EARN Conference 2011Milwaukee, Wisconsin

September 14, 2011

Ilana BoivieDirector of Programs

Retirement Security: Pensions Get It Right

About NIRS

• Nonprofit, nonpartisan research organization founded in 2007.

• Contribute to informed policy making by fostering a deep understanding of the value of retirement security to employees, employers, and the economy as a whole.

• National research and education programs.

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Fact Based Pension Messages

Pensions Get Retirement Right

Fiscally Responsible

Can Achieve Full Funding Despite

Downturns

Americans Want Pensions

Ensure Self Sufficiency

Create Jobs, Fuel Economy

Drive Public Asst. Savings: $7.3 Billion

for ‘06

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Traditional DBs Still Make Sense for Employees

• DBs are the best way for most Americans to stay middle class in retirement.– See Retirement Readiness: What Difference Does a Pension

Make? (NIRS 2008)

• Americans with DBs more likely to be self-sufficient, less likely to need public assistance. – See The Pension Factor: Assessing the Role of DB Plans in

Reducing Elder Hardships (NIRS 2009)

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Pensions Are an Effective Recruitment and Retention Tool

• DB pensions remain important recruitment and retention tool for employers.

• DB coverage means:– Employees are 17% more likely to stay at their jobs

in a single year– Quit rates are 40% lower at large firms– Quit rates are 10% lower at small firms

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Who Killed the Private Sector DB Plan?

Companies Continue Freezing Plans

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Key Findings

• Traditional DB pension plans still make sense:– For employees: Better ensure retirement security

– For employers: Cost-efficient and effective recruitment and retention tool

• Yet employers have been closing DB plans since 1980s.

• This is due to several factors…

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Key Findings

• Employers closing plans due to:– Increased regulation

– Industry changes

– Poor knowledge of employee preferences for DBs

• Employers NOT closing plans due to the inherent cost of providing DB benefits.

• It’s the volatility.

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Regulatory Changes Led to Increase in Freezes

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Public Sector DBs Endure

Reasons for private sector decline not relevant to the public sector…

1. Not subject to private sector regulations.

2. Industry changes in the private sector have limited bearing on public sector employment.

3. Public employees known to value pension plans highly, and willing to give up higher wages to keep pension coverage. (Ippolito)

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Pensions and Retirement Security: A Roadmap for

Policymakers, 2011

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Key Findings

1. Americans highly anxious about retirement.

2. Americans have low retirement expectations.

3. U.S. retirement system stressed, needs reform.

4. Pensions relieve anxiety, reliable.

5. Washington disconnected from Americans’ retirement anxiety.

84% Concerned Current Economic Conditions Hurt Retirement

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77% Agree Disappearance of Pensions Makes Harder to Achieve “American Dream”

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81% Say All Americans Need Pension For Independence, Self-Reliance

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83% Agree Govt. Should Make It Easier for Employers to Offer Pensions

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New Research: Lessons from Well-Funded Public Pensions

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• Lack of analysis of plans that remained well-funded through the Great Recession.

• What led to better funding?• Study six well-funded plans and tease out

common elements: – Funding Policy– Benefit Design– Economic Assumptions

Lessons Learned: Why We Did This Study

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Lessons Learned: Key Findings

1. Employer pension contributions that pay the full ARC, and that at least equal the normal cost;

2. Employee contributions to help share the plan cost;

3. Benefit improvements that are actuarially valued before adoption and properly funded upon adoption;

4. COLAs that are granted responsibly;

5. Anti-spiking measures that ensure actuarial integrity and transparency;

6. Economic actuarial assumptions that can reasonably be expected to be achieved long term.

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Pensions Still Get Retirement Right

Pensions Get Retirement Right

Fiscally Responsible

Can Achieve Full Funding Despite

Downturns

Americans Want Pensions

Ensure Self Sufficiency

Create Jobs, Fuel Economy

Drive Public Asst. Savings: $7.3 Billion

for ‘06

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Possible to Bring Back Pensions

• Because DB plans still make sense for employees and employers…

• It is possible to bring back pension coverage to the private sector through:– Third party DB sponsorship

– Amending regulations to decrease funding volatility

– Incorporating employee contributions

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Ilana Boivie202.457.8190

iboivie@nirsonline.org

www.nirsonline.org

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