Senator proposes public/private pension reforms
Orrin Hatch is the sole sponsor of gThe Secure Annuities for Employee (SAFE)
Retirement Act of 2013h
Published: July 9, 2013 - Pensions & Investments
Public defined benefit pension systems could purchase private annuities under
a legislative proposal introduced Tuesday by Sen. Orrin Hatch, R-Utah. The
legislation would also create a gStarter 401(k) planh for small private-sector
employers, and shift fiduciary oversight of 401(k) plans.
Mr. Hatch, the ranking member of the Senate Finance Committee, is the sole
sponsor of gThe Secure Annuities for Employee (SAFE) Retirement Act of 2013,h
which was designed to address a $4.4 trillion public pension underfunding crisis
that is beyond fine-tuning, he said in a statement.
gA new public pension design is needed: one that provides cost certainty for
state and local taxpayers, retirement income security for state and local
employees, and does not include an explicit or implicit federal government
guarantee,h Mr. Hatch said in the statement.
In the public sector, the SAFE Retirement proposal would seek to avoid future
underfunding by calling for market-based fixed annuity solutions overseen by
state insurance regulators.
In the private sector, Mr. Hatch's proposed reforms include a Starter 401(k)
that sidesteps the administrative burden of setting up a traditional 401(k)
plan, and broader access to financial advisers by transferring fiduciary
oversight of 401(k) plans from the Labor Department to Treasury Department. It
also would reduce administrative burdens and barriers to offering defined
contribution plans and purchasing annuities.
The legislation has the backing of several insurance and business trade
groups, but it is opposed by public pension advocates.
gShifting to annuities is an unnecessarily expensive approach,h said Steven
Kreisberg, director of collective bargaining at the American Federation of
State, County and Municipal Employees. gExperience demonstrates that public
pension funds manage risk quite well. Underfunding of pensions is almost
entirely due to failures to adequately contribute.h
gWe disagree with the whole premise,h said Hank Kim, executive director and
counsel of the National Conference on Public Employee Retirement Systems. gI
have a lot of problems with asking the private insurer market to take over
public pensions. Our participants are smart enough to know that there is no free
lunch.h
Julia Lawless, a spokeswoman for Mr. Hatch, said he will gaggressively seekh
co-sponsors for the legislation.
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