One of the hearing's witnesses, United Auto Workers union member Sara Schambers, stressed that unlike her grandparents, she won't have the benefit of a pension when she retires. Though she does have a 401(k) plan, Schambers told Sanders that her 401(k) "is based off what the stock market's doing," which can lead to major losses.
"401(k) plans are an important part of the retirement equation. They were just not designed to replace pensions," said Dan Doonan, executive director of the National Institute on Retirement Security, in his testimony.
"Pensions are the most economically efficient way to deliver retirement income, and they offer workforce advantages to employers," Doonan added, later suggesting that defined benefit plans may encourage employees to stay at their jobs.
However, other witnesses and lawmakers said that a pension plan is not inherently better than a defined contribution plan.
"I think there's a place for Social Security. There's a place for pensions, and there's certainly a place for what we're doing in 401(k) plans," said Eric Stevenson, president of retirement solutions at Nationwide Mutual Insurance Company.
Sen. Bill Cassidy, R-La., who serves as the top Republican on the committee, said that "Republicans do not support putting the thumb on the scale to prefer either defined benefit or defined contribution. We support what works."
For defined contribution plans, Stevenson suggested that more plan sponsors offer annuity products.
"Encouraging plan sponsors to offer at least one protected requirement income solution in their plans will go a long way in making sure that people have guaranteed income when they retire," Stevenson said.
In a letter to committee leaders Sanders and Cassidy, the American Council of Life Insurers also advocated for annuities.
"Policies should continue to evolve to promote savings and address longevity protection by increasing access to lifetime income options, removing barriers to annuities in qualified retirement plans, with the aim to create a more financially inclusive retirement landscape and one that provides opportunities for greater retirement security," wrote ACLI's president and CEO Susan K. Neely in a Feb. 28 letter.
In their own Feb. 28 letter, the Insured Retirement Institute said that Congress should facilitate the use of protected, guaranteed lifetime income solutions as well.
Specifically, Congress should pass legislation to ensure employers offering protected, guaranteed lifetime income solutions as a default distribution option in defined contribution plans "will have satisfied their fiduciary duties under ERISA so long as participants are notified of the default annuitization option and have the right to opt-out at the time of distribution," wrote IRI President and CEO Wayne Chopus and Paul Richman, IRI's chief government and political affairs officer, in the letter.
