House Committee on Education and Labor
U.S. House of Representatives

Republicans
Rep. Howard P. “Buck” McKeon
Ranking Member

Fiscally responsible reforms for students, workers and retirees.

Photos

NEWSROOM

Press Release

FOR IMMEDIATE RELEASE
October 7, 2008

CONTACT: Alexa Marrero
(202) 225-4527

McKeon Statement on Retirement Security and the Financial Crisis

WASHINGTON, D.C. – The U.S. House Education and Labor Committee today held a hearing on “The Impact of the Financial Crisis on Workers' Retirement Security.” Rep. Howard P. “Buck” McKeon (R-CA), the panel’s senior Republican, issued the following statement:

The American economy is in the midst of a serious downturn, constrained by a global credit crisis and burdened by the weight of toxic assets that have made it more difficult for businesses large and small to maintain their day-to-day operations, much less to create the new jobs our economy needs.

“The stock market is often a reflection of the nation’s mood, and today’s widespread economic uncertainty can be seen clearly in the stock price rollercoaster ride of the past few weeks.  And while it would be easy to dismiss the woes of the stock market as merely impacting the wealthy, the reality is that millions of Americans rely on investments in planning for retirement.  Because of this, a downturn in our financial markets can have a real impact on workers’ retirement security.

“An increasing number of workers rely on 401(k)-type savings plans, in which they invest pre-tax earnings that are often matched by their employer.  These plans are portable and protected, in that an employer or a union can never take away the benefits an employee has accrued.

“A smaller share of workers participates in defined-benefit plans, in which a plan sponsor – usually an employer or a union – agrees to pay an established benefit throughout retirement.

“While these plans – defined-contribution and defined-benefit – have many differences, both are impacted in large measure by the overall health of our economic system and by investment performance in particular.  401(k)-type savings plans are invested directly, usually managed by workers.  Defined-benefit plans require plan sponsors to manage millions in assets over a period of many decades, requiring effective management of resources and risk.  With the collapse in recent years of a number of defined-benefit plans, we have seen the risk to workers and retirees when plans are not effectively managed, or when benefits are over-promised and under-delivered.

“The current downturn in our financial markets has brought considerable uncertainty, particularly for those workers nearing retirement.  More than half of people surveyed in an Associated Press-GfK poll released last week said they worry that they will have to work longer because the value of their retirement savings has declined.  Particularly for those workers whose savings were held in too risky a portfolio for their savings goals, or for those who were not well-diversified, these are difficult times.

“Recognizing the challenges Americans face in planning for retirement, Congress passed crucial reforms in 2006 – through the “Pension Protection Act” – to shore-up defined-benefit plans, increase participation in defined-contribution plans, and, importantly, to allow workers to access high-quality investment advice in managing their retirement savings.  In these times of financial turmoil, those reforms should help to make a real difference for workers and retirees.

“Today’s hearing is an important first step in examining how the ups and downs of the financial markets impact workers’ retirement security.  However, this issue cannot be understood in a vacuum.  Our committee does not have jurisdiction over the government sponsored enterprise mortgage giants Fannie Mae and Freddie Mac, but it is clear that the appropriate committees in both the House and Senate must ask the tough questions and hold to account those who allowed these agencies to put us on this path to economic instability.

“And while I commend Chairman Miller for holding today’s hearing, it is critical that Congressional oversight in this area not be limited to pre-election political theater.  Members on both sides of the aisle should be permitted to examine these issues when Congress is in session, and with a full opportunity to explore the causes of the current financial crisis, the impact on workers and families, and what can be done to prevent such a catastrophe in the future.”

# # #