Private Retirement Funding Questions

[Persyko <alpersyko@earthlink.net>]

Over the last decade companies have abandoned the traditional defined 
benefit plans which provided workers a guaranteed retirement income in 
favor of low employer-cost defined contribution plans.  According to 
Adam Meyers of the Hay Group a typical 401(k) costs about 3 percent of 
payroll while a pension plan usually adds up to about 5 percent.  I 
fear we are attempting to transform Social Security into a private 
pension plan which is not what it was intended to be.  Social Security 
was intended to supplement private retirement savings, not be the 
primary and/or only retirement plan we have.  Volatility and risk 
belong in the private pension arena.  Before significantly altering 
and possibly jeopardizing the major safety net for American workers 
and their families it would seem prudent to evaluate whether we are 
maximizing our other retirement funding options.

For example, although the assets of defined contribution plans are 
primarily derived from employee contributions through salary 
reduction/deferral and workers frequently share plan costs and assume 
all risk and responsibility for individual account performance, almost 
all plans exclude rank and file employees when selecting a plan 
provider or investments offered.  According to the 1998 KPMG 
Retirement Benefits Survey, the typical 401(k) offers four to nine 
investment options, only 6% of companies surveyed offered 15 or more 
options.  To quote from an August 1998 Smart Money article evaluating 
401(k) performance:"The reality is that most employers are far from 
comfortable with the role of asset manager, and far from well equipped  
to make some of the crucial decisions that will determine what kind of 
a retirement you end up with.  Having fallen into the trap of 
believing that any 401(k) is better than nothing, many companies have 
slapped together a few options here and there--whatever was easiest to 
purchase from banks, insurance companies and mutual fund 
companies--with little thought given to basic investing and retirement 
saving principles."  Why does ERISA not require employee participation 
in decision-making proportionate to employee assets in the plan?  It 
would seem only logical and fair to include those who will either 
benefit or suffer from investment decisions in determining the best 
possible plan.  How else can we ensure that plans which were intended 
to be "solely in the interest of the plan's participants and 
beneficiaries" are able to fulfill that mandate?

Additionally, millions of workers are offered no retirement plan.  If 
we are truly serious about increasing retirement savings, shouldn't 
all workers be able to fund their retirement savings with pretax 
dollars at the same level as workers who are offered a 401(k)?  Why 
are workers who are not covered by a defined benefit plan or defined 
contribution plan limited to a maximum $2,000 IRA deductible 
contribution putting them at a significant retirement funding 
disadvantage?  Shouldn't workers be encouraged to save by being able 
to contribute to their IRA's through automatic payroll deductions 
similar to a payroll direct deposit?

Finally, millions of American workers believe investing is not without 
a political and/or moral component.  They choose to invest in a manner 
which is consistent with their principles, beliefs and vision of a 
better future.  According to the Washington-based Social Investment 
Forum, one in ten investment dollars is now being managed utilizing 
screens which integrate personal values and societal concerns.  Many 
of us do not want to invest in companies which are exploiting other 
human beings, jeopardizing the health and well-being of people and 
their families or degrading the environment in order to enhance their 
bottom line.  How would any plan to provide personal investment 
accounts address the issues and concerns of these investors?