The Investment Company Institute (ICI) pressed its case against conventional wisdom Monday, releasing data showing that employer-sponsored retirement plans help more Americans today than ever before.
In 2013, it said, one-third of retirees received some retirement income from plan-sponsored assets, either their own or a spouse’s. In 1975, the rate was 21 percent, it said.
Moreover, median retiree income from private-sector plans was about $6,000 in 2013, compared to $4,900 in inflation-adjusted 1975 dollars, it said.
Critics of the employer-sponsored defined contribution model include politicians on both sides of the aisle and a number of think tanks. ICI’s research is meant to challenge the widely held presumption that Americans are less prepared for retirement since the decline of defined benefit plans in favor of defined contribution plans.
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“To date, the shift from defined benefit pensions to defined contribution pensions has not led to a decline in private-sector income,” said Peter Brady, senior economist at ICI. “Since 1991, there has been a more than 40 percent increase in the median amount of inflation-adjusted income received by those with income from private-sector pensions.”
The ICI’s research is based on private-sector retirement income trends since 1974, just after the enactment of the Employee Retirement Income Security Act, or ERISA.
The ICI, which represents the interests of the mutual fund industry, also contends that proponents of defined benefit plans often overstate their historical value by discounting how many workers actually failed to get the full benefits they were promised. Vesting rules and “back-loaded benefit accruals” resulted in many retirees getting little or no retirement income from their defined benefit plans, it said.