Tallahassee --- The Florida Public Pension Trustees Association has released a report examining the viability of defined contribution plans – also commonly called 401(k) accounts – as a replacement vehicle to finance employee retirement plans. Among the report’s key findings:
• American workers with little or no retirement savings increased for the third straight year in 2009.
• An Employee Benefit Research Institute survey shows that those with less than $10,000 in retirement savings increased to 43 percent in 2010, up from 39 percent in 2009.
• The average 401(k) balance is just $63,000.
• An estimated 35 percent of early baby boomers will be unable to maintain their pre-retirement income, and the risk is higher for those who have no workplace retirement plan (50 percent), or just a 401(k) account (49 percent).
The FPPTA solicited the expertise of professionals in the actuarial, legal, accounting, and financial and asset management industries to analyze the relative merits of defined contribution plans as compared with defined benefit plans in its report: 401(k) Accounts are not Retirement Plans. The report can be found in its entirety at http://www.fppta.org/FPPTA/Research.aspx
The report’s findings shed light on the challenges facing employers and taxpayers in funding retirement benefits that must provide for workers whose life expectancies are lengthening, and whose need for financial support will be necessarily met by public assistance if their retirement plans fail them.
“Defined benefit plans guarantee a pension for life. Defined contribution accounts only deliver what is in them when a worker retires,” explained Raymond Edmondson, Jr., CEO of the FPPTA. “Media attention focusing on the alleged high cost of public pension benefits in Florida misdirects public attention away from the more important and fundamental issue, which is that Americans in both the private and public sectors will suffer if defined benefit pensions are lost. Defined benefit plans are not lavish, nor are they too expensive for taxpayers or private sector employers,” insists Edmondson, who believes taxpayers lose far more in the long run when 401(k) accounts fail to support retirees depending on them.
Raymond Edmondson, Jr., CPPT can be reached at the Florida Public Pension Trustees Association, 800-842-4064.
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The FPPTA was established in 1984 and provides educational and support services to 488 pension boards throughout the state. Programs include local continuing education courses, a trustee certification program, seminars and the annual professional development conference for members statewide.