A GAO report said that only 50% of U.S. workers currently are covered by a retirement plan, highlighting the need for improving the country’s employer-sponsored pension system.
Despite “significant tax incentives,” many employers still do not offer employees a defined benefit or defined contribution plan, according to the Government Accountability Office report, conducted after recent stock market losses decimated many retirement savings accounts.
Employers also continue to freeze and terminate traditional DB plans, the report said, while account balances in DC plans are low — even for those approaching retirement.
“Many experts agree reforms are needed to make the U.S. private pension system more effective in protecting workers from risks to accumulating and preserving adequate savings for the retirement,” the report said. “If no action is taken, a considerable number of Americans face the prospect of a reduced standard of living.”
Just what action to take remains unclear, the GAO said in the report. The agency studied the private pension systems of the Netherlands, Switzerland and the United Kingdom, and found that while some of their approaches mitigated the risks for workers, they also posed “trade-offs.” For example, in Switzerland and the Netherlands, retirement plan coverage is mandatory for most employers and workers; while this reduces the risks for workers, it can negatively impact employers, especially small companies, by raising benefits costs.
“New approaches raise a number of issues that would have to be addressed, including the relative roles of workers, employers and the government, particularly with regard to contributions; how such a system would be administered; and its relationship to both Social Security and the existing private pension system,” the report said.
