NU Online News Service, July 30, 2003, 5:53 p.m. EDT – Employers should do more to warn about the investment risks retirees face when retirees roll pension assets into individual retirement accounts, according to an official at the U.S. General Accounting Office.
The official is recommending that Congress consider amending the Employee Retirement Income Security Act so that the act will require pension plan sponsors to provide participants with notices about the risks that individuals face when managing their income during retirement.
If retirees fail to understand the risks that they face when managing their own pension assets, “retirees could be at greater risk of outliving their pension and retirement savings plan assets or ultimately having insufficient income to maintain their standard of living through their retirement years,” Barbara Bovbjerg, GAO director of education, workforce and income security issues, writes in a report about pension payout issues.
The GAO drew on a panel that included representatives of business schools, consumer groups and benefits consulting firms, along with the American Benefits Council, Washington; the American Council of Life Insurers, Washington; John Hancock Financial Services Inc., Boston; MetLife Inc., New York; and Prudential Financial Inc., Newark, N.J.
The report includes many tables and charts. One table shows that the percentage of defined benefit plan participants who chose annuity payout options fluctuated between 1992 and 2000, while the percentage who chose to receive lump sums or leave assets in defined benefit pension plans or retirement savings plans increased to 66%, from 44%.
The GAO has posted its report at http://www.gao.gov/cgi-bin/getrpt?GAO-03-810