The challenges to the country’s retirement system are vast and complex.

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A freshly released and exhaustive report from the GovernmentAccountability Office, a non-partisan agency often referred to asCongress’ watchdog, paints an unflattering picture of the nation'shybrid public-private retirement system:

  • The Social Security trust fund is hemorrhaging cash and expectedto be depleted within two decades, if not before.

  • The Pension Benefit Guaranty Corp.’s multi-employerinsurance program is also facing insolvency.

  • Meantime, only half of Americans have access to workplacesavings plans.

  • Wage stagnation and rising health care costs have conspired tomake saving for retirement impossible for low-income Americans.

  • Those that make enough to save are shouldering the burden ofnavigating investment and longevity risk virtually on their ownthrough self-directed 401(k) plans, as the list of employers thatare sued for fiduciary breach in the plans they sponsor grows.

Industry stakeholders, regulators, consumer advocates, academicswho focus on retirement security, and the legal communityare well acquainted with the picture painted by GAO.

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While the facts are not new, the course GAO recommends in thereport is.

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Much of the agency’s previous and extensive work on retirementissues was the result of specific inquiries from members ofCongress. But this time around, it is the GAO that is making arequest of lawmakers.

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In “The Nation’s Retirement System,” which reads at morethan 150 pages, GAO is calling for a comprehensive reevaluation ofthe country’s retirement system, and goes so far as to suggest thatCongress launch an independent commission to examine policyoptions, much as was done in the early 1980s prior to SocialSecurity reform.

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“If no action is taken, a retirement crisis could be looming,”wrote Gene L. Dodaro Comptroller General of the United States, inthe report’s preface.

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As part of the report, GAO convened a panel of 15 experts lastyear to explore potential policy options, and to discuss thesuccesses and failures of incumbent policies.

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Read on for 10 takeaways from that discussion, as laid out inGAO’s report:

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1. GAO panel tapped policy experts and industrystakeholders

The 15 panelists were selected to span the range of ideologicaldiversity among policy experts and industry stakeholders. Amongthem were:

  • Phyllis Borzi, who was then the Assistant Sec. of Labor and headof the Employee Benefits Security Administration

  • Harry Conaway, President and CEO of the Employee BenefitResearch Institute

  • Cindy Hounsell, President of the Women’s Institute for a SecureRetirement

  • Will Hansen, Senior Vice President for Retirement Policy at theERISA Industry Committee

  • David John, Senior Strategic Policy Advisor at AARP

  • Melissa Kahn, Managing Director, Retirement Policy StrategistState Street Global Advisors

  • Teresa Ghilarducci, Professor of Economics and Director of theSchwartz Center for Economic Policy Analysis, The New School forSocial Research

  • Warren Cormier, CEO and Founder of Boston ResearchTechnologies

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The report provides a record of the panel’s daylongdiscussion.

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While it includes direct quotes from panelists, the quotes arenot attributed to specific panelists.

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2. Current policies are a concern.

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Many of the panelists agreed that a retirement crisis is in theoffing, but opinions differed on what that crisis would looklike.

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The report said there was broad agreement on the need to addressSocial Security’s impending insolvency.

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“Most of the discussion focused on the weaknesses of the currentsystem from the perspectives of individuals trying to save forretirement, from employers wanting to help their employees save forand manage their retirement, and from government agencies trying tooversee and administer a very complex system designed to helpindividuals and employers accomplish these objectives,” the reportsaid.

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3. The retirement system puts a strain on individuals.

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“The shift of risk that we have put on the individualworker in the United States retirement system is a mess. It’s theinvestment risk, it’s the longevity risk, the health risk, thelong-term care risk...ultimately we’ve put so much risk onindividuals who don’t really have the tools. And the tools that areout there to help them cost a lot ofmoney.” __Panelist on the lack of tools toaddress risks

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4. Current tax incentives favor higher earners.

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Several panelists said current tax incentives to save providegreat financial incentives for higher-income individuals, but areless effective in encouraging enrollment and the accumulation ofretirement savings for lower and middle-income individuals.

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One panelist commented that tax advantage policies mainlysubsidize retirement saving that would have occurred regardless ofthe tax advantage, as opposed to encouraging new saving.

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“When we think about our tax code it does wonderful things toencourage savings by people who can afford to save. It doesn’t domuch for the people at the low end who are living just on SocialSecurity.

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"I don’t want someone to take that Social Security check and goto a payday lender because they need to get their car replacedbecause that’s how they get to the doctor.” __Panelist ondisparity of tax incentives

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5. There are limitations on financial literacyefforts.

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Some panelists argued that efforts to enhance financial literacyamong workers have not moved the needle on savings rates.

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One panelist said little progress had been made in spite ofinnovations in financial literacy tools. Another said enhancedfinancial literacy can lead to greater indecision for somesavers.

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“We have a very, very acute problem with financial literacy. AndI think it’s actually gotten worse. As the financial instrumentshave gotten more complicated, it makes it less likely that peoplecan understand what they’re doing.” __Panelist on theproblem with financial literacy

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6. The current system is burdensome for employers.

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The present private sector retirement system is too complex andburdensome for employers, and presents too much financial andlitigation risk, panelists said.

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Some panelists said more employers may find it in their bestinterest to not sponsor a plan.

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“Mandating employers to do things that make themnoncompetitive is not a good thing for thecountry.” __Panelist on the employer’s role in promotingretirement savings

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7. Don’t create a government mandate to save.

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Panelists generally agreed on the importance of providing betteraccess to ways to save for retirement in addition to SocialSecurity, according to the report.

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Some resisted the idea of creating a federal mandate toparticipate in savings plans.

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“It’s hard to imagine how you broaden the coverage in terms ofretirement security without doing something more dramatic, moredirective. I’m not saying it has to be a mandate. It could bestronger incentives, different types ofmatches.” __Panelist on increasing access to savingsvehicles

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8. Do create a government mandate to save.

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Other panelists argued the country needs a new federal mandateto save for retirement, as has been implemented in the UnitedKingdom.

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“When it comes to coverage, there’s only one way to do it. It’sa mandate. If you don’t require that people have coverage, if theydon’t require that they have an account, whether that’semployer-sponsored or employer-facilitated, it’s not going tohappen, period. And that’s the experience in theUK.” __Panelist on the need for a federal mandate

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9. Keep it simple, stupid.

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There was broad consensus on the need to simplify saving forboth individuals and employers.

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Some panelists advocated for new investment selection safeharbors that would limit employer risk.

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Others suggested attaching new accounts to Social Security,which would allow private accounts to be rolled over togovernment-administered funds.

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“You don’t need financial literacy in order to get SocialSecurity. You just need to pay your contributions in or have theemployer do that for you--when compared with everything else, it’svery, very simple.” __Panelist on simplifyingsavings

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10. The future role of plan sponsors may change.

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Employers’ role facilitating savings has changed dramaticallyover the past 40 years.

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That role can be expected to continue to evolve.

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“It seems every week another employer is getting sued, andthey’re going to withdraw from what is a voluntary system. I seethe future for employers as being funders and facilitators ofbenefits--rather than as plan sponsors.” __Paneliston the future role of employers

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.