Sen. Tom Harkin's proposal for a universal private retirement system with professional money management was praised by several pension experts as a first step in addressing ways to improve retirement security.
Diane Oakley, executive director of the National Institute on Retirement Security, Washington, which issued a report July 26 highlighting the increased risk of poverty among older Americans as defined benefit pension plans dwindle, said Mr. Harkin opened up “an important discussion to a new level. We need some innovation and creativity.”
Karen Friedman, policy director for the Pension Rights Center in Washington, said, ”We think Sen. Harkin has put forward a really good proposal. All the elements are the recipe for success.”
Mr. Harkin, D-Iowa, chairman of the Senate Health, Education, Labor and Pensions Committee, on July 27 proposed the new system to propel the debate over what he called a crisis of “disappearing pensions.”
Describing it as a “sort of a middle ground between pensions and 401(k)s,” Mr. Harkin unveiled a plan to create what he called Universal, Secure and Adaptable Retirement Funds.
Designed to augment existing employer-provided defined benefit and defined contribution plans, which would not be changed under the plan, its main features include:
- having employers enroll employees in a fund and process contributions from both employer and employees;
- creating an independent board of trustees for selecting or managing funds, which would shift fiduciary responsibility from employers;
- using professional asset managers for investments, where risks would be shared by participants;
- making benefits portable; and
- having benefits paid as an annuity, based on the investment returns of the funds at the time of retirement.
“It's like a retirement insurance program. It reduces costs and eliminates underfunding” by having benefits tied to the investment performance of the funds, Mr. Harkin said at a press briefing on the proposal.