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Committee on Ways and Means For Immediate Release CHAIRMAN BILL THOMAS As prepared for delivery Careful planning for retirement plays a major role in ensuring a comfortable future. When ERISA became law, most covered workers belonged to “defined benefit” plans, where an employer invests the plan’s assets, and the employee can count on a fixed benefit upon retirement. The modern financial world offers a much broader array of choices than was available in 1974. The shift toward “defined contribution” plans, in which individual workers, not employers, make the investment decisions that will affect their retirement income, means workers are more responsible for their own investments. But the choice of options, while more attractive, is also more daunting to all but the most experienced financial professionals. And the risk this entails increases when individuals make the investment decisions. 42 million Americans are covered by defined contribution plans today, up from 12 million in 1974. The growth in these plans is a positive development for American workers. The problem is that the law has not kept up with the pace of change. ERISA laws unintentionally limit the ability to provide workers with expert advice. In general, employers and the financial institutions that administer retirement plans are allowed to provide workers with general education on investing. But they are severely limited in their ability to provide specific advice on allocating money among the plan’s various options. Most people don’t have the luxury of hiring a financial advisor, but they need and want more access to professional advice. Only 16 percent of 401(k) participants have access to investment advice through their retirement plan, and only 17 percent have access to an outside advisor. Seventy-five percent of full-time employees surveyed said they would take advantage of individualized advice services if their employers offered it. The legislation before us today - H.R. 2269, the Retirement Security Advice Act of 2001 – would bring the law into modern times by allowing more workers to receive expert investment advice. The bill updates ERISA and the tax code to reduce the barriers that discourage employers and service providers from offering advisory services. It would allow service providers to offer professional investment advice as long as all fees and potential conflicts of interest are fully disclosed. The bill includes safeguards to protect workers and to ensure that the advice provided is in their best interest. Advisors would have to be registered, and comprehensively regulated, ensuring workers have access to high-quality advice. The bill establishes a fiduciary relationship between the investment advisor and the worker, ensuring that remedies are available if the advisor violates his duties. The provisions would be voluntary: employers would not be required to offer an investment advisor, and workers would not be required to seek or accept the advice. By offering greater access to prudent financial planning, this legislation offers American workers a more comfortable retirement through greater returns on a lifetime of hard work. In his dual capacity as a key subcommittee chairman on the Committee on Education and the Workforce, and a Member of this Committee, the gentleman from Texas, Sam Johnson, has put in double time to ensure that this legislation meets the concerns of America’s workers. I thank him for his hard work and dedication, and call upon him to make a few short remarks at this time. |