More students than ever before are receiving Pell Grants to help pay for college and that number is on the rise, according to a new report released today by the College Board. The study also shows that, with college costs rising, students are continuing to access the federal student loans for which they are eligible. Over the past year, the average tuition and fees for in-state students at four-year public colleges and universities increased by 6.4 percent to $6,585 for the 2008-2009 school year.
"With college costs still rising and families facing growing uncertainty in today's economy, federal student aid is more important than ever," Chairman George Miller said. "Over the past two years, the Democratic Congress has made college affordability a top priority -- providing historic investments in federal student aid and safeguarding federal student loans from the turbulence in the nation's financial markets. This study reinforces that these efforts are critically needed to help make college more affordable and accessible for students and their families.
"This report also shows that the Pell Grant scholarship -- which Congress has significantly boosted in the past two years -- is playing an increasingly important role in expanding college access, especially for low- and middle-income students. As we work to get our economy back on the road to recovery, it is vital to make sure that students are aware of all their student aid options and are fully maximizing their federal student loans before turning to more expensive private loans."
According to the report, the number of students receiving almost all federal grants and loans have increased over the last ten years and the number of students receiving Pell Grant scholarships has increased from 3.7 million in 1997-98 to 5.4 million in 2007-2008.
Last year, Congress enacted the College Cost Reduction and Access Act, which provides the largest increase in student financial aid since the GI bill. The law increases the maximum Pell Grant scholarship by more than $1,000, cuts interest rates on need-based student loans in half, creates income based repayment programs for students graduating with college debt and gives loan forgiveness incentive programs for public service workers.
Congress also recently enacted the Ensuring Continued Access to Student Loans Act to ensure that students and families can continue to have access to all the federal college loans they are eligible for.
In August, Congress enacted the Higher Education Opportunity Act, the first reauthorization of the nation's primary higher education laws in a decade. The law addresses rising college tuition prices, makes textbook costs more manageable, simplifies the federal student aid application process, makes the Pell Grant scholarship available year-round for the first time, provides new consumer protections for federal and private student loan borrowers, and much more.
The U.S. Department of Education recently released new regulations for the No Child Left Behind Act.
Some of these regulations are steps in the right direction; but others will do little to change the criticism facing NCLB . It is troubling that the Bush administration has waited until the last possible minute to address some of the serious concerns with No Child Left Behind, in particular the lack of uniformity across the states when calculating their high school graduation rates. No Child Left Behind law is in need of significant and fundamental improvements -- so that every child has the opportunity to get a world class public education. I look forward to working with the next administration to make the law more fair, more flexible and better funded.
The U.S. Pension Benefit Guaranty Corporation’s investment losses now total almost $5 billion in fiscal year 2008, according to information released at a Committee hearing today.
Earlier this week, the PBGC reported a $3.1 billion loss in equity investment in the first 11 months of fiscal year 2008. The September loss of $1.7 billion in stocks increased PBGC’s total losses for the fiscal year to $4.8 billion.
The dramatic loss comes at a time when the PBGC is beginning to implement a new controversial investment policy approved in February. The new policy would significantly shift PBGC assets from fixed-income securities, such as U.S. Treasuries, into more risky securities like real estate, emerging market debt, junk bonds and venture equities.
“With the current market turmoil, we have to ask the question whether it is wise to invest our nation’s pension backstop in volatile equities,” Chairman George Miller said.
The head of the PBGC, Charles Millard, appeared before the Committee today regarding the agency's financial problems that may threaten the retirement security of millions of Americans. The PBGC is a government agency that insures traditional private-sector pension plans, manages failed pension plans and pays benefits to workers of those plans.
The American economy could slip into a deeper recession unless immediate action is taken to stem the tide of rising unemployment and falling family incomes, witnesses told the Committee in a hearing today.
Economists predicted that, based on past recession trends unemployment could soon reach eight percent or higher, and middle-class families’ incomes could drop by more than $2,000 this year.
“It is urgent that we prepare now to take the next steps to rescue the economy by creating jobs, providing immediate relief to the states and small businesses, and by making real investments in energy, technology and education,” Chairman George Miller said. “We must have a plan that speaks directly to the needs of American families and workers today.”
The number of out-of-work Americans has increased by 2.2 million in the last year. They join more than 2 million workers who have been unemployed longer than 27 months. In October, many workers began exhausting their unemployment insurance benefits. By the end of this month, an estimated 775,000 workers will be left without a safety net, and a total of 1.1 million workers will be in the same straits by the end of the year.
In a letter to Chairman Miller released at the hearing, economist Alan Blinder of Princeton University predicted that “unemployment will top out in the 8-8.5 percent range” if the coming recession is as severe as the recessions of 1981-82 and 1973-75. “My worry,” wrote Blinder, “is that we may be heading in that direction.”
“We are clearly in the early stages of a potentially very serious recession that will likely be as deep as anything we have experienced in a generation,” said Ron Blackwell, chief economist of the AFL-CIO. “Just how deep and protracted this recession will be depends on a timely, aggressive and well-focused economic recovery package.”
To help families make ends meet while they look for a new job, the Democratic Congress voted to extend unemployment benefits in early October. Unfortunately, that effort was blocked by Senate Republicans. The Bush administration threatened to veto the extension claiming it would encourage out of work Americans not to find a new job.
“There is nothing enjoyable about being up at night worrying about how you are going to make ends meet,” said Dana Stevens, an unemployed worker from Thorofare, NJ. “For anyone to suggest that receiving unemployment is like getting a free vacation is insulting and degrading to the millions like myself who are desperately trying to get back to work.”
Millions of workers not only lose their jobs during a recession, but household incomes for those with a job also decline on an average of four percent. Jared Bernstein, director of the Living Standards Program at the Economic Policy Institute, said that if past trends repeat themselves this time around, middle-class families’ who earn around $60,000 will see their income fall about $2,500 this year.
“Due to factors regarding job loss, fewer hours, and the slower wage growth driven by the weaker job market, incomes usually fall in recessions,” said Bernstein.
In September, the House of Representatives also approved an economic rescue and job creation package to help head off a deeper recession. It would have created good-paying jobs by investing in new energy technology and infrastructure. The bill would have also provided access to job training and helped working families with grocery and health care bills. Senate Republicans and the Bush administration also opposed this effort.
Many economists say that making infrastructure investments are some of the most effective uses of federal dollars that create jobs in both the short-term and the long-term.
Robert Pollin, a professor of economics at the University of Massachusetts-Amherst, said a $150 billion job creation program will create 2.9 million jobs in the short-term alone.
“In the midst of the severe financial crisis and deepening recession, it is imperative that the federal government take action as soon as possible to counteract the downturn,” said Pollin.
Pollin’s latest research also reveals that infrastructure investment produces a second wave of private sector job creation within two years, pushing the 2.9 million new jobs up to 3.3 million new jobs in a two-year time frame.
To encourage long-term job creation, investments are needed to build the nation’s technological backbone that will help foster growth in the emerging high-tech industry and green economy.
“Advanced networks will allow increased opportunities for the creation of even more highly skilled technology jobs to invent new products and improve existing ones in the vital areas of energy, health care, education, public safety and services,” said Christopher Hansen, president and CEO of AeA. “These are the jobs of the future.”
On Friday, October 24 at 10:00 a.m., the Committee will hold a hearing examining strategies – including investments in rebuilding crumbling infrastructure – to create good-paying jobs in order to put the nation’s stalled economy on the road to recovery. More than 2.2 million American workers have lost their jobs in the past 12 months and millions more are still looking for permanent employment.
“Building an Economic Recovery Package: Creating and Preserving Jobs in America” Scheduled on October 24, 2008 at 10 a.m. in room 2175 Rayburn H.O.B.
Witnesses:
Panel 1:
Hon. Charles E. F. Millard Director of the Pension Benefit Guaranty Corporation
Panel 2:
Jared Bernstein Director of the Living Standards Program Economic Policy Institute
Ron Blackwell Chief Economist AFL-CIO
Christopher Hansen President and CEO AeA (formerly the American Electronics Association)
Robert Pollin Professor of Economics Founding Co-Director of the Political Economy Research Institute University of Massachusetts at Amherst
Dana Stevens Unemployed Worker Thorofare, New Jersey
William W. Beach Director Center for Data Analysis The Heritage Foundation
Today, I chaired a U.S. House Committee on Education and Labor hearing in San Francisco where we examined how the current financial crisis is affecting retirement savings. Witnesses told us that after a lifetime of planning and saving, a growing number of retirees are facing shrinking 401(k)s and increasing insecurity as a result of the ongoing financial crisis. While this crisis may have started on Wall Street, it's Main Street that stands to suffer the most. More than ever before, there is an urgent need to help Americans strengthen their retirement savings.
We also learned today that U.S. Pension Benefit Guaranty Corporation lost at least $3 billion in stock investments during the last fiscal year through August, and invested a significant portion of its funds in mortgage-backed securities. The head of the PBGC, Charles Millard, will testify before the committee on Friday in Washington regarding the agency's financial problems.
Taxpayers subsidize 401(k) plans by $80 billion dollars annually. For a taxpayer investment of this size, we must ensure that the structure of 401(k)s adequately protects the nest eggs of participating workers.
At the hearing today, we heard from Roberta Quan, a retired school teacher from San Pablo, CA, who is also caring for her husband who has Alzheimer’s: "The recent unstable financial crisis is having a devastating effect on my life. A lifetime of savings in catastrophic decline is demoralizing. The bottom line is that I am retired and unable to re-earn lost funds."
Steve Carroll, a retired writer from Petaluma, CA, told us: "Our monthly budget has been severely depleted for life. We still have our IRAs. But, as they are in mutual stock funds they are so far down in value that selling any of them right now, as the law requires of [my partner] Chuck, the loss would be an enormous percentage of the investment."
Current regulations require account holders of 401(k)-type account to withdraw a minimum amount of money every year after they reach 70 ½ years old. If seniors do not take out a minimum amount based on an Internal Revenue Service formula, they are subject to a 50 percent penalty. For instance, if an individual fails to withdraw $4,000, they would be assessed a $2,000 tax the next year.
Other witnesses spoke about problems with the current retirement security system where individually directed 401(k)-type plans have become a worker's main retirement savings vehicle. Where investment decisions were once made by professionals managing a traditional pension portfolio on behalf of workers, the responsibility of picking the right investments and implementing retirement savings strategies are left up to an individual account holder.
We started this investigation last week, as part of a series of hearings the House is conducting to investigate the causes of the financial crisis, and what additional steps are needed to protect homeowners, workers, and families.
Last week, Peter Orszag, the director of the Congressional Budget Office, told us that American workers have lost more than $2 trillion in retirement savings over the last fifteen months – an astonishing loss that could lead workers to delay their retirement.
Several experts also told us that workers closest to retirement could suffer the most from this financial tsunami. But while the housing and financial crises are intensifying retirement insecurity, we also know that workers’ retirement savings have been declining for quite some time. Rising unemployment, stagnating wages and benefits, and a shift away from more traditional defined-benefit pension plans have been making it much harder for workers to save for retirement while juggling other expenses.
Now, the number of investors taking loans on their 401(k) accounts is increasing. And hardship withdrawals are also increasing. T. Rowe Price estimates a 14 percent increase in hardship withdrawals just in the first eight months of 2008. And, all the signs point to an increased frequency of 401(k) loans and hardship withdrawals in the coming year.
As other committees’ hearings have revealed, many of the Wall Street titans responsible for this crisis have still escaped with their plush perks, lavish spa trips and golden parachutes intact. This is an outrage. For too long, the Bush administration anything goes economic policy allowed Wall Street to go unchecked.
As we look at how we can rebuild workers’ retirement savings and our nation’s economy, the Democratic Congress will continue to conduct this much-needed oversight on behalf of the American people.
Being able to save for retirement after a lifetime of hard work has always been a core tenet of the American Dream. We can’t allow the promise of a secure retirement for workers to become a casualty of the financial crisis.
Chairman George Miller announced at a hearing today in San Francisco that the U.S. Pension Benefit Guaranty Corporation lost at least $3 billion in stock investments during the last fiscal year through August, and invested a significant portion of its funds in mortgage-backed securities. The losses were only partially offset by modest gains in other investment classes. It is likely that losses will be substantially worse after September results are reported.
The PBGC is a government agency that insures private-sector pension plans, manages failed pension plans and pays benefits to workers of those plans.
The head of the PBGC, Charles Millard, will testify before the House Education and Labor Committee on Friday regarding the agency's financial problems that may threaten the retirement security of millions of Americans.
"At a time when Americans' anxiety about their economic future is escalating, Millard's testimony is vital to better understand the financial situation of the nation's pension guarantor," said Chairman Miller. "Now is the time to gather all the information we need in order to rescue the economy and help workers and retirees."
According to a document obtained by the Education and Labor Committee and based on preliminary unaudited figures, the PBGC lost more than $3.1 billion in its trust fund related to the agency's stock investments for the first 11 months of its 2008 fiscal year. The PBGC trust fund invests pension assets in order to pay out benefits to workers whose pension plans were turned over to the agency.
The recent dramatic loss also comes in light of a new controversial investment policy the agency recently approved. The new policy would significantly shift PBGC assets from fixed-income securities, such as U.S. Treasuries, into more risky securities like real estate.
Millard recently testified before Congress recently that the new investment policy would not add any additional risk to the long-term stability of the trust fund.
The invitation to answer questions from Congress comes after the Millard rebuffed a committee subpoena in July that demanded the agency turn over documents regarding a report into the agency's mismanagement and lax governance practices.
$5.1 billion in emergency funds was released yesterday to help seniors and families pay their heating bills this winter. Congress passed the funding for LIHEAP, the Low-Income Home Energy Assistance Program, last month as part of a larger appropriations package.
With the financial crisis making hard economic times even worse for many families, we must make sure that Americans have the help they need to heat their homes this winter. This emergency relief will help the millions of seniors and low-income families who all too often are forced to choose between paying their heating bills and putting food on the table. In my home state of California alone, these funds will provide nearly $250 million in much-needed help for families and seniors. With the burdensome cost of high energy prices, this aid will give a critical helping hand to millions of families struggling to make ends meet.
On Wednesday, October 22, the Committee will hold a field hearing in San Francisco, California to further examine how the current financial crisis is impacting Americans’ retirement security, including pension funds and workers’ directed retirement accounts like 401(k) plans. The Committee held a hearing on this topic on October 7 as part of a series of hearings House Democrats are conducting to look at the causes of the financial crisis and appropriate responses to it.
"The Impact of the Financial Crisis on Workers’ Retirement Security" Scheduled on at 9:30 a.m. Pacific Time on Wednesday, October 22, 2008 in the San Francisco Board of Supervisors Legislative Chamber, Room 250, 1 Dr. Carlton B. Goodlett Place, San Francisco, CA. Chairman George Miller will lead the hearing.
Witnesses:
Shlomo Benartzi, Ph.D. Professor UCLA Anderson School of Management Los Angeles, CA
Mark Davis Partner Kravitz Davis Sansone Encino, CA
Jacob S. Hacker, Ph.D. Professor University of California at Berkeley
In December 2006, Rep. George Miller, the new Chairman of the House Education and Labor Committee, announced that the Committee would be dedicated to the mission of strengthening America’s middle class. And over the past two years, the Committee has delivered on its promise. America's students, workers, and families need help more than ever during the current financial crisis, and the Committee will continue its work to strengthen the middle class. Below is an overview of the Committee’s legislative milestones in the 110th Congress.
Affordable colleges » The Committee has enacted three laws that together will make college more affordable and accessible for middle class students, create a more efficient, consumer-friendly, and fair American higher education system, and protect federal student loans from turmoil in the economy.
High quality education » The Committee enacted legislation to strengthen the nation’s premiere early childhood program, giving more young children the skills they need to succeed in school and in life. The Committee also helped enact emergency aid to help Gulf Coast schools and colleges still working to recover from Katrina and Rita. In addition, the Committee took a key step toward improving learning conditions for schoolchildren by passing legislation to help schools modernize their facilities and become more energy-efficient.
A competitive workforce » The Committee has enacted legislation that builds on the principles Democrats first laid out in their “Innovation Agenda – A Commitment to Competitiveness to Keep America Number One.” These new laws will help prepare more Americans for jobs in emerging, high-tech industries that will keep our nation more competitive and create more good-paying jobs here at home.
Fairness in the workplace » During the first 100 hours of the 110th Congress, the House passed the first increase in the minimum wage in ten years. Since then, Committee has passed a series of key measures to strengthen workers’ rights, improve workplace safety, end discriminatory practices that have unfairly eroded workers’ pay and other benefits, and help workers balance demands of work and family.
Retirement security » While roughly 50 million American workers now have 401(k) style retirement plans, studies show that the vast majority of these workers don’t know how much they are paying in fees to the companies that service their 401(k) plans – fees that could be eating away at their retirement savings. The Committee passed legislation to help workers better understand these hidden fees and strengthen their retirement security.
Safe children and youth » The Committee enacted laws to protect America's children and youth, including runaway, homeless and missing children, and to increase penalties when employers violate child labor laws. The House also passed legislation to protect teens in public and private residential programs.
Accountability and responsibility » The Committee conducted oversight over government agencies in its jurisdiction, shining a light on the Bush administration’s failures to safeguard taxpayer dollars used to fund education programs and its efforts to weaken protections for workers. In some cases, the Committee’s investigations paved the way for legislation and spurred the U.S. Department of Justice to pursue a criminal investigation.
By the numbers...» The Committee has held 113 hearings and heard from 683 witnesses in its efforts to grow and strengthen the nation’s middle class. In the next Congress, the Committee will continue to build on this record by working to improve the lives of children, students, workers and families.
Though the Department is required to conduct audits of applications submitted to ensure against fraud, the OIG found that the Department actually discontinued some types of audits nearly three years ago. Additionally, the OIG found that the Department did not even audit many applications which had been selected for either random or targeted audits.
The OIG concluded: “The effect of [the DOL] not auditing applications selected for audit is that fraudulent or non-meritorious applications may have been certified. Certifying non-eligible foreign workers could negatively affect the U.S. workforce by reducing the amount of jobs available for U.S. workers.”
Chairman Miller's letter to Secretary Chao states: “The OIG report demonstrates that your Department has failed to properly implement the Program Electronic Review Management (PERM), a program that is similar to one you propose in the H-2A and H-2B regulations. Thus, we worry that the Bush Administration scheme for the H-2A and H-2B programs could lead to more fraudulent or non-meritorious requests for temporary foreign guest workers, at the expense of U.S. workers, with little risk of detection.”
Note: Sensitive information has been redacted from the OIG report.
Following an urgent meeting held by Democratic leaders and top economists in Washington on October 13, Speaker of the House Nancy Pelosi announced that House Democrats will begin laying the groundwork for a comprehensive economic recovery and job creation program, including a hearing to be held by the House Education and Labor Committee. Chairman George Miller said the hearing will focus on the nation’s severe unemployment outlook and strategies to spur job growth.
“The credit crisis and stock market crash is making an already dire unemployment situation worse,” Chairman Miller said. “The top economists who have briefed the Democratic leadership today and over the last few weeks all agree that unemployment is going to continue to rise. We are going to examine the best ways to get Americans back to work and put our economy on the road to recovery.
“The emergency financial bill we approved late last month was one important step toward rescuing the economy, but we knew then that additional, comprehensive measures would be needed to help stabilize and heal our broken economy. We need a longer-term economic recovery plan that will create jobs, grow the economy, and protect Main Street. These hearings will be vital to our efforts to develop a plan that rebuilds our economy while protecting taxpayers and helping workers and their families seize the opportunities that our 21st century economy presents.”
American workers have lost as much as $2 trillion in retirement savings over the last year – highlighting the devastating toll that the nation’s financial crisis is taking on their retirement plans, witnesses told the Committee today. Today’s hearing was one of several that House Democrats scheduled to investigate the causes of the financial crisis and what additional steps should be taken to protect taxpayers, homeowners, workers, and families.
“Unlike Wall Street executives, American families don’t have a golden parachute to fall back on,” said Chairman George Miller. “It’s clear that Americans’ retirement security may be one of the greatest casualties of this financial crisis.”
According to the Congressional Budget Office, this multi-trillion dollar loss in workers’ retirement wealth could further slow the ailing economy.
“To the extent households view balances in defined-contribution plans as part of their overall portfolio of wealth, a decline in those balances could lead people to reduce or delay purchases of goods and services,” said Peter Orszag, director of the CBO. “It could also lead some workers to delay their retirement.”
According to a survey released today by the AARP, in the last year 20 percent of baby boomers stopped contributing to their retirement plans because they have had trouble making ends meet. As several witnesses explained, workers closest to retirement may suffer the biggest hit from the financial meltdown.
“The current financial crisis has certainly highlighted the fact that 401(k) participants—whose 401(k) account represent their sole retirement savings—bear all the investment risk,” said Jerry Bramlett, president and CEO of BenefitStreet, Inc., an independent retirement plan administration firm. “The pain is particularly acute for those participants closer to retirement whose retirement income expectations have been significantly impaired possibly resulting in the need to postpone retirement.”
The AARP also found that a third of workers surveyed are considering delaying retirement as a result of the financial and housing crises.
“In the last few weeks, we’ve been confronted with older worker and retirees’ lives being turned upside down; their panic tops-off an already existing state of chronic anxiety about retirement futures,” said Teresa Ghilarducci, professor of economic policy analysis at The New School for Social Research.
Witnesses also said that while the current financial crisis is reducing workers' savings today, retirement insecurity had been steadily growing over the past decade.
“While the events that have taken place over the past several weeks have shone a spotlight on how affected Americans’ retirement plans can be by such volatility in the financial markets, it is important to keep in mind that Americans’ retirement security has been in distress for much longer than the past few weeks,” said Christian Weller, senior fellow at the Center for American Progress “In fact, retirement security has been a growing concern for Americans for many years due to limited retirement plan coverage, little retirement wealth, and increasing risk exposure of the individual.”
Chairman Miller said that greater transparency in retirement plans and the fees workers pay is needed, especially when workers are losing money and looking for the best deal.
“401(k) holders lack critical information about how their money is managed and what fees they pay. I’m here to say right now, those days are over,” said Chairman Miller. “We must have more transparency in 401(k) investment practices. The Wall Street veil of secrecy must end.”
Last week, Congress approved an emergency rescue plan in response to the worst financial crisis our country has seen since the Great Depression. We know that this plan alone will not magically turn the economy around. But we are confident that without it we will not have the chance to move forward.
We insisted that the plan include strong protections for taxpayers and tough accountability – neither of which was included in the President’s original request to Congress.
Immediately after the plan was approved, Speaker Pelosi announced that the House would conduct a series of hearings to investigate the causes of the current financial crisis and what steps we should take next to protect homeowners, workers and families struggling today.
As part of that commitment, the Committee on Education and Labor today is holding a hearing to explore how this financial crisis is impacting the retirement security of American families.
Yesterday, the House Oversight and Government Reform Committee launched the first of many oversight hearings examining the toxic mix of corporate greed, recklessness, and deregulation that created this financial crisis.
During his testimony, Lehman’s CEO, Mr. Fuld, showed no remorse for his catastrophic mismanagement of the company. In fact, he repeatedly denied responsibility for running the storied Lehman Brothers investment house into financial oblivion.
He refused to admit that his own reckless management – and his industry’s success of keeping regulators at bay – directly contributed to this historic financial crisis that is costing taxpayers, shareholders, and the nation’s current and future retirees billions of dollars from their nest eggs.
All the while, he insisted on taking obscene multi-million dollar bonuses for his executive teammates.
Unlike Wall Street executives, American families don’t have a golden parachute to fall back on. It’s clear that their retirement security may be one of the greatest casualties of this financial crisis.
The current financial and housing crises are stripping wealth from American families at a record rate.
A new poll just found that 63 percent of Americans are worried that they will not have enough savings for their retirement. Tragically, they may very well be right. Due to the collapse of the housing market and the financial crisis, trillions of dollars that Americans were counting on has been lost.
Americans were counting on much of this wealth for their retirement. Now it is gone – as is their ability to adequately fund their retirement.
Even before the current meltdown, middle-income families were losing ground due to the decline in middle-class wages over the last decade – making it harder for them to save for their retirement and family emergencies.
Retirement and financial experts now predict that retirees and older workers who rely on financial investments for retirement income may suffer more than any portion of the American population in the coming years.
According a survey released today by the AARP, one in five middle-aged workers stopped contributing to their retirement plans in the last year because they had trouble making ends meet. One in three workers has considered delaying retirement.
Now, the number of investors taking loans on their 401(k) accounts is increasing. And hardship withdrawals are also increasing.
T. Rowe Price estimates a 14 percent increase in hardship withdrawals just in the first eight months of 2008.
And, all the signs point to an increased frequency of 401(k) loans and hardship withdrawals in the coming year.
It makes sense that more Americans will be raiding their retirement accounts as they deal with rising unemployment and increasing costs of basic necessities.
Unfortunately, these drastic measures taken by workers today will have a long-lasting impact by significantly reducing account balances once these workers reach retirement age.
Over the past 12 months, more than a half trillion dollars have evaporated from 401(k) plans as a direct result of the crisis in the markets.
Some experts say that it will take as long as 3 years to recover market losses in 401(k)-style accounts – but only if the market turns around soon.
Just like consumer directed retirement plans, traditional pension plans are not immune from the financial crisis.
Although pension plans hire professional money managers and are required to be diversified, these plans will likely lose value as a result of the weak performance of the investment markets.
Sophisticated pension funds lost 20 to 30 percent of their value during the 2001 recession and took several years to overcome those losses.
We must keep our eye on these plans and I await further data on the health of our nation’s pensions.
While this crisis began on Wall Street, much of the financial burden will ultimately be borne by Main Street. And this did not happen overnight.
With the Republicans’ help and armed with their powerful lobbyists, Wall Street cunningly held off fair regulations by Congress, arguing that Americans would be better off if left to their own devices.
As Congress continues our investigations into this crisis, we cannot allow those responsible to emerge unscathed. The American people are paying the price of this go-go, Wild West approach to governing.
One cost will be the concern that our nation’s workers will not have sufficient savings to ensure a secure retirement after a lifetime of hard work. In the coming months, this committee will examine what measures may be needed to ensure a safe and secure retirement for workers, retirees and their families.
For starters, we know that 401(k) holders lack critical information about how their money is managed and what fees they pay.
I’m here to say right now, those days are over.
We must have more transparency in 401(k) investment practices. The Wall Street veil of secrecy must end.
I would like to thank all of our witnesses for joining us today. I look forward to their testimony.
And I expect that we will be back here repeatedly until we can ensure greater security for the retirement of hard-working Americans.
The Committee today will hold a hearing to examine how the current financial crisis is impacting pension funds and workers’ directed retirement accounts, such as 401(k) plans. According to a recent poll by the Associated Press, more than half of all Americans are worried that the ongoing financial crisis will force them to postpone retirement.
"The Impact of the Financial Crisis on Workers' Retirement Security" Scheduled at 1:00 p.m. on Tuesday, October 7, 2008, in room 2175 Rayburn H.O.B.
Witnesses:
Jerry Bramlett CEO BenefitStreet, Inc.
Dr. Teresa Ghilarducci Professor of Economic Policy Analysis The New School for Social Research
Dr. Peter Orszag Director Congressional Budget Office
Jack VanDerhei Research Director Employee Benefit Research Institute
Dr. Christian Weller Associate Professor of Public Policy, University of Massachusetts-Boston Senior Fellow, Center for American Progress
The U.S. Bureau of Labor Statistics announced today that 159,000 jobs were lost in September, the steepest decline in five years and the 9th consecutive month of job losses.
Today’s jobs report highlights the massive destruction that the Bush-Cheney-McCain wrecking ball has done to our economy, workers, and families. Eight years of their misguided policies have culminated in nine straight months of job losses. Two million workers have been unemployed for more than 27 months – 167,000 more than in August. Our nation is now dealing with the largest financial crisis since the Great Depression.
America’s working families are hurting, and in need of real solutions to get our economy back on track. For starters, we must extend unemployment benefits for hundreds of thousands of out-of-work Americans whose current benefits are set to expire this weekend. Today, as the House considers a financial rescue plan to protect the credit that small businesses and families rely on, we will also vote to extend unemployment benefits to help workers cover their bills while looking for a new job.
But workers also need a long-term strategy to generate new jobs. Last week, the House passed a much-needed stimulus that would create millions of good-paying jobs by investing in our crumbling infrastructure – an investment that would get our nation back to work and prevent our economy from falling deeper into recession. Unfortunately for American families, Senate Republicans blocked the package.
This latest news underscores the urgent need to ease the pain of America’s working families and get our economy on the road to recovery.
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