to foment change."

Kadlec's principal argument is that 401(k)s alone cannot - or for the most part probably won't - provide a source of guaranteed lifetime income, as the pension systems of the past used to.

And he notes that lifetime income solutions are being considered for 401(k)s as adaptations - such as the makeover proposed by Sen. Tom Harkin - but in the end, many of those ideas go back to reformulating the benefits once provided by company and government pensions.

We see over and over again that the pension system will never be the way it was, and that existing public pension systems are tremendously and dangerously underfunded. 

And more and more companies have opted to get out of their pension obligations while the getting's good and move in the 401(k) direction: It's not a perfect solution, or in some cases even a good solution, but it's what we've got. Unless you have some better investment ideas you can make the case for.

In the meantime, game on. Lucky refs.

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