RPEC Battles: The fight for Retirement Security

Are Americans worried about retirement?

Yes, according to a recent poll by GALLUP, retirement is now Americans' top financial

worry

Retirement Crisis: The Great 401(k) Experiment Has Failed for Many ... NBCNews.com. March 23, 2015 In a hearing last September on retirement security, Sen. Ron Wyden, D-Ore., declared that "something is out of whack. The American taxpayer ...

Retirement Crisis: 29 Percent of Older Americans Have No Savings NBC News –June 3, 2015 How bad is America doing when it comes to retirement savings? The

Government Accountability Office looked into the question, and its answer ...

More evidence of America’s Retirement Picture Worsening Financial Advisor Magazine - Mar 18, 2015 The study reinforces an NIRS public opinion poll released earlier this month that found that 86 percent of Americans believe the nation is facing a retirement crisis and 75 percent are concerned about their ability to achieve a secure retirement. "It's no wonder...

America's $4 Trillion Retirement Gap Morning Star - Mar 27, 2015 Courtesy of the thoughtful researchers at the Employee Benefit Research Institute, retirement preparedness is separated into the have and the have-nots, with the latter facing long odds to achieve anything resembling a decent retirement.

Retirement Security is Crumbling

Nearly 2 out of 3 seniors depend on Social Security for most of their income.

More than 1 out of 3 seniors rely on it for 90% or more of their

income. In 1979, 38% of private sector workers had a defined benefit

pension, today only 19% do, and this decline is expected to continue.

At the end of 2013, the median 401(k) account balance was just

$18,433, according to the Employee Benefit Research Institute In Washington, 48% of those 55-64 years of age have no

pension

Differences for Public Sector? Public Sector Private Sector

Access to DB plans 83% 14% Access to Health Care at retirement

71% 16%

Average pension $26,455 ?

What is RPEC’s Role?

We are the last bastion for DB pensions…fight to retain what we have and push for DB style pension for all. 48 states have substantially changed to statewide plans since 2009.

Fight in coalition (state-wide and nation-wide) to protect SS,

Medicare and Medicaid. Fight to protect access to PEBB for those that have it and

increase affordable health care for those that do not.

Why Support DB Plans? Defined Benefit Plans (Traditional Pensions)

Employer contributes, Employee may contribute Monthly benefit based on years of service and salary Guaranteed monthly income for life

Defined Contribution Plans (401k, 403b, 457) Employee contributes, Employer may contribute Money available for retirement based on dollars in

account No required guaranteed income option

Historical Accident

Benefits consultant, Ted Benna, realized the provision could be used as a retirement savings vehicle for all employees.

In 1981, the IRS clarified that 401(k) plan participants could

defer regular wages, not just bonuses, and the plans began to proliferate.

Companies found that providing a defined contribution, or

DC, plan cost them less.

401k FAILURE “Shifting the responsibility for growing retirement income from employers

to individuals has proved problematic for many American workers, particularly in the face of wage stagnation and a lack of investment

expertise. For them, the grand 401(k) experiment has been a failure.” http://www.nbcnews.com/business/retirement/great-401-k-experiment-has-failed-many-americans-n327321

FEES

LOW WAGES MARKET VOLATILITY

LACK OF INVESTMENT KNOWLEDGE NO POOLING OF RESOURCES

NO SHARING OF RISK NOT UNIVERSALLY OFFERED

Benna, the father of the 401(k), has said "If I were starting over from scratch today with what we know, I'd blow up the

existing structure and start over." 2013

RPEC’s Pension Battles Oppose plan 4, as it would undermine ALL current plans Maintain purchasing power for all plans Oppose Plan 3 default Maintain Funding of pensions Maintain transparent oversight Go on offense, putting forward DB style for all (State Based Social Security Supplement)

Social Security

Best run federal program EVER.

41 million of the 58 million participants are Seniors.

SS replaces about 40% of an average wage

Retirees need 70 % or more of pre-retirement earnings to live comfortably.

Of each SS tax dollar paid, less than one cent is spent to manage the program.

Social Security’s benefits are modest, but vital, averaging $15,640/year.

Current Social Security Battles 1. Disability Program (SSDI) - trust fund low resulting in a 20% cut in pay outs

Current average benefit is around $1,000 per month.

Growth in payouts due to:

1. 45% increase in working population since 1980

2. The risk of disability rises steeply with age (currently 70% of those receiving disability are over 50)

3. Increase in the full retirement age from 65 to 66 delayed the conversion of disabled workers to retired workers

4. DI applicants must have a steady work history -- and until women joined the work force in huge numbers, relatively few of them qualified like they have in recent years.

Congress has allowed a transfer of money 11x under both Republican and Democratic administrations, but at the beginning of this year a rule preventing any other transfers passed, unless a transfer is tied to cuts to Social Security.

Current Social Security Battles…

2. Attempt to increase the age for Social Security “A harsh blow to Americans in the bottom half of the income distribution, who depend on Social Security, often have jobs that involve manual labor, and have not, in fact, seen a big rise in life expectancy.” (Krugman, economist & Noble Prize winner) 3. Scrap the cap: eliminate the ceiling on wages preventing contributions to Social Security above set amount (2015 $118,500)

Medicare Battles 1. Privatizing Medicare, by providing vouchers to beneficiaries to

find their own. Very unpopular and leaves more ?’s

2. Privatize Medicare by moving to all Medicare Advantage plans

3. Letting the federal government negotiate discounts on prescription drugs.

4. Stepping up fraud prevention efforts. “And an investigative series published earlier this summer by the Center for Public Integrity uncovered needed reforms of the Medicare Advantage program, pointing to “tens of billions of dollars in overcharges and other suspect billings”

Medicaid Medicaid is a safety net, provides medical and long-term care

services to low-income seniors 1 of every 5 Medicare beneficiaries qualifies Nursing Homes: average cost more than $50,000 a year and climbing Medicaid picks up the cost of nursing home care once all savings spent. Spouses allowed to keep some assets (income, savings, home).

Paying for Nursing Home Care Extended nursing home care usually eats up savings after six months. 2/3 pay for their care with money from Medicaid, including in WA WA continually suspends the legal requirement to keep Medicaid

reimbursement to nursing homes up-to-date. Since 2007, for example, four public nursing homes — providing vital

rural area care — have closed, with a recent news story showing another teetering. Few Long-term care insurances offered in WA. In December of 2013,

the state long-term care insurance program was eliminated for those who had not already purchased it.

Medicaid Fixes being Circulated

Replace private insurance with a new Medicare-style public coverage financed with a payroll tax (state/federal)

Better integrated, especially services centered on the home

Overall cut in costs to health care

To fight on all these fronts we must: Grow our membership Increase knowledge of our members Develop new leaders/representatives of RPEC Increase visibility Develop legislative relationships Grow voice of retirees in WA through WSARA, networking

with other organizations, and coalitions