Members of Congress today commenced an effort to determine whether retirement legislation needs to be enacted to protect the retirement security of the country's aging population — an effort that could lead to regulation of target date funds, among other things actions.
The U.S. Senate Special Committee on Aging, led by Chairman Herb Kohl, D-Wis., held a hearing this morning to gauge the impact the current financial crisis is having on individuals preparing for retirement.
He said that he sent a letter to Securities and Exchange Commission Chairman Mary Schapiro encouraging the agency to examine the effectiveness of target date funds and consider regulations that would help older 401(k) plan participants preserve their retirement assets.
Many aging workers — including Jeanine Cook, the 58-year-old witness who kicked off the hearing — have seen the value of both their houses and 401(k) plans plummet during the last year, just before they planned to stop working and retire.
“You save for a rainy day, and now it's pouring,” said Ms. Cook, an Ohio resident whose family was forced to tap its retirement savings to prevent their home from being foreclosed earlier this year. “It's pouring, and it isn't getting better.”
Lawmakers and key witnesses — including Dallas Salisbury, president and CEO of the Employee Benefits Research Institute in Washington, and Deena Katz, a financial planner and associate professor at Texas Tech University in Lubbock — discussed the success of 401(k) plans in helping Americans save for retirement, among other expenses.
Specifically, Mr. Kohl zeroed in on the use of target date funds in 401(k) plans and expressed concerns that some of these all-in-one funds invest too aggressively in equities, which could subject older workers to dramatic swings in the value of their 401(k) plans before they retire.
“Despite their growing popularity, there are absolutely no regulations regarding the composition of target date funds,” said Mr. Kohl. “With more and more Americans relying on 401(k)s and other defined contribution plans as their primary source for retirement savings, we need to make sure their savings are well-protected with strong oversight and regulation.”
Ms. Katz, for her part, said lawmakers should move to force “all professionals who provide advice to retirees” to be considered as fiduciaries, and also called on members of Congress to provide greater use of
financial planning resources for retirees.
