Don't scrap 401(k)s, ICI president says

The mutual fund industry today attempted to make a pre-emptive strike against congressional efforts to reduce tax breaks for 401(k) plans or to make major changes in the system. “Some policymakers would have us abandon the 401(k) system,” Investment Company Institute president and chief executive Paul Schott Stevens said at a newsmaker briefing of the Washington-based National Press Club this morning in that city. “But millions of Americans who are saving for retirement through 401(k) and similar plans want nothing to do with that,” Mr. Stevens asserted. He referred to hearings held this fall by the House Education and Labor Committee at which committee Chairman George Miller, D-Calif., questioned the value of keeping tax breaks for 401(k) plans, arguing that it has not resulted in greater national savings InvestmentNews Oct. 12 and InvestmentNewsOct. 1 The Washington-based ICI released a white paper, “Retirement Saving in Wake of Financial Market Volatility,” showing that only 3% of more than 22 million 401(k) account holders had stopped contributing to their plans this year, and fewer than one in 25 had taken any withdrawals in 2008. According to information released at a House Education and Labor Committee hearing in October, retirement savings accounts have lost about $2 trillion in value over the last year. Fifty-six million Americans save for retirement through defined contribution plans, Mr. Stevens said. About $3 trillion were in 401(k) accounts at the end of March, and about half of that money was in mutual funds, according to ICI data. The ICI’s research found that among 3,000 households surveyed from late October into December, more than 70% supported the tax incentives available for defined contribution plans, and almost 90% did not want the government to take over investment decisions for the accounts. The latter issue was discussed at the Labor and Education hearing in October. Mr. Stevens supported the idea of “automatic individual retirement accounts,” under which all employers would be required to allow workers to contribute to IRAs directly from their paychecks. He also suggested that attempts to provide more-direct investment advice to workers be increased. Mr. Miller and other members of his committee have said they will oppose a Labor Department proposal that would allow advisers affiliated with mutual funds and other companies that sell investments in the plans to provide advice.