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April 08, 2002
Workers Bearing Most of the Pension Burden
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rican workers now put more money into pension and retirement savings plans sponsored by their employers than the companies themselves do, according to The New York Times.

It shows just how far companies have moved away from the system of decades past, in which employers alone financed the retirement savings of their workers, and toward 401(k) and similar retirement plans financed mostly by workers.

The Times notes that 401(k)'s and similar retirement accounts were never intended to be the main way for an employee to save for retirement. Rather, they were expected merely to supplement company-financed pension plans.

The huge losses on retirement savings of workers at Enron and other troubled companies have focused attention on the vulnerability of the new retirement accounts.
Yet most American workers are confident they will have enough money to live comfortably, according to a survey released in February by the Employee Benefit Research Institute.

These workers are optimistic even though Americans generally are notoriously weak savers, the Times reports. While corporations and the financial industry have shifted the burden to employees, they have far to go in adequately educating the public about its responsibilities in paying and planning for retirement.

"We have to look at the issues from a broad point of view, one that encourages saving and which reduces the risk on the saver," said William V. Roth, the former United States senator from Delaware who was a leading Republican voice on pension and retirement issues. "It's a real concern. We want people to reach their so-called golden years with adequate funds to live comfortably."

To even the most astute participants, the current pension system is a bewildering array of regulations and options for companies and employees. Roth, for example, said he had to consult a pension expert after his retirement from the Senate to help figure out his pension plan.

Congress and the administration have begun discussing possible changes in retirement policy. Few people in Washington are yet predicting new programs as radical as those that led to the Employee Retirement Income Security Act, the 1974 law that created a government-sponsored insurance program for pension plans. But that does not mean that change will not come in waves over the next several years.

The Times notes while Studebaker Car Company jolted the system by terminating its employee pension program in 1963, it took Congress 11 years and dozens of false starts to finally pass ERISA.

"Retirement policy has really come to the forefront thanks to Enron, and I think it will stay there for a while," said Eric Lofgren, global director of the benefits consulting group for Watson Wyatt, the giant pension adviser. "I would be surprised if there was not a series of legislative moves over the next decade, as we learn what works and what doesn't."

To view the New York Times article, click here.
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