>> live pictures from the national press club here in washington, d.c. where the u.s. chamber of commerce and aarp are cohosting a retirement planning event. the focus ways to get more of them -- it will get underway in just a minute and we'll have live coverage on c-span2. an[inaudible] let me introduce randy johnson.

good morning. i'm randy johnson, senior vice president for labor, immigration and employee benefits. i want to thank you for coming today to the quote solution for a rethink of retirement moving ahead without leaving anyone behind. and i think it's a something about where we are in the state of washington these days when people look at the fact that the chamber and aarp are doing something jointly, perhaps hopefully, on a friendly basis. how, maybe how, can i use the words screwed up? how screwed up things on washington. we're all in this together. employers but an important role providing retirement and the workers, many of whom are represented by aarp and retirees, we're all in this boat together. the chamber contrary perhaps to what some people may think we can fight the good fight but we

often join with nontraditional allies. we are joined with the unions on immigration reform. we joine join with the civil ris community on negotiating many changes. we just had a big event yesterday at the chamber celebrating those achievements. so i think i would like use that as sort of a model for local how we will cooperate with aarp on many important retirement issue. that's funny i used to think retirement policy of course was really nothing, wasn't important me that i woke up one day with gray hair and i realized well, i've got to start thinking about this stuff. both personally and as a matter of policy. when you think about 10,000 people waking up everyday and retiring, those of us, this is a show it's scary and amazing. people are always in the same boat. literally, as a matter fact age 65 an over population is expected to double in size with the next 25 years.

so that by 2030, almost one out of every five americans will be 65 years or older. when you compare that to the fact there are only 3 million people over age 65 and 1900, it obviously means we've got a situation on our hands at we need to try to solve it or not. if we don't solve it, in terms of providing means for increased savings, we'll have a real problem on our hands. so that's why i'm grateful to be working with the aarp. today i am a card-carrying member, looking at the statistics obviously there's going to be a lot more card-carrying members in the future. hopefully get some of those to join the chamber to. work on them. but without let me turn it over to executive vp, debra whitman, over at aarp. >> thank you, randy. and good morning, everyone. on half of aarp and our 37 and a half million members, i want to

thank the chamber of commerce and want to thank all of you for your interest in learning more about ways to improve retirement savings in america. today we're putting the spotlight on a dangerously low level of savings that many millions of middle-class americans as well as more moderate earners have a committed for their retirement. and leslie do something about it, the lack of a sufficient -- will mean hardship and downward mobility in old age or much of the american public. while we're hosting this at the national press club, it's not a kind of crisis that often dominates the news. but it's very real, and people are increasingly concerned about their own future and the future of their family. we hear this directly from our members, and for the last two years aarp have spoken with more than 10 million americans age 50

plus about their concerns on health and retirement security through an effort we call -- they sent us a clear message. a woman named joy from connecticut put it this way. i'm concerned about being able to afford medicine and basic necessities when i'm older. i don't even see the possibility of retiring. these words are backed up by statistics here consider this, in 2010, four out of 10 families headed by someone age 45-64 had nothing set aside for their retirement. think about that, nothing set aside for their retirement. four out of 10 older americans. and even when the look at all families with retirement savings, less than $44,000 a year saved. and that's not, that's simply not enough, especially as people are living longer into their

80s, '90s, and even past 100. sadly the growing fear that you'll run out of savings before you die looks very real for many americans. for many, the golden years old even the bronze. as health and long-term care costs have risen and life expectancy has increased, the cost of retirement has become much greater than what people are saving over their working lives. i'll give you just one more statistic. according to the deli, a 65 year old couple that retires today may need savings of $220,000 just to cover their medical bills. so the course we are on is extremely troublesome, but there are ways to ease these dangers and approve the long-term outlook for working americans and their families. today, aarp and our friends at

the chamber of commerce are highlighting three broader strategies that can make a real difference in the standard of living for retirees. first, we need to greatly expand access for individuals to tax-deferred payroll deduction retirement savings plans at their workplace. right now only about one in two workers has the option of enrolling in a retirement savings plan at work, and many employees don't bother to enroll even when they have the chance. so we want to see more employers offer their workers the opportunity to save for retirement, and we also want more plans to enroll workers automatically. and we can even go further than that. we want plans to increase the workers contributions automatically. because we know that making savings automatic makes it easy and can have a huge impact on how prepared workers are for their retirement. we also need to keep and

strengthen tax incentives for people of all income levels. to say. importantly we need to improve incentives for those who have the most trouble saving on their own. incentives are critical for people with low and moderate incomes, but to also, it's also important for people of all income levels. finally, we needed a better job of educating the public about the importance of saving and how much they're going to need in retirement. we want people to have a clear understanding of the potential cost they face in retirement, that can easily last 20, 30, or even 40 years. that includes the possible cost of long-term care as was health care costs that they will have to pay out of their own pocket. the public should also understand that social security benefits are modest, averaging less than $15,000 a year or older beneficiaries. and in some cases much lower than even that. that's why we must also help

workers to understand the importance of personal savings to supplement their social security. taken together, we believe that these three strategies can make a difference in americans lives and america's future. future. now, everyone in this room knows, people in washington disagree on a lot of things. but the importance of a secure retirement should not be one of them. the value of being able to retire with peace of mind and dignity is recognized across ideological and credits in my. because it is something all of us want for our family members, and for ourselves. that's why aarp and the chamber are here today with a joint statement. who knew we could find something, randy? are or positions of different missions but we each see the need to strengthen retirement security and we each see the need for constructive debate in solving this problem. my hope is that by working

together to focus attention on this issue we create a safe place for the president and congress to come together and develop real solutions. today we're hoping to start a national conversation about responsible, commonsense ideas to solve this problem. because unlike some of the other problems our nation faces, the lack of retirement savings is actually one we can fix. that's what aarp members are asking of us, and we are listening to them. i would like to turn the podium over to my friend, randy johnson, who will introduce our next speaker. thank you. [applause] >> let me -- let me just go through a few more statistics to kind of round out sort of the landscape out there with regard to the employer sector, and, obviously, we're challenges ahead. i do want to note that there are 650,000 private-sector defined

contribution plans now covering more than 73 million active participants and nearly 47,000 private-sector plans covering more than 70 million active participants. every year, private employers to spend over 240 billion in retirement income benefits. and i think this is interesting. furthermore, or into the is department of labor, bls, nearly 80% of full-time workers have access to retirement plan and more than 80% of those workers participate in those plants. even when one includes all part-time and seasonal workers in all income groups, 68% of cess to a retirement plan and 79% participate. anyways, these numbers demonstrate i think that employers are in the game, trying to do the best they can, often with limited resources to provide the retirement of some sort for their employees. there's a move away, and certainly there's more that we can do but there's a lot going on out there. whereas, obvious there are big players in this issue and they will continue to be and

hopefully with aarp we will continue to move on. tab, you touched on the principles of our agreements. i won't go through those again. again retirement impacts all of us and so i'm just very place where having this event. but i said that the disability event yesterday. it's often, events are great and people feel great afterwards. that was a great event. it's the follow-through that kills you. so what we do with this information later will be key. so with that, at this time i'm delighted to introduce our keynote speaker bob reynolds, chairman and chief executive of putnam investments. ops by a is the number two but he is a perfect person to start our conversation has been a leader in financial services and retirement history for decades now. now. specifically, bob has been action in falluja and the developer in a 401(k) plans. in 1989 he led fidelity investment entry into the defined contribution 401(k) business. during his tenure the 401(k) plan market grew from 3 billion to more than 300 billion.

wow. bob has continue that success and taking them out ceo putnam investments in july 2008. more important for our purposes today, bob is an active and outspoken advocate for reform as was new initiative straight jobs in america. strong believer in the valley of savings himself, bob, thanks a lot for joining us today. we look forward to your comments. [applause] >> first off, good morning, everyone. i'd like to thank randy for the very generous introduction. and thanks to u.s. chamber and aarp for inviting me to share some thoughts with you this morning. i would say my first thought actually when i think about this meeting, just tearing aarp and the chamber coming together this morning, and finding common ground on strengthen retirement

savings is an inspiration. i'm reminded of humphrey bogart famous last line in the movie casablanca. louis, i think this is the beginning of a beautiful relationship. and i sure hope it is. because no two groups in this country i know of could do more together to advance the cause of retirement security in america. and we do, all of us, share a common goal. we all want every working american to be able to save for a dignified, well-financed retirement. i trust we all agree that it is in the interest of every american business to see every working american had a real ownership stake in the american enterprise. i am very confident that these

two goals can be achieved in tandem by strengthening both our public and private retirement systems, and the crucial elements that make them successful. there is much, there is too much knowledge in this audience today to really talk about retirement savings shortfalls, woes and problems. we all know that there's a serious risk arising if we don't act soon to shore up both our public and private retirement system, and lift america's retirement savings rate. that's why we're here this morning. but the most salient point i wanted to make today is that they did we are asked much closer to solving america's retirement challenge that i think most everyone realizes. in the workplace savings arena at least, i know what actually

works. my greatest hope for this conference would be that we could begin today to reframe the national debate about retirement savings away from the problems and towards solutions, and that onto actions to make these solutions real. so i'm going to focus this morning on ways we can build on proven successes, successes that are already taking place within america's existing defined contribution savings system. i'll discuss three specific actions that would more fully realize the potential of 401(k) type plans to help working americans reliably replace their incomes in retirement. for their whole life. and i'll close by suggesting that the long-term benefits that

robust, reliable workplace savings can deliver for america's economy, and national morale, far outweigh any short-term costs. better yet, we do not need to reinvent the wheel. we already have the key structures and insights we need to build on. to put it in a nutshell, there's nothing wrong with 401(k)s that cannot be fixed about what is right with 401(k)s. this is especially true since the passage of the pension protection act of 2006. because while defined contribution plans have been displacing defined benefit plans for a generation since the mid 1980s, it wasn't until the pension protection act that congress and regulators formally

recognized the k. plans in fact have become the primary source for america's future retirement income. by endorsing the best savings plan design elements, namely auto enrollment, automatic savings escalation, and then guidance to qualified default investment, and by providing employers legal safe harbor for adopting these features. ppa marked a qualitative change, one that has already begun to transform all workplace savings plans in this country. for the better i might add. pre-pension protection act, workplace savings plans were seen mainly as supplements to social security and defined benefit plans.

post-ppa, the wave of change among k. plans across corporate america has begun to create a true national retirement system. though the buildout is far from finished. in the seven years since ppa was signed into law, we have seen best practices like auto enrollment, spread across most large american corporations, and raise the retirement readiness of millions of workers. we can see the positive benefits already, as was the continuing shortfalls in a lifetime income surveys that putnam has done over the last three years in collaboration with right work partners. these surveys take stock of the total assets of more than 4000 working americans, aged 18-65,

weighted to match u.s. census parameters. the assets we count are quite comprehensive. social security, any db plan benefits they have, defined contribution balances, other savings and investments him and even home-equity and the valley of businesses that people on. overall, we estimate that working americans in total are on track today to replace roughly 61% of the income they enjoyed during their working careers. this confirms the future risks for millions of a serious drop in living standards in retirement, even when we include social security. but what's most important and positive about the survey's findings are the powerful

evidence they provide about what is working well into america's retirement savings today, under current law, and through current workplace savings plans. george orwell once said that seeing what's right in front of one's nose needs a constant struggle. and went this survey shows us -- and what this survey shows is right in front of our noses are the key changes we need to make to fully realize the potential of workplace savings, and dramatically raise the prospects for retirement success for all working americans. first and foremost, we need to recognize that the only real solution to america's retirement savings challenge lies in payroll deductions in the

workplace. the difference in retirement readiness between americans who have access to workplace savings plans and those who don't is truly staggering. our lifetime income research shows us that the median americans who have no savings plans on the job are on track to replace just 41% of their worklife incomes once they retire. and remember, that is including social security. americans who do have access to savings plans at work, are on track to replace 73% of their pre-retirement incomes. that's still less than we should aim for, but it is radically a better result. workers who are active in defined contribution plans are

on track to replace 79% of their worklife income. those who are automatically enrolled in the plans are doing even better, tracking towards 91% of income replacement. those who are enrolled in auto escalation are headed to 95% replacement rates. perhaps most strikingly, those who differ rates at 10% or more stand to replace over 106% of their working income, once they choose to retire. that, my friends, is success by any measure. and we not talking about some tiny outlying exception your. we estimate that 23 million

individual retirement savers are on track today to replace more than 100% of their current income in retirement. and they come from all income classes, not just the well-to-do. and that's what i put the next round of retirement policy debate in america should be about. we can and have identified the structures, and behavior, that leads to success. how can we make this success contagious? if we define success in retirement as an enabling working people to replace paris retirement income for life, the answers to those questions are again right in front of our noses. here are three highly impactful steps that would take us from here to retirement security.

first, let's aim to make the best practices endorsed by the pension protection act of 2006 the new norm for all workplace savings plans. let's go full auto, auto enrollment, auto escalation to hire deferrals, plus automatic default to qualified target date or balanced funds for every workplace savings plan in america. there really is no reasonable doubt here that these basic structural elements do raise participation, deferrals, account balances, and the likelihood of retirement readiness. knowing this, i do feel like a medical doctor who has discovered a vaccine that can prevent a serious illness. in this case, financial stress

and elderly poverty. that's why i would love to see these auto features be made mandatory for all workplace savings plans. in other words, a requirement of all plan designed, either through the next round of pension legislation or through regulatory guidance, or maybe just a mass outbreak of common sense. by spreading these best practices across all existing d.c. plans, we could lift the retirement readiness of more than 70 million working americans. as i see it, we almost have a fiduciary responsibility to aim for that. and no excuse not to. the second big step towards boosting the country's

retirement readiness extends some form of workplace savings access to all working americans. many of the ideas proposed so far to do this, such as the auto aarp concept, or proposals for central fight 401(k)s, would actually be quite inexpensive for companies to implement. of course, if we do require companies to offer savings plans, they could be compensated through the tax code and protected from liability, just like the pension protection act did. they gains in retirement readiness below in moderate income workers would be astronomical. proposals like the auto have been stymied so far by opposition to the very idea of a

mandate. but can we not encourage policymakers to design incentives that makes simple savings plans so attractive that every small business would be motivated to offer them? and at the individual level, auto enrollment in the workplace, savings, is absolutely not a mandate. it's a choice, or bided there is an easy opt out for them. we do, by the way, already have a real mandate in the form of fica taxes. what i'm saying is that everyone subject to the fight to mandate should also have -- fight to mandate should have the individual option to save for their own future on the job. by facing up to on solving this very real coverage problem, we could not only lift the

retirement readiness and dignity of millions of our least advantaged workers, we could disarm a weapon that critics of workplace savings constantly use to attack the whole defined contribution concept and industry. the best defense of existing savings incentives, in my view, is to go on the offense and extend them to everyone. the third action step we need to take is to lift the bar on savings rates across the workplace savings system from the roughly 7% level we have achieved today through the current system to a new baseline of 10% plus or there is -- plus. there is no more driver of success than deferral rate. and i feel a fiduciary duty

again to call for a 10% plus as the new industry baseline. we don't really serve anyone well by allowing them to believe that saving 3%, 5%, or even 7% is enough to ensure retirement readiness. so let's tell the people the truth, even if it's the hard truth. i know these three steps, to retirement security, are easy to say but hard to do. securing savings access for all will surely require a new legislation. moving to full auto designs, plus 10% less than deferral will require changing plan design and lifting current savings rates by

40-50% across tens of thousands of plans, and amman millions of participants. but if we are serious about rethinking retirement and leaving no one behind, these are the most powerful three steps we could take. with them, i believe, we can create a workplace savings system in america that makes success easy, and failure very hard. we can inoculate generations to come against the risks of elderly poverty. and that seems to me is a goal worth waiting for. thanks for listening, and i would be happy to take questions. thank you all very, very much. [applause] >> ahead of schedule which is a

good omen for this entire effort. bob, we have time for q&a. >> yes, ma'am. [inaudible] >> this may be a little bit off topic but certainly related. in the concept of encouraging people to invest in secure savings and confidence in the savings system, and certainly historically you have asset diversification and all the four o. one 401(k)s and other plans, et cetera, et cetera. and the concept of long-term investment and profitable companies and letting your money grow with them certainly makes sense, but what we are presented today is a short term volatile investment -- i mean, casino type mentality and not a reality of long-term safe investments, although long-term they probably are but the volatilities and the

risks in the savings system has to be a piece in terms of people having confidence and wanting to invest their money. that's probably a whole other topic but i can't see how that isn't an up or obese of it. >> no, very important piece of it. which spurned the invention and growth of target date funds. target date funds are put together to provide diversification, against volatility and towards a specific time horizon. the longer someone's time horizon, the more predictable returns are. a shorter time horizon, the less predictable. so you have to invest that way. so i do think that target dates have become a big part of the industry to solve the problem, which is a real problem for savers today. >> that's where my money is. >> thank you.

your comments sound very relevant for people who are in traditional firms. there seems to be an increasing part of the population that's having trouble getting a traditional job. a lot of people are now in temporary agencies or they are ending up being contractors juggling lots of different jobs. they are part-time teachers, they run websites and so on. can you comment about how these ideas can help kelo like that? many of them, fica, are not earning a lot of money and they have trouble setting aside funds, given the relatively low income levels. >> that's a great question. i mean, the current unemployment level and underemployed level in this country should be an embarrassment to everyone in this city, but and that's a

whole nother thing. the reason why we say anyone who gets fica has the option or five individuals a choice. and i think it's very, very interesting when individuals have it available to them, thank you save for retirement. and i think, since retirement is a tax deferral it is all pretax. so the cost of it is not dollar for dollar per se. when it comes out you pay a tax, but to your point i think should be made available and gives individuals a choice. but they are enrolled in less they said no. yes. >> one of the challenges that they worry about is even as people safe enough and invest appropriately and get to 65, 67 with a very good nest egg, there's always the risk of outliving your savings if you live an extraordinary long life.

there's a lot of adverse selection, can be hard to figure how much do you take out. do you have ideas about how we address those kinds of problems? >> yeah, i have ideas i think. you know, it's interesting, the accumulation phase we know what makes it work. the withdrawal phase i think we're in the early innings of innovation, solutions, and ways to do it. i do know that if you do safe enough, you should have enough money through retirement. one concept that i particularly like more as an individual is a deferred annuity that doesn't kick in until you're 75, 78. that way you set up a budget and then knowing when you turn the page of money for the rest of your life. but i do think we're in a -- in

the very early stages of the income solution around retirement. and i think it's going to be critical for these plans to be success for the long-term. >> just one more. >> i have a question for you about 401(k) plans. since the advent in 1978, coming online social security with 1982 over the last 30 years the average balance for 401(k) plans for some has maxed out the whole nine yards is about $208,000 according to ici. with that being said, the average account balance, about $70,000 to the rest of the workers. we talk about savings and investing, would you be opposed to having people put money into

an after-tax plan as well as part of your mandate? >> first off, let me take the first part of your question. i have no problem with after-tax, because you know, retirement has always been a three-legged stool. social security, private system, and then personal savings. so the more individuals save in each, two of the buckets, social security is spelled out, the more you can save in those other two buckets, the better retirement. as far as 401(k), as you know they pull out balances at all, i would tell you that it was passed legislation and 79, final regulations were not done in 284. and the first 401(k)s in this plan, country, were called salary reduction plans. who wants to sign up for salaried action? [laughter] so they were supplemental plans

for many companies in america. many, many. a lot of new companies, microsoft started the retirement system as a 401(k). but other companies had savings plans the converted a 401(k) or converted a 401(k) later. it did not become the main savings, main retirement really a slightly before the pension protection act and after it. so a lot of people are trying to judge a system, number one, on average of all workers. let's look at workers 60 and above. but also a relatively new system. and again, the numbers i cited to you are actual people. people go to participate, 10% level, invest it the right way will replace over 100% of their income in retirement throughout their life. so we need to give the system a

chance to work. we need to get in the right features, and we have the basis for a great retirement system as a country. and i will take that to the the grave. thank you very much. [applause] >> we hope that's not too soon, bob. [laughter] so i would like, that's good. i would like to introduce our next panel to be led by gerry, director of economic issues at the aarp public policy institutinstitut e and he will do the moderating an introduction. gary, thanks a lot, man. >> good morning.

so, to start things off, you for some sister six and i was a more edgy because there's a couple that are out there bashing is some statistics. so the center for retirement research at boston college estimates the retirement savings gap, which is the years between what people have saved and what they need to save, is about $6.6 trillion. the employee benefit research institute using it as a model, different data, different assumptions estimates the retirement savings gap is about for $.3 trillion that's just for baby boomers and for generation x. these are astonishing large numbers and they said the same thing and that is we are not saving enough in this country. the retirement research center also come to similar conclusions regarding who is at greatest risk of not being able to maintain their standard of living and retarded. said they find that generation

x., which is my generation, and i will say is two years away from turning 50 is that more at risk than baby boomers. low-income households which include many african-americans and hispanics are at greater risk than high income households, and women are at greater risk than men. so the goal of this first panel is to learn more about barriers to retirement savings for women, african-americans and hispanics. how we do that our three experts that just came up in a field and we have going for my left to my right, patti balthazor bjork contract of retirement research at aon hewitt. we have leticia miranda, policy advisor of the national council of la raza and cindy hounsell, president for women's institute for a secure retirement. thank you for joining. we will try to have this as a discussion, no formal presentation. what we would like to do, what i would like to do is also have questions as we go along, and so

if you have a question as the mood strikes you just raise your hand and i would ask you again if i do you are for our panelists. and with that i'm going to start things off with a couple of questions just to kick things off and we will go from there. so we heard statistics about how unprepared americans are for retirement. and my first question i think am going to start at the end with you, cindy, is to get your take on this. is how concerned are women based on research that you've done about being prepared for for retirement, about being able to saving of? >> i think pretty much every study has shown for about the past 20 years since lake research started this in the early 90s that women from is one of their top priorities. they're very worried about retirement. there's always a lot of surveys that give a glimmer of hope where the market is doing great and the economy is doing great and people feel better about it, but underlying it is women live

longer and that's a big issue. they go into the nursing homes and they see who was there. and it's a scary process. >> from what i've read, women are living longer, also they typically have interruptions in employment so they don't have lifetime earnings. that's a bigger factor, bigger hurdle. >> right. and twice as likely to work part-time as one of the questioners already mentioned. women have always traditionally work part-time because of family, caregiving issues. >> leticia, hispanic, are they returned about retirement security? >> yes, hispanics are deathly concerned about retirement security. similar to the situation with women, hispanics are more likely to earn less money and we do have a longer life expectancy than other americans. and, unfortunately, we tend to

be the people who are working in companies that do not offer any type of retirement savings plan to the workers. so argument is more dependent on social security than every other racial and ethnic group in the country. about 53% of hispanic seniors depend on social security for almost all of their income. so these are really important issues to our community, as well as just social security in making sure that one option remained something strong for all of these workers. but hopefully we can all work together to create a better private retirement system that will include lower and moderate income workers as well. >> patti, i'm going to ask you a slightly different question because i know there's been some work done on this but what we know in terms of hispanics and african-americans in terms of planning for retirement? >> we did a joint survey to employees with investment and we

got 19,000 responses, 20% of the people that we set these questioners out to respond to that's pretty significant. i think they wanted us to hear what they have to say. we heard from whites and asian-americans one out of five, one out of four had a plan in place today. and for asians and hispanics and african-americans it was one out of four. then we asked are you saving enough for retirement? do you feel like you're saving enough? 43% of african-americans said much less than they need to come and hispanics was 36%, and asian-americans and whites were 19 and 30 but i think the point was, nobody knows how much they need to say because they don't have plans in place and if one feels like they're not saving enough to so they must be pretty nervous because what is enough? i don't know. i don't have a plan and everyone just has the feeling i'm not saving enough. >> let me ask this question.

this is something that i hear, it's an argument that folks make that low income people don't have the ability or the desire to save. you here along with it is that social security will be enough. i'm just curious in terms of the work that you guys have done, what is your experience with that? how do you react to that? we will go back to cindy to start and we will work her way down spent a lot of the work we do is with moderate and low-income people and i would like to say what save as much as anybody else but they want to have access to a lot of times what happens is that they end up not having the money after a longer time because they just, they need it for other things. but the ability to save, they want to be able to do that. and it's really important. we are working right on a project with caregivers, i mean care, in home business,

caretakers of children. it's amazing. i mean, they have shown up. i never think people will show up for weeks later, especially moderate and low-income people have so many other demands on their lives like other jobs. they do it because they want the information to they want to know how to do this. >> i would concur with that. sometimes i do talk show radio in spanish, and i've had farmworkers call me in the central valley when i talk about retirement security, saying i really wish i could save more money but what can we do to raise the minimum wage? most of my money i use, i have to eat. but it's a very important issue. we actually did at nclr recently did a survey, hispanics in californcaliforn ia whose annual earnings were approximately 25,000 a year. and we found that 73% of them were saving their money in some way or another, even when they

don't always have access to a bank account. because a lot of banks require a lot of id and so should you numbers and so when. so that is a barrier for many in our community who still do not have legal status in this country. so it's even hard for them to open up a geek out, by people are still finding a way to save money. and if you want and know that this is important and they want a retirement, a way for them to save and put money away for the retirement. i've had very low income people call me about that. >> let me just follow up with a question for you because you mentioned about financial institutions, and i think one thing that i've heard is that hispanics and african-americans tend to be less trusting, perhaps of financial restitution or they certainly feel less welcome at the local financial institution. is that a barrier to saving? >> having a bank account is correlated with saving more money, being able to save money. so we saw that in our recent survey that we did.

what we found was customer service feeling welcome were two very important issues for people when they're selecting a financial institution of, you know, where they could save money. we didn't really ask about that, trust issue. just customer service, language access, that kind of thing, feeling welcome, those are really important issues. >> so i'm going to go back to the study we did again. it covered 2.4 million participants in 60 large plants. and we looked at by salary, look back to see people that were paid 30,000 or less how they contributed. 50% or not. -- 50% are. people want to contribute like to see. when you put an automatic and will which can be a big part of this conversation, that, typically we'll see whites and asian-americans contribute, three quarters, 75, 80%. but two-thirds of african-americans and hispanics will contribute to a plan.

when you put an automatic enrollment it almost neutralizes and eliminates that whole issue. everyone is up to 80% because they are probably new hires, younger generation and then, they are not opting out. they are getting this almost a flat ban across. >> let me just pause there and see if there's any questions from the audience as far as, going. don't be shy. please raise your hand at any point and i'll occasionally look back to the audience. actually we do have a question. >> sorry. have you any information about the savings or enrollment among people who work at relatively low paying retail establishmen establishments? mcdonald's. >> anyone speak with a lot of retail was a part of a retail and our studies we did see the participation levels significantly vary by rate.

so whites and asians, asians been the highest and then whites and then african-americans and hispanichispanic s. we did a burrito as a part of that and retail is much lower than average which we know, but automatic enrollment is not a silver bullet unless it is put in right does help everyone to increase the rates. just didn't have that escalation and other features high to it and default them in at a high enough rate. so it is impacting the region as well skip when you say in writing, the default rate? >> the default rate to 50% of planted and 3% or less but really like you said earlier in the discussion it should be six, seven, eight, nine an escalating up past 10. if we're putting those defaults in lower, we have to escalate but we like to see them put entire and continue to escalate. otherwise savings rates for those that are not automatically enrolled are significantly lower than those that would often on their own.

if you have automatic enrollment your rates will be lower than if you opted in on your own. if you're not default in at the right level. >> any other question? >> there's been a lot of attention on 401(k) plan leakage. i wanted to know with your work with low income workers, is that an issue that you see more common with low income and minority workers than other groups? >> the question is on leakage, is that how big of a problem is this for low income earners. you have information on that? >> i mean, i think what the data shows is that for sort of women generally have less income, i mean, they have less savings, all of that.

so when they leave the job their rollover benefit is going to be much lower. and so that probably encompasses a lot of low income workers as well. and especially in the occupations. we know that it's going to be lower. people are going to take their money. i think there was some work, but i'd heard a number like 5 billion a year is the penalty amount that people are paying for taking, you know, taking out their money early, and a lot of that is low income. treasury department has a very complicated paper on all of that, but that's the only place i've ever heard of that really spent we did look at leakage. by race and by pay bands. and so that is where we really did see some differences, that african-americans are taking high volumes of loans and withdrawals and gender fuels are taking high volumes than males. but the highest level of leakage

is really happening in the 40-$60,000 range, the midrange. those are the ones that are tapping into their account at the lower levels are but not as high a person that. so it's interesting to see. when you look at loans, african-americans, it's about 50% of outstanding loans where whites are at about 26. so you can see there's a significant issue there. and the same for withdrawal. more hardship withdrawals are. >> so leakage of course is an issue when you assets to auschwitz ago. so one thing i would like to question, leticia, is what you see is that barriers from your perspective, for getting hispanics to save more? >> right. well, the huge elephant in the room for our community especially is the fact that we work for companies that do not offer any form of employer-sponsored retirement plans. some people have no way to save through their paycheck, as was

discussed earlier. so two-thirds of hispanics work at a place that doesn't offer retirement plans. it's actually lower for white workers. it's about 40%. so all of these questions, leakage, so and so forth, these are things that are irrelevant to the majority of our community. so until we do something, we need to change our private retirement system and make it an inclusive for low and moderate income workers. until we do that, i mean, these are nice little interesting conversations to have, but they are not relevant to the retirement security for our community and for all kinds of low and moderate income workers. >> cindy, what do you see as a very? >> while i mean i think a lot of times women especially save money for the children and they don't save money, and they just believe that that's culturally, i think we found that with a lot

of latino women, if you say to them, save for retirement, they will say i am saving for my children's education. so to tell them to join a 401(k) plan is like a no-no. >> [inaudible] >> i'm data-oriented. >> issue because we've been doing that level of education for maybe 20 years or something. i mean, that's what happens. i see a lot. or they don't have access at all. it was there a question over there? >> i 100% agree to even having the ability to open up the broader -- >> especially access to a well-designed plan. i mean, the data in research as most of the research by really prominent researchers in this field show that if you do and automatic enrollment process, these racial disparities disappear. you know, so commentary aside and anecdotes aside, if you look at the data, do a well-designed

plan and you will address this issue. >> i agree except a lot of people don't -- >> so what is the solution? a structural change. >> questions mostly for leticia but entries about your other thoughts on the panel. do you feel for many of the folks that you work for that their employers could be more likely to respond only to just enhanced incentives like refundable tax credits that would pay the admission cost for operating a plan? or is it your sense that you really need some sort of mandate that employers offer these plans to employees in order to make sure that that access is there? >> well, if you look in california, they did pass a bill. it hasn't been implement to get. they're going to the federal regular process, the california secure choice retirement plan. so that is a mandate on all employers with more than i've

employed. that offer a way for their employees to save from the page it. so it does not require them to do a match and it would be pooled money. the money would be pulled and professionally invested. so it doesn't require much from the employer other than they probably give them a paycheck anyway, and it's just an automatic deduction. so i think things that are not onerous and address the issues of small employers, they are important parts of the solution, and i believe something should be done that's mandatory. because this voluntary system that we have has resulted in a situation where millions of smaller employers have volunteered and not provide a retirement plan. and the workers that are left out are a lot of times low income and people of color and women and so forth. ..

to the point of giving people more access, do you see any resistance on the part of small employers to the concept of my employees don't make enough money to justify a 401(k) or in particular automatically and rolling them at a level of savings that makes a difference in their lives? what we are finding in our research is the employee's themselves like this idea of

automatic enrollment, sometimes employers use that as an opportunity to compound or have part of that broken. >> it is an important question and i would like you to respond again. that is an argument we hear, low-income earners don't have the ability to save and that could be an excuse for not offering a plan. >> 72% of the people who earned $25,000 a year were saving their money not necessarily for retirement but doing some form of savings. people definitely understand the importance of savings but it is human behavior if you take the money away and put it somewhere and let it grow and make it hard for people to access it is going to be there for them later. those are just general things about all cuminhumans.

>> if people don't think they have access to it, if they think it is locked away they won't contribute because they had so little and this is true of a lot of women. studies have borne this in the past, you are locking your money away. if you have a rock fans knew you could get your money people on much more likely to do that. is much harder to be setting up these nontraditional accounts. >> sounds like there is the trade off, in order for people to encourage people to save they need to know if they had any emergencies they can get the money out. >> they need more education to do that. >> and implementing automatic features, it was and small-business but in a lot of cases because of the costs. if you eliminate the match and

get automatic features they are concerned about push back from participants that they will be upset by it but with the studies we have people who would be upset if your client automatically unrolls you. 20% are not going to like it and will act out but the other majority said i kind of like that. would be a nice thing recommending something to me. thing that employees aren't going to like they will like it if it comes and give it is not a cost issue, that is the easiest way to save and walking to the bank. it is a nice feature to give people access to it. >> a couple other questions? >> does any research show an interaction between the health

care costs and willingness to enroll in retirement savings plans? i am asking this in part because of obamacare turns out to be fairly successful, there should be a subset of the population who will find their costs for health insurance will fall significantly and that might open up an income opportunity for people to save more. >> anybody wants to handle that? >> i haven't seen that data directly but the rockefeller foundation use to do an american workers survey and should for hispanics the main reason they did into their savings, the number one reason was to pay medical bills and hispanics, the most likely to have any form of health insurance and even if we have immigration reform they are cutting out people who gain the goals that s, they will not have access to affordable care

subsidies for ten years and some want to extend that so the situation of insecurity due to health care costs is a big issue and it affects retirement savings ability. >> we have already touched a little bit in terms of we are hitting hard on automation, auto enrollment. let me more generally, are there things that we know from their resources in terms of what works or more importantly what doesn't work in terms of getting african-americans, hispanics, women to save for retirement? >> the data is so clear with the automatic features, the ottawa enrollment features and those were spelled out in the more recent study, you move from 59%

of hispanics when in that mixed crew, some with and some without, 51% without. when you don't have model enrollment 51% of hispanics participated but when you had i know enrollment 80% participated so it has a huge important benefits. you could extend if we had a more universal system with an automatic ira or mandate on employers to permit employees to save them money, it would be awesome. >> there is a lot of segmentation going gone. when people get e-mails and have access to something they think is important everything i have seen companies doing and financial companies especially that focus on women will get people really excited, if they're forced to go to a lunch time event and people like talking to them one on one in a

way people can understand they will make all sorts of changes so there is good evidence. >> good evidence and communication or access to volvo, some people want print versions but communication -- the other side is health products are important to help people, how do i invest? try to target these funds and schools to help people diving to the process. >> it happens at the workplace. >> within the program. >> i have a question about what you think offering a match not necessarily by the employer but perhaps through making the credit refundable, putting money on the table since low-income workers don't get a lot from tax benefits that are more of an incentive to hiring people if

they knew they would get a refundable tax credit, what affect would that have on the participation rate and their ability to accumulate a more significant amount of money that might encourage them to keep bond contributing and have a sense that they are getting somewhere. >> there is a credit right now in the law but it is not refundable, low and moderate-income, taxpayers, what do you think of making it refundable or effective? >> that is the model i mentioned earlier with child care workers. that is what we're doing to see if it works or not and we are doing the refundable double credit that they normally would be getting rather than just the 1% or 3% match and that is why they're showing up every week. >> i you seeing some results

now? >> yes. and the that people who never had any retirement savings ever, they want to do this. everybody wants it. >> is it designed as such that the focus is retirement savings or savings more generally. >> add ons basically and if we had retirement bonds that would make for another opportunity for people. >> any thoughts on refundable savers credit? >> we are supportive of that and as we go into the tax reform debate we included that in the priorities, currently the tax incentives in our retirement are completely skewed to the top 1-fifth of workers and it is so unfair and we will spend $2 trillion on those tax

incentives. can we do something to make these kinds of incentives refundable and available so that low and moderate-income people can benefit from some of that $2 trillion would be great. >> sue byrd . this was alluded to earlier. we are seeing part-time workers today less likely to have access to a plan that works and women, african-americans and hispanics are more likely to be part-time workers than white. my question, if you have any thoughts on how to bring these folks into the retirement

system, how do we build assets, retirement savings for these folks? any thoughts out there in terms of how to bring these folks into the system? >> the first thing is access. then we can treat them like everyone else. if they don't have access if you are part-time a lot of people won't have access to these plans and they won't have the ability to do it. >> we have been talking about that for many years because women of more likely to work part-time. if they did have access it would change things. >> >> guest: had a universal retirement system where everybody where all required -- all were required to make sure employees were involved, this new system, all workers would be eligible. it would have to be portable and so on and so forth so as people

change between jobs they would continue to have their retirement money continue to grow and follow them around. >> other questions? >> consumer financial protection bureau. we are seeing a higher percentage of minorities and low income populations carrying their debt into retirement and i was wondering how that interacts with the decision to clean social security and also the decision to throw into the key assets for retirement? >> the question is the higher debt which i think is a growing problem. >> it is a big barrier to why people can't save. i don't know what you do with that.

they can afford to pay their bills. >> i am not a and debt expert but i have colleagues who are. i can't speak very much about it. >> there is agreement that growing debt is a problem and building assets, increasing your debt is not the best thing to do. there is a balance there, maybe there is an order in terms of getting the debt down and building your assets. >> when you look at the elderly, a lot of the debt they are accumulating is because of health care, medication, things like that, they go to the pharmacy, good work done that too. >> any other questions? let me come back for a second

with respect to what you are doing, west virginia. the focus is largely on single credit. are there other experiments that you know of that are occurring? so far, number one is access. number 2 is designed of the plan itself and tax incentives and education. that is a pretty big bucket we are catching a lot of. either of a things people are experimenting with? >> the idea people do a lot about it. retirement isn't allowed to. >> the idea is? >> individual development accounts. people try to do that and they

do i are as that are geared toward retirement and they focus on some age groups and those have been successful too. >> okay. asset building, someone had a question along the small accounts arguments, and small assets in these accounts but there is literature on assetbuilding and what it means for people in terms of their flexibility, confidence and economic mobility. . they have anything on that you have looked at? any other questions before we move on? we are ahead of schedule.

>> the structural issues that need to be addressed, have any of you thought about those who are low income and don't have the access ability to invest and they have the debt, it might be a better idea to put money into a savings account where the money is guaranteed through payroll deduction and once they get to an area -- they can start investing in the mutual-fund. we will hear saving for retirement to be synonymous with investing and there's a difference because what we are saving goes to an account that cannot be lost and there are no guarantees on the funds. and the registered investment adviser, the reason they don't invest is fear of the market. but when they put money first into a savings account where the money is accumulating, it won't

be lost through payroll deduction, then they can start graduating from that point forwarding to investment accounts. the problem is the gatekeepers are the payroll department. they don't want to open payroll accounts to allow people to have any other kind of retirement vehicle other than a 401(k). from a structural point that needs to be addressed and may be you can address that. >> that is why i think the roth is a better solution for a lot of people because it does a lot to save and you are not supposed to do that with your retirement account but that is the only way people do that. if they are at their job they don't have access to what you are saying. that is part of the problem. we have to have two or three new accounts to have people put money in but we haven't been

able to get one so i don't know how we will get two others. there are a lot of things people need help with. >> the roth ira and a retirement account with after-tax dollars and put earnings like tax premium and the additional -- >> there is a group we worked with for a long time, if you are a d c person you know and so others might eat and they do that and they actually have a retirement account, a 401(k). it is amazing because they have a lot of employees because they run a lot of homeless shelters. what they do is if you don't want the money taken out of the 401(k) you can go to the payroll people and tell them i can't do that. i am fixing my car and can't take money out of my can't allow them to have a savings account

and suffered. that is because that is what they are in the business of doing and this is a bigger issue for the rest of the world. >> your question, volatility of the market is something that really discourages african-americans, hispanics to take a first step in saving because it seems with a 401(k) you have options for fairly safe investment. >> i remember the data on the percentage of assets that were in equities and for hispanics it was the same as for everyone else and especially with the march target date, those decisions are being made by the mutual-fund now. i haven't seen data on that. i don't know that that is an issue. >> i was going to say i saw something a couple days ago, a

study that came out showing women were saving more once they got into the 401(k). they put in more money than the men. that study was a few days ago and something else would be sweet. >> any more hiring? that is interesting and equity exposure to find out for same across all -- that is interesting. >> the same -- ours wasn't smart--far off from the norm before the spread of target dates. >> those who are like me put it in and don't look at it so is just getting it in and hopefully not tinkering with it too much. one follow-up on this question is it seems like what was asked was this idea of having a

starter savings account, something that is very safe and transitioning once it hit a certain level into something more. what do you think of that? would that encourage more savings? >> at the beginning it is not targeted to retirement. >> it would be principle protected is the idea. and then perhaps once in reaches a certain threshold, number 3,000 or whatever the case may be, perhaps gets rolled over into something that has a mix between equities and bonds. i look for reaction. is that something using could make a difference in terms of savings if there is a strong fear of the market? >> california secure choice, they guarantee you won't lose your equity and guarantee a small rate of return, it is more

of a bond type of thing. they found that to be something that helps them get the bill passed. californians don't know about it yet. he thought it was an important feature, the sponsor of the bill. >> and you think for hispanics they would see that guarantee which would make it mor rk). bu. >> er ro whquestowi'o ispa pe w

prefer something they won't >> i would love to hear what you think should be done to encourage small businesses to do these, have the owner taken out of their pocket. >> if they want to respond that the response but the next two panels will be specific to those issues. >> these panels. >> i will say something. i run a nonprofit so i get where you are coming from. there need to be incentives. that is why nothing happens. i was telling somebody yesterday that she and i did this at the press club about 22 years ago when i was at the pension rights center and give an event how to

get women covered in small-business so here we are 20 years later. there needs to be done, something different than the last two decades. >> some of the innovative ideas coming out and bubbling up at the state level are not putting requirements that the employer contribute -- the california secure choice plan does not require the employer -- it prohibits employers from giving the match because they want it not to be subject to the law, employers are prohibited from giving a match in the california secure choice plan. all they are asking is in your payroll deduction to offers them that payroll deduction, if you have a d p or whenever to let the employee be ducked part of their own earnings, what you paid them and let them save that money so i would say people are bending over backwards to make that easy, new ideas to try to

make it something employers can do and critical that whatever ideas come out need to be extremely appropriate for small businesses because for hispanics we are more likely to work with small businesses that have less than 100 employees are the main people to offer any retirement plan because the industry has not offered products that are relevant to small employers who have low income workers. we need new ideas and it is important to make sure businesses not be burdened financially or with a liability or so on and so forth so that they will do this but people have of moral responsibility to try to help improve the retirement security situation of all workers in this country. >> the automatic eye are a common employers cannot provide

a match and certainly the president's proposal and others there is an enhanced employer startup tax credit and i think we are out of time so thank you very much and i will call david. [applause] >> david, a senior strategic policy adviser at aarp will lead the next panel. [inaudible conversations]

[inaudible conversations] >> all right. well. are we all said? so far we have heard that if you go back to the title of this event, moving ahead without leaving any one behind that despite some very important innovations and very effective innovations we are still leaving people behind. we thought for this next panel we would bring together four of the most innovative minds in the industry to come up with practical, interesting solutions and ideas for how we move this

area foreword to. how do we include everyone as we rethink retirement? very briefly and in order of appearance first we're going to hear from beth micheel of work force investing at fidelity investments. second we will hear from heather huber of loren ward. third from jamie kallamaredes of prudential retirement and last but certainly not least from michael kiley of planned administrators. all yours. >> thank you to the aarp and the chamber. as we said this is an important conversation. at fidelity our goal is to help individuals of all ages and demographics prepare for secure retirement. economic security does mean different things to different

people and it is important the good news is we are living longer and that means we need to support ourselves longer in retirement and shoulder more years of living expenses. let's not forget the high costs of health care, $20,000 figure is staggering 465-year-old couple today retiring to set aside for that. that is an essential extends. no matter how you look at it you need to have some preservation of that to cover that. there is reason to be optimistic. there is increasing recognition of the need to save more. more and more americans are taking action with respect to retirement readiness. this panel here is going to talk about innovative plan designed and in particular automatic enrollment and automatic annual contribution increases are helping millions of americans

get on the pact to secure retirement. at fidelity when you look at the data, since the passage of the pension protection act more plans have adopted automatic enrollment and that number has jumped from 2% to over 24% of all plans kept by fidelity offering automatic enrollment and that number increases the larger the plan so the larger the plan more likely they are to offer automatic enrollment so there's an opportunity with the small an end of the market and smaller employers out there. automatic enrollment is up powerful step towards getting people in plans and getting people covered to have access to workplace plan. plans with automatic enrollment have an average participation rate of 83% compared to 54% of

those without automatic enrollment. as we talked before it is helping those who need it the most. it is helping younger, lower compensated employees and you can see the gap from 46 to 90 on the upper end of the income spectrum where it is much smaller. the higher participation rate also holds true no matter what the default contribution rate. the good news is we are getting more people enrolled and covered by workplace plans but the hard reality is people are still not saving nearly enough. 74% of all plans set the automatic default referral at 3% or lower. participants tell us they trust their employer to do what is

right for them, yet so many plants set that default as a rate far below the recommended savings rate of 10% to 15% so the fact that 60% of employees make no change to that default and deferral in that first year so what is the possible solution we could have available? looking to change that minimum default to 6% or higher and increase the cap on the safe harbor beyond 10% are some ideas and suggestions we have. mets -- what is also interesting is employees themselves are saving less but what that means is as a result they are leaving money on the table in the form of employer contributions because many employers are setting the default below a the match. as of result when people are saving at 3 fay may not be getting food advantage of the

employer contribution as well. what is helping some what is as we talked about, the automatic escalation. paco increase programs gradually raise employee contribution rates and provide very beneficial area of innovation for plan design but only 11% of plans makes the automatic installation of automatic. in our data last year we noted for all our participants and we have 20,000 employers, twelve million plans, one third of all increases last year were attributable to the annual escalation and that number was almost two thirds for those individuals aged 20 to 24 so

left to their own devices under employees are less likely to increase their contributions which we know is essential to get closer to that 10% to 15%. so what is holding employers back? that was one of the questions asked her earlier. the question we see is complexity. we know overwhelmingly that employees and employers are looking for guidelines to help them understand how are my participants or employees doing? how is my plan doing and for employees when you listen to the phone calls and hear the question help me make the recommendations, help me understand, what is my goal and how could i possibly achieve at. we looked at whether or not recommending savings rates can lead to employees taking action, the short answer was yes, it

did. what we have done is we were working on solutions that continually and consistently across all channels help an individual understand if you are 25 or 30-year-old and you are not saving get 10% you need to be saving at 10% and need to continually in free and force that and people will ultimately take action on that. that is the plan design first and foremost. employers of small-businesses, that are easier to use and more cost-effective and more complexity in the administration of the plan, and solutions that help them achieve success. there's a cost component. for employers, automatic escalation this, as they see a

real costs in them in the form of employer contribution. they need more flexibility and creativity, to save sufficiently. in summary, streamlining what is workable for employers, 4 more individuals given the opportunity to participate. and consistently through opening years. this is the conversation we don't want to have today. what is continuing outside of this room, and we are working with everyone on that. >> thank you. i would like to thank the

chamber and aarp for having us here today. this is an important conversation that i am excited to participate in and i trust you will definitely be a lively conversation and i look forward to that because this dialogue will help get us from point a to point be. to echo what beth mchugh has been saying, the similar line of thinking across the room is simplicity is definitely a piece of this puzzle and it is puppies that can be brought to employers and participants in these plans for a plan designed and obviously the focus of this panel today but many of you probably saw the recent article which highlighted and survey 25,000 plans who had implemented these automatic features and the really incredibly positive outcome these automatic features had on the overall savings

rates, the average participation or deferral rate jumped from 7%, probably being generous, to over a 11%. and part of that is creative simplicity for the employer. the employer implemented automatic features, decided to be generous in nature, they have educated or created tools that allow participants to understand the programs a little bit better and seeing the results of that and that is a fantastic statistic to have because automatic features and some of the plan features that are available now weren't available ten years ago and that is progress for our industry overall. auto enrollment is a great feature. i completely agree that 3% won't get anybody there. 6% won't get anybody there either but being brave as an employer and putting that out is

an important piece of this somewhat parental and child relationship that employer and employee have. the employer is set up to guide the employee, to support the employee, that is the viewpoint employees often have of their employers and whether it is a bottle and rollins or auto escalation that has targeted features that allow escalation or lifestyle based escalation based on your age a really fantastic feature a lot of employers should be considering as they go through this process. not to say targeted designs like profit sharing where they tilt toward the business owner, the business owner that sends the last few years putting money into their business as opposed to end at their retirement. these tools are amazing tools that unfortunately are not always as cost competitive as they need to be to be attractive

to those employers but they do allow certain individuals to catch up from what they haven't been doing for all these years and many employers are not aware of them. we have done a really great job of creating a massive obstacle course for employers and using fee disclosure as the great s u segue into this we make this very complicated. i think we are losing a big opportunity by doing that. employers want to focus on running their business. they don't want to worry about all the moving pieces behind their plan. they care about mainly three things. obviously running their business, they care about administration, probably number one on the list where many people would not want to say it is number one on the list and they care about the risk. there's a lot of chatter in the marketplace, a lot of lawsuits being pushed out where employers

who are trying to do the right thing i getting sued as a result. that is scary. ease of administration, risk mitigation, and also creating a meaningful benefit for their participants, they get them to retain top talent and get them to save and stay. those are important pieces of the puzzle land plan designed to help the employers do that not effortlessly but easier than they currently are able to do it. we know the employee's perspective. everyone has walked a mile as the plan participant. skills like yesterday i was making really bad decisions for my retirement and i look at that stands like the average joe i know more than my friends do as it relates to the subject and that is a little scary. a lot of people we are leaving out of this equation. a lot of participants have given

so much information all that has done is create interference. they don't even understand what the underlying message of the program is which is you need to save and you can't afford not to. planned design helps get them there without a whole lot of interaction, whether it is an employer match or also features or risk-based model portfolios with their risk tolerance question to make good decisions and avoid the behavior's we see in the marketplace. the question was asked earlier about do you see the volatility in the marketplace creating an impact for women, latinos, african-americans, scared everyone to death. the daily volatility in the marketplace is behavior we need to manage and i don't think that segment for certain groups of individuals, everybody feels it at any age. you watch the news you will feel that and that is the participant's perspective. they don't know what to do.

they want help. they want it to be easy and we need to work hard to remove that interference and the strategies we are talking about today are all the same. the message from the beginning to the end is all about access and creating access for these employers. it is easy for them to implement, doesn't create a huge amount of risk, doesn't take too much time out of their day and access for these participants though they actually have a chance to save because if they are not doing it through work they are probably not going to do it. odds are they are not going to go to your local fidelity branch and open an irs. people are not sophisticated enough in many situations to do that and not educated enough to understand the importance of why. planned design bridges that gap and education and engage and strategies are critical to it. we talked about the deck. i have seen a lot of success in the marketplace where advisers

or employers are actually offering workshops or webinar as on budget planning, how to get out of debt, giving preliminary tools to help make better decisions before we tell them all about why they need to save. there is almost too much information for people to make good decisions and we need to focus hard on eliminating that malloy is. from california, i was recently appointed to the california secured choice retirement board. its cares me to death there are 6.3 million california private sector workers that don't even have access. that statistic is staggering. what that means for our state, for any of the states is something we all need to consider as we go through this process. i have seen the benefits plan design can really create. outside of studies i have worked

with thousands and thousands of plans. i have seen it from an employer's perspective being a former or human resource person participant, i have worked on the service side of the industry in record-keeping and third-party administration and now an investment management firm. we design our or portfolios to make that decision easier for participants in a prudent way. there are a lot of things we can do and collectively as a group if we put our heads together to make this message simple we will get really far. out of the box thinking is going to help get us there. any strategies or solutions we have our what we are here to talk about today so we appreciate your time edge with that i will toss it over to jamie. >> i am from prudential retirement and i agree and credential agrees saving at the workplace is the most he efficient and effective way to prepare for a secure retirement.

workplace based savings use behavioral finance principles to pay yourself first, defer taxes and benefit from institutional versus retail pricing to invest in a diversified portfolio that we have been enabled to the pension -- pension protection act, the previous panels have discussed the best practices using automatic enrollment, automatic escalation and default investments and i heartily endorse those but i want to talk about two more options if we could dance to the next presentation. i want to talk about two other items, expanding coverage to small businesses using an existing plan tight multiple employer plan and some unexpected benefits of retirement incomes present within defined contribution plans, saving this money to have it in retirement. what about retirement income? let me talk about multiple employer plans.

the 401(k) system works extremely well with these practices for large and mid-size employers. unfortunately most small employers do not offer a retirement plan. it is a lot like retirement on the other side of this chasm. mid and large size employers have the resources to build the bridge. we as an industry and a society have not build the bridge for small employers and small employers might as well have a real challenge of building a real. . they are not prepared, don't have the resources or the time to build them and the reason small employers don't offer retirement plans, we heard some of them. administrative hassle, fiduciary responsibility, virus standard of responsibility there is, cost. in fact, 50% by prudential's numbers, twenty million american workers at small businesses less

than 100 employees do not have access to retirement plans. 6.2 million workers don't participate at these plans because they lack those practices women are likely to be lower and moderate income. more likely to be people of color. this is a critical issue for our public policy. the current price for small employers are higher than medium-sized employers due to lack of purchasing power, fixed cost of running an individual plan and wide variation in plant assignment but it is not a product or supply problem. there are lots of providers trying to serve this industry but it is a friction problem in supply and demand. prudential believes we can make small changes to the existing

law using the existing system to have an enormous impact on retirement coverage for small employers by using multiple employer plans to allow small-businesses to pull their purchasing power, reduce costs, simplifying administration and transfer the complex decision that their fiduciary responsible to professionals, transfer, not eliminate. a quick definition. multiple employer plans and defined contribution are not multi employer plans. multi employer plans are collectively bargained agreement, often times served by craft unions and the like, part of the retirement savings solution and multiple employer plans are different than multiple employer d.c. plans. in d b plan there is risk sharing on liabilities. in multiple employer d.c. plans just a common purchasing power and cooling. multiple limb players small

plans exist today but are used on a very limited basis because there regulations prevent them from being used and getting of the benefits i am describing. i believe multiple employer plans can provide some useful solutions. we can make changes that will prevent one bad apple among all the employers from making all the participating employees liable. multiple employer plans can create a model plan designed to provide, make providers compete like prudential and the rest of my panelists compete based on service cost and investment performance rather than plan design and the plan design can have the best practices we have been talking about. multiple employer plans and the concept we are talking about and transfer fiduciary

responsibility to professionals. their bipartisan. they have been endorsed by a variety of the city groups and industry this, the chamber of commerce endorses them as well. this seems to be the congress to pass multiple employer plan solutions that the federal level. the need is real and the solution is bipartisan. net me jump a minute to retirement income, and getting

savings their automatic enrollment the next job is to make income last a lifetime but most d.c. plans don't offer in come solution. let me describe it like this. we build the bridge and look at this bridge, what is wrong with it? there are no guardrails. close your eyes, approaching this with your loved ones and realize there are no guardrails do you drive across it? do you drive slowly across the board the drive faster across it? think about your answer. have you ever hit a guardrail on a bridge? why do we have guard rails on bridges? to make people behave appropriately and maintain the speed limit. retirement plans are the same way. we built retirement plans without guard rails. without guardrails people behave in very odd manners. they put all their money into stable value, a product power

company manufactures. that is bad diversification or they stepped on the gas and invest in a specialized media company stock, a bad investment as well or don't cross the bridge at all. the presence of retirement in, get into the products themselves but the presence of retirement income has interesting behavioral affects based on prudential's research. the first thing is two out of three people are happier and feel more secure about their retirement. the next thing is people save more with retirement income in the plan. they save 50% more when retirement income is in the plan. we did a study between the most volatile times of savings in america, roughly 2008-2009-2010. people were two thirds more likely to stay invested in a

diversified portfolio if they had the presence of retirement income, they felt comfortable with their diversified portfolio decisions, they had guard rails on their bridge and guess what? they are more satisfied and i haven't mentioned guaranteed income from life depending what solution you are using. all of these solutions just like the lifetime incumbent disclosure act change the definition of what retirement is from accumulation to creating retirement income paycheck and framing that question is critical. putting retirement income into a defined contribution plans is something employers can do today. there can be enhanced regulation but there's nothing preventing plan sponsors or participants from having retirement income today. in summary two things we need to do besides having a plan designed, we need coverage of small employers, multiple employer plans are a solution,

retirement income has some unexpected benefits. >> thank you, jaime kalamarides. my name is michael kiley, founder of pai. we are a provider of this marketplace. i want to thank everyone for coming today and i want to thank aarp and the u.s. chamber for coming to get it to advance this message and give us an opportunity to speak in these realms. all righty. we are going to talk about winning at retirement. part of the presentation is going to be a little bit different. if you participated in many presentations on retirement you get somber tones, long words, you get to talk about big exciting things, we are going to

take it a completely different direction. venimus vidimus vicimus, the people who put this together at a lot of courage and issuing the statement that we need to solve this is a tremendous step forward. housekeeping, i have to be very for something, they approved me doing a slide presentation that has 40 slides and it. in seven minutes. we are going to get it done. get ready. get your heart rate going. we will speed through some things. as we speak through this i want you to get used to or be aware of three things. i will try to get across pretty significant forms of this presentation, the first is some of our innovation history.

we do innovation inside the industry, innovation outside the industry. i want to give you some background so you can be comfortable that we need to be thinking in a different part of our brains as we go through this. second is why am i invested in this, why are we doing this. third i will hit you with a blizzard of images that if you are in a retirement industry you are not used to these things, i want you to take away from that scene, not content. you have to have permission to go that fast. two other things. at the bottom of the slides you see the phrase illustration only. illustration only. in order to create these images for you i grabbed brands, real brands on fake solutions. everything you will see is something we're working on.

do not walk out and say did you see company x, these are illustrational. the products are real, the names have been changed. you may know wisconsin, one of our suburbs has a football team. we cover 13,000 employers, if you hundred thousand employees, we are approaching $4 billion worth of american retirement savings that we take care of. we have an innovation resume. i have some examples on the screen. i will go quickly through them. on the upper left-hand corner as the audience sees it is the infamous dancing baby. those groups of employees watching this are going here we go again. good dancing baby was brought into everyone's attention by a tv show called callie mcbeal. that the first introduction of the internet into people's homes. pai turned the internet into a

service platform faster than most. most people were doing brochure work on the internet. we were taking care of balances, getting decisions from them, things of that nature. the lower left-hand side, pai has been over a decade long sponsor of of a team that competes in dot.com. we do that for one reason why team is discovering, gives us a chance to go around world and meet people from other parts of the world's who live in other retirement systems and we had an indonesian oil company that pays for all of it. on the left the bit more mundane, pai was one of the first companies to get involved in involving heat exchange traded funds for retirement participants. there are ways to use exchange traded funds to keep costs down so we pushed the innovation in that direction. on the upper left is something in our history most people would not associate with us but i

actually helped the nfl right its fast package for collecting with the elias sports bureau and i will tell you right now the reason the nfl did that was the same reason we are in this room today. .. >> this year's question is a very simple one. the teams have to put together a presentation to describe the answer to the question that we all generally get the fact baby boom generation could not save enough for retirement.

what would the world look like if they had? so make sure it's the right benefit, make sure we're in the right ear. that is a picture of the country, keep in mind i travel all over the world. that country does not have a coverage problem. we don't have a coverage problem in the united states. we have a participation in an engagement problem. i was going to add 17 more slides and opted not to. are 17 places that i could stop into and opened an automatic savings account. it would withdraw from my account every day, excuse me, on the day i suggest once a month and it would put money into investments of my choice. most everybody is exposed in the same way. the trouble is we don't have people doing it. that's the problem we need to make sure we are working on. so retirement important and here's something we need to pay attention to. this is how the industry thinks

about this problem right now. at the employer level among benefits, medical plan coverage, holidays, vacation, sick time, then retirement issues. that's a people when they think of employment-based plans, that's the importance of retirement plans. we need to be measuring it against that level. right? big screen tvs, dining out, vacation. these are the choices people are making the i want to be respectful when i look at that list and enough we're talking the people who don't have enough money to save. we can address the problem as we address these others but i'm trying to highlight the fact that we work every day at the street level with small companies across this country. the problems that we have is that come is one of participation and engagement, not of availability. you will see that i've intentionally capitalize the some of the letters in there and we'll give you some

understanding as to why. so the employer, this is a real experience. we were hired to put together a disruptive 401(k) solution. and the intention of the solution was that he be able to be installed inside of 10 minutes. it would cost less per month than the cable -- cable-tv bill but it was a highly automated solution. this goes back 10 years that we put this thing together. the result was over the course of about eight years we got just about 1% of those businesses to buy-in. only took 10 minutes to install, cost less vendors cable tv bill. as a business owner i can tell you if my employees demand a reasonable benefit, i'm going to cover. i'm going to be there. i'm going to provide it. so this is an indication of the

status of the need for a combination of things to bring this solution into place. so when customers install plans would ask this really difficult question or unusual question, and that is when somebody insults a planned we ask them, why did you install the plan? specific, why didn't you install one last year? why didn't you install one the year before that? that's the answer we get. it was fine. my revenues are asked. my profit are asked. i have x number of employees. i should have a plan. further, x. is personal and subjective. meaning i'll take three phone calls in one day. i have 17 employees, it's time i should have a plan. the next phone call inside 67 employ. it's time. i should have a plan. so we have a broad spectrum of answers to that question. didn't make the list, my

employees are demanding it. just the facts at this point. we can help solve that. the retirement savings, it is a business problem to it's a business problem. and is rapidly becoming a problem for business. if we don't solve this problem who are we going to sell what you in the days to come? the want of a fun conversation? go talk to the strategy guides of those people who own the biggest portion of our gdp. what will you be selling? so what can we do to make it time? visible eyes value, decrease incentives and increase incentives. we don't do all three of these, they gain is given a. i want to take a moment and tell you because we are bound to the speed round, one of the reasons that i'm invested in this, or

maybe nine of the reasons why i'm interested in this, my father was, or is, a world war ii combat veteran, still lives in the house that i grew up in, and he worked until he was 80 because he walked in the door of his place of employment at age 62 and found the retirement plan did not quite work the way that he was expecting it to. my father is a very smart man. smartest man i've ever met. in truth. we have another problem in our family, which is we all live, to be in the '90s. so at agencies if i've got a 30 year problem, minimum. and last but not least is the fact that my wife and i have seven children. i'm going to be paying college tuition, i'm reminded, in 2029. [laughter] i don't want to create a business environment for them to open their own businesses where they're surrounded by people who

are living that gap between the haves and have-nots. these are the reason why i want to go after these things. the reason i'm sticking my neck out and showing you some of these things. now please, illustration only. do not associate these brands with these solutions. all right, so heart healthy, stay healthy. sometime ago we succeeded in introducing little hearts on many to get everybody, knows what they're about. we don't have that language for retirement plans. we need to find a way to create that language and get into people's lives. save all you spend. one of those israel. safer nation on the upper right. this is a company that has put together a solution with a link your cashback rewards out of their credit card savings with your retirement savings. the rest of those are recognizarecogniza ble that have nothing to do with anything we're doing in the retirement industry. so scoring in financial

services. everybody recognizes this guy. free credit report.com. we're all used to the fact is something called a credit score that governs some parts of your life when you go to apply for that, when you go to redo your mortgage, it has an impact on rates, things of that nature. there are also some other things that society chooses to do with it. that when israel by the way. that's not a fake thing. so i'm not advocating that we start doing anything with that. however, there might be other ways that we can get credit scoring or case going into our lives. apparently that guy has got completely hooked up. so other industries have been through scoring exercise the other industries have gone in thinking they will suffer i scoring exercise. back in the '70s we got this new thing, a new way to buy cars

called in pg. if you talk to the car this use of which i'm one, the product is just going to get off a. we're going to end up with these 10 boxes that are not funded drug and to get tied to gas mileage anybody will be focused on what. look what it look like. when he walked up to the side of the car in the '70s divide, there it was, big numbers, city, iowa, all that sort of thing. look what it looks like today. it has taken its place. it's down in the lower left. the information is there. there's a slide bar, a qr code you can read with your phone so you can get more from it. but what are they highlighting? all the included features that make this a high-value purchase that you should feel great about. our industry will go through the same thing. we've got to find a way to develop a miles per gallon for retirement plans. current 401(k) statement, as an interest, this is what we're putting out today. the industry is evolving.

it has to evolve but i have to tell you when i see that 401(k) statement, i'm inspired to do all sorts of mail things like drop my voice and say things like ratios, right? a lot of data there. a lot of fun. the fact of the matter is that's a much better retirement statement. you've acquired six years with the retirement. if that's good enough coming keep going. in our retirement that if you want to acquire more, click here. these are numbers that people can understand. now, all of that data is going to be behind the living in this world where we create that kind of visibility will make it easier, make it a lot more available to people to talk about. here's my favorite retirement statement. retirement readiness and.

if you think about all the things that you can wire into the back of that income keeps me connected with their financial future, this is one of my favorite ways forced to stay connect with with people we're tried to serve. across all income spectrums, across all races, colors, genders. is one of those, my favorite things we can use to stay connected. so these are the types of things we are building. something happens can here's a really strange when the most people don't think about the a 45 you gets raise in pay, retirement readiness goes yellow, and the extreme. you have new higher bar, more pay, more income to replace in retirement at a short time to do it in. this starts the conversation. in our industry we have this wonderful thing. would like to think about this is important stuff. people should really know this, right? how much do you know about your firmness? right? how much do you know about your car quechee during the day, it fires up. can you tell me if it were injected -- fuel injected?

you can go out and hurt yourself with it, right? so as an industry with adhesive that would make our product usable, save, relatable. then people can build values. if we want more we need to do more. now we're going to get really hairy. we need to incentivize a plan were society that loves rewards and we need to involve people in that same way. so we've got to game if i 401(k) plans. we've got to put the rewards other for people to do the right thing. we've got to stay in touch with people. we've got to make sure they understand, you're getting ahead. your day. you're doing the right things. this is one my favorite examples in the world right now. nfl play 60. i love that commercial on the bottom and. i'm not a big football fan but the commercial is fabulous. nfl play 60, why not nfl first and 10%?

>> [inaudible] >> fabulous. this is a great way for people to get the message, get into their everyday language, become relatable to, be a participant. these other types of things we need ask people to get involved in. all right, employers but what's in it for me? so we're talking about a lot of things are really helpful to employees. this is the first place we've got to decrease disincentives. we also have to decrease distances. please note we do nothing with stables but i just love the easy button. so decreasing disincentives, the industry is doing a great job at this. we have target date funds. we have automatic enrollment. we have automatic escalation. we've simplified investing. we have judiciary services now coming to be available. we have multiple employer plans. we have all of those things working for us. a very inclusive strategy that involves brokers, advisors,

institutions, brands, things of that nature. all things that work inside of the industry as we are decreasing disincentives. so i would tell you i think in the last five years our industry gets an a+ for decreasing denson sent by making plans easier. we are creating cruise control plus dps as an effect for both the employers and the employees. we're taking down there conversations. we're putting of call centers they can call into directly as employees. to all of those things are contributors. and while we're doing these things, and i for number of people say this and it's one which i objected, i set it and forget. that's exactly what i don't want you to do. as an industry i want you to set it, be confident and i want, just visible. if we create that and use all those autopilot solutions, but you can keep people in touch. something goes yellow, there's

an alert. then click our, follow through, see it is a fun issue, sits a contribution issue, see what it. we can keep people connected with the actual outcomes. here's a big one. the big companies are in our country through their workers. everybody knows it. we talked about large-company coverage is excellent. what people don't think about so much is that employees, through institutional investors other retirement plan provide capital to big business. so why can't we do that for small companies? turns out and there is a way. we are working on it. if you're a small business owner and you want to be invested in the retirement system, you want to see it as a source of capital. this speaks to small business owners but we went through the banking crisis. it was impossible to find capital because the rules have changed for everyone.

all right, let's get workers are currently providing retirement capital to large businesses in a vehicle to safely provide retirement capital to small business. i'm not talking about investing directly in the company stock of your employer. i'm talking about a more generalized method. auto ira. in simple terms to a guy like me names one thing, it just reduced my distribution costs and distribution costs are a third of my costs. the auto ira as a midwestern kid is exactly the wrong idea. there's a lot that i do not like about the auto ira. as a guy who has been involved in the business, for the last 30 years, as i'm reminded often by my team, we need it. it is actually the solution that

gets the job done. we've got the simple solutions that could take away the risks from the employer, and it allows the employee to participate in solving the problem for themselves. so in simple terms the auto ira decreases education costs, allows the employee to solve the problem for themselves. keep in mind they can go do something different places and by their own. so quite candidly the fast we get the auto ira, the faster i can help my big brands solve this problem. last, a game the whole country can play everybody recognizes megamillionaire everybody recognizes, i bet if i asked my show fans how may people here who could announce that stunning lottery victory that happened within the last year. what was the amount? just by show of hands. how many people actually think they know there was a woman who one a stunning lottery victory.

people pay attention. mega millions game is a game that the whole country likes to play. why would an employer, what with the employers role be in a lottery system inside of a savings program? when you reward one of the participants, you reward the employer, here's the plan. just like you reward the company that sold the winning lottery ticket. you allow them to participate. you give them incentives to do so. now, there are waning days investment strategies in other countries. the uk has something called the -- there are others out there that work similarly. anything about a lottery is you can put a first in first out requirement on it to prevent leakage. the first contribution that you put into the program at the beginning of your career, multiplies in value if you leave it in there.

so again this ideas that we are working on, a little unconventional, but great ways for us to get people involved. who pays for this? the highest bidder. simply put. the only thing that's true is you can't have the provider create a lottery. you can't have the provider create the win. you can invite national branscum of us wants to be a part of this, american idolizes it, announced at the super bowl, whatever you want to, but hail the winners. thanks much for listing. i appreciate the opportunity to be a speak. and that concludes the presentation. >> fantastic. thank you, michael. [applause] >> we have a little over five minutes for questions. i have a whole list of them here. so you want to avoid my questions, the best thing to do is come up with your own, or

comment. i can imagine after these four presentations there wouldn't be some discussion. john? >> a taxable question. a lot of people recommend you put in 10% of your pay over your career. and if you did that, what do you in up with in terms of like a dollar amount or -- what does that actually translate to? >> i can take that. so, there's a lot of dependency there. not the least of which is the time in which you do it. the risk that you involve yourself in, those types of things. that's where the solution becomes kind of complicated. and that's what a simplified language would help to address that. but there are some more variables that go into that question that really do determine the outcome. simply stated if you're literally talking to somebody saving 10% from age 25 to age

65, invested in a fiduciary only prudent fashion, take risk when you should take risk of don't take a risk when you shouldn't take risk. 100% income replacement, that mr. reynolds quoted only, you are right there. >> also assumes no interruption in contributions, no loans, no withdrawals which we know is a hard reality. at the fact remains that the structure can work. the challenge is what's reality situation for many who are in it. [inaudible] >> so, if you assume 75 total uncommitted balance, yeah, it's 85% -- we've done some analysis. >> retirement income tacklers on the web choose to save.org, others have them as well. if you just plug in any snow you would like, they have very basic assumption that would tell you exactly what the dollar amount

is. >> thank you all. that was terrific. i want to just ask a general question. and that is, how valuable would be if in the next round of pension legislation we were able to strengthen the safe harbors for small employers to offer plans that all, and allow providers to assume as much as possible of the fiduciary risk? after all, if a small employer offers his or her employees a company car, ford motor company is responsible for the fleet. and a product defect of something they have to stand up for. to what extent are provided going to say we will take the fiduciary responsibility away from the plan sponsor, as to the extent the law could allow?

did we talk a little bit about that? >> i think that transferring the fiduciary responsibility to professionals only holding small employers responsible for sending paycheck deductions in on time is a big portion of it. however, pooling for cause is another big portion. small employers who currently have plans today average three times as much as participants in medium and large employers. pulling matters. the number of employees with any plan that have a common plan design is the biggest factor based on ici and deloitte's work for reduction -- reducing costs, if not dollars for participants. the other big thing is, we've got is all but analysts have suggested, simplify administration and allow a best practices plan design so that employees, smaller employers don't have to make choices.

they can just adopt the best practice plan design. >> i would also add to that that i think fiduciary risk and complexity behind plan management is certainly a big issue, in particular with small employers which is primary where my focus has been for most of my career. what i would also say is that there's a been a commence amount of compression across the entire industry and it's become less and less attractive for service providers to a properly service these plans and bring forward really great solutions that give them there. and with that decompression in mind, a lot of really great advisors or brokers or service providers overall, what is record keeping and administration have chosen to set their pricing so that it simply isn't even attractive for a small employer to enter into the records of looking at increasing of additional responsibility, those service providers have, and particularly as relates to the small apple or market, it's going to be tough

to execute. especially with just the pricing that we have seen over the last several years. >> i'll add one last -- sorry. my company and companies like mine are competing at a death match level to get those fiduciary solutions into the market place as quickly as possible. there's a lot of really good things going on in that space. candidate right now everybody is learning how to talk about it. so i go out and sell this thing i want to make sure i set expectations correctly, but i would tell you that you will see the market flooded with producer solutions even at the smallest employer level, even as we speak. >> thank you. we have one more. spent this is a question for jamie. i was very glad to hear you talk about guaranteed lifetime income, especially important for women. but i have a couple of specific questions about the multiples initiative multiple employer plans.

because when an employer plan offers a guaranteed lifetime income option and it's unfortunate that very few do, there are a number of important protections under erisa for women. the annuity has to be gender-neutral, and there is a default survivor benefit for a surviving spouse. and if there were these multiple employer plans, with those protections carry over to a lifetime income option offer through a multiple employer plan? >> multiple employer plans are truly covered by erisa. all the small changes that i suggested wouldn't change any of the rules by which they are covered by erisa and that would have all those same protections. spent at this point we're going to make a transition. so far you've heard a discussion of the problems with making sure that we're not leaving anyone else behind. we've had a discussion here of a variety of innovative ways to

include everyone. and now we're going to transition to a panel where we're going to have a discussion between large and small employers and representatives of the consumers. but i've got two things to do. the first thing is to thank this panel for an incredible presentation. [applause] >> and the second is to introduce a leader who will take over this microphone. she is the executive director for retirement policy at the chamber of commerce. thank you. [applause] [inaudible conversations]

[inaudible conversations] >> if i could ask everyone, we're just going to keep going. maybe not. yes, thank you.

[inaudible conversations] >> thank you. we're going to start with our last panel. but i'm glad we're generating such great conversation, but we do have a final panel today. and as david mentioned, this panel i would like, i'm very pleased to be here. i think this panel is really where the rubber hits the road. we've had discussions brought about where we are in retirement. we talked about populations we need to target or are underrepresented. we've heard solutions from service providers but now we have the employers and coworkers. these are really the key parts of the puzzle when we are talking about retirement security. i would like -- this panel will

follow the format of the first panel in terms of we wanted to be a discussion big so please feel free to ask questions at any time. in order to get the discussion going on going to briefly introduce our panel is but encourage you to look at their bios which are in your packet because they are wonderful experts in the field. two mighty neat left is paula calimafde, the chair of the small business council of america. next, stacey time, the vice president for corporate public policy at boeing. and for this to my left is shaun o'brien was a system policy director for health care and retirement at the afl-cio. i want to begin with the question which may seem very basic but i think is very important as we have this discussion. in its simplest terms it is why? we've heard from other people, but i guess to get it directly, why do employers sponsored

retirement plans and why do workers participate in them? start with paula. spent i'll start listing some of the comments i heard this morning i found very disconcerting because some here -- i'm a rep as a small business employers and businesses. and from listening to many of the comments you would think that the small business owners who are really driving the economy of america are sort of these headless blogs have no idea what to do in our can't even figure out what the retirement plan is or anything. so my comments may seem a little different from what you've heard but i guess that's because i am a small business owner myself. i work in a law firm with about 70 employees. so i know what a small business owner is and how a small business works. when you look at the small businesses and white a small business would sponsor a retirement plan or not forget to say do so, what is a small

business. and of every place in businesses, small businesses sort of encompass this enormous spectrum. so i can be a one person business and they can go all the way up to like 500 people employed in business and they're all considered small business and they're very different. sometimes small businesses based on size, is based on like receipts and it might be under 10 million considered small business. a lot of people think under 10 is way too small a number of what a small business. but a one person business, the way they run the business is very different, or he or she runs the business is very different than a 500 person business. but they're all considered small business go from there and try to say why do they sponsored retirement plans. first and foremost those of you who have never sort of walked into the small business or have never known a small business owner in the very beginning of a

small business life, what happens is you're the owner or a group of owners and they are literally putting everything on the line to start that business. they are putting their house on the line. they are putting their asses on the line. this is an incredible economic commitment that is going on. and the first several years of the business, they probably may not make it. statistics are shocking but in the first four years of the small business life, 40% of them don't make it. so usually when you get to the issue of retirement you are not talking about the beginning of a small businesses lifecycle. you've gotten to a point where the business has now made enough so that the owner doesn't feel like he or she or they are in jeopardy of losing all of their own personal assets. so then what happens? how do small business owners retire? as we have heard some of them never do retire. but by and large they don't have

nonqualified deferred comp plans to take the world of big business that you know and just jettison it. because of the way the tax code works, there are no nonqualified defer to come business for small business owners. and can rely on selling the business? sometimes but not very often. so how are they going to save for retirement? they have to do it themselves. now the choices to stay inside the coming or do you said outside the company? basically that is a cost-benefit analysis. what are the costs? the owners have to sit down and they talk to their advisor, very often it's account, tax plan administered. it may be a lawyer. it could be summoned at a brokerage house and they say what is the cost of running this plan? well, you have to cover your employees. how much do i have to cover your employees what you have to cover your employees a lot. here's what the tax code says. here are the contributions you

must make, okay? that the cost to administrative costs. what other costs? internal administrative costs. so though some accounts but what are my benefits? might benefit is on going to be able to save for retirement and a tax advantaged way. it is a great tax advantage way? i would say it's okay. it's okay on the startup where you're getting a reduction income for contributions going in. the money that is the plan as we all know gross tax we. that's great. what happens on the way out? not so great to every dollar up this subject to ordinary income. you take that into account. what else to take into account? you take into account that people usually don't save unless they're saving in a retirement plan. that's a big one. they may not believe you, the owners, that when they sit back after 25 years, they will be in much better shape than the folks who are not. we know that over and over.

so the cost-benefit analysis from the employer's perspective, i use my own firm as an example. when we put in the plan, after about four or five years we have a 401(k) profit sharing plan. today its nonelected so i like the term profit sharing. so we put in after why we brought in an independent financial expert to educate our employees. and to help them choose amongst the fun choice we have and we have index funds, small-cap, large-cap, mid-cap, value growth, bond fund choices, some people say you are offering too many choices. we think we're offering the right amount of choice. so what has happened over those years? i have seen people of been with us for 25 and 30 years, which is strange but we do have employees who are here not long, they have really significant account balances. and what do people talk about in the hallways?

these are some people like some of them have just graduated from college and they're talking about mid-cap, small-cap, bond funds. there is no way this dialogue what been going on without that 401(k) plan. no way. they been brought into wall street. what i think is very exciting about it is, to me, this has to be going over to the personal life. and what else is great about the 401(k) plan, in my opinion, is employees don't go in and say i need $100 for my daughter's prom dress, so today it's what, $500, some crazy number. she really needs it and i need to give it to her sumptuous going to access it. they can do it with an irate. they don't do that with 401(k) money and the money sits and sits and grows and grows. at some point when he gets to be a big enough number and figure out what the number is. i know there's a magic number, i think it is $10,000, maybe too high, maybe too low but at some point it's like this is real money i have. i'm going to take this more

seriously. and then you just see it all go. so that can is why people, the employees want to be involved and participate. thank you. >> thanks for having me here today. i have a short answer to the question and then with a longer clarification as to why. so why do we sponsor retirement plans? two reasons. our employees wanted, and it's the right thing to do. let me tell you a little bit about boeing first of all. we are the largest aerospace company in the world and the largest u.s. exporter. we are made up of two companies, boeing commercial airplanes than boeing defense system. we have over 100,000 employees worldwide but approximate 163,000 our u.s. employees. so we are a u.s. manufacturer. we do have a very large pension plan, one of the largest pension plans in the country.

it's comprised of about nine plans, and we are proud to say that it is 100% funded under erisa. so we do have a d.c. plan as well, very large, over 240,000 participants in it. it has about $40 billion in assets and boeing contributes about $650 million a year to this plan. so it's a pretty big, pretty good-sized plan. like everything boeing does, it's on a larger scale. we do have a great participation rate in our plan. over 91% and i saw some numbers here earlier today, i think is like 83% for the average. we offer about 100% on the first floor contribution, and about 50% on the next floor. we do have an auto enrollment program which starts off at 4% increases to 1% per year until you hit about 8%. so participation i is not our problem tickets are not a

problem in the large employer sector. what our problem is about 21% of our employees don't maximize their match and about 55% are not probably diversified. i'll touch old bit about it on the and -- i know some folks have raised a few. we offer and annuity. less than 1% of our employees take it as primarily for two reasons. 90% of our workforce is covered by a plan, and two, they want their money. they told us that. would let that offering annuities through the d.c. plan as an investment option, guaranteed life option. it's not cost effective we will wait and watch to get these products mature before we put our tailback in the water. we do support our employees in a variety of ways of tools and resources, whether it's our

online advisors. we do financial planning seminars. we have monthly webcasts. we provide and the internet a total compensation profile which is they pay and benefit profile. it's really so they can understand the value and it is quite popular. we have what we call well being news. our inclusion of newsletter. we can webcast each month and next month we are actually, we're going to start a new potter, a 12 month pilot which we are excited about. i'm telling you all of your before our employees know we're doing this next month. we are launching it august 15, and it is, we are excited about it. it's one on one financial counseling. and it is personalized. and winning by that is we are looking at their budgets. their cash flow, looking at their dead, their insurance plans. it's integrated with our judiciary service, so really excited about this.

and hoping that it is a success and continue to extrapolate on that. i did see the mobile app up earlier. we, of course, have one of the mobile apps is very, very popular. we have 2407 access to the d.c. plan. people like you. we tend to consider our workforce ready tech-savvy. they like those kinds of things. we are also looking at obviously did signage -- design change. we are pumping up our the for from 25 to 30%. we're going to now allow folks to defer their bonuses to the d.c. plans. so we have a pretty complicated compensation structure but for this is for non-managers as well as for managers. so if you don't feel as though you continue to bump up just on day-to-day then you can take your bonus and defer that to your d.c. plan which we are really just excited about and got some great feedback about that.

so that's probably a long answer to why we sponsor, but the numbers show why we sponsor. >> we know why participants at boeing, or workers at boeing participate in those plans. shaun, can you give us a little broader perspective on why workers participate? >> sure. and i think the top one answer is pretty simple. whether you work as an employer with five employed or 500,000 employees, you want to retire some day. either because you simply aspire to retire, don't want your whole life to be defined by work, or, and/or you know do not be able to work forever. that defines most workers, the overall majority of them. you know, also regardless of whether you be with a company for your entire career or you change jobs every year, right, you might want to be able to

retire. you also need financial city for itself and to family. on your last channel -- panel, heather hooper talked about a parent child relationship between employers and employees. i was a sort from the perspective of our members they're looking for a relationship at least that equals, and the way they go about ensuring retirement is by negotiating directly with employers. so they bargain as part of the total economic package that they get, retirement plans. and that happens, comes down a couple different ways to either taking part of their total compensation package and having to put directly into a plan it is are specified contributions or through the benefits, benefit levels are not very should as a part of pensions. and certainly they also negotiate for retirement and savings plans.

and when you look at the numbers you can see how important retirement is to our members. 85% of union members in the private sector participate in some kind of retirement plan. two-thirds of private sector union members participate in defined benefit plan. compare that to 12% of nonunion private sector workers. there's also a greater share of union workers are dissipating in defined contribution plans than our nonunion workers in the private sector. so retirement is very important to our members, and i think broadly we can say it's important to workers. working families throughout america. i also want to talk a little bit about why not. that's part of what this conversation is about. why do we see people not saving. when they have access to them. as a talk about these issues.

the context is important to especially recent economic experience. we have to consider the fact that over the past decade we'll wages have stagnated, whether you're blue collar or white collar, college educated or not. and if you want to look at a short time period, let's look at what's happened since the start of the great recession. for the bottom a bit of wage earners, real wages have declined. these are certain just part of the picture. increasing current work part-time. the jobs that have been great have tended to be lower, lower paying than they were before the recession. in addition, we have sort of this secular trend around health care costs. more and more health care costs being paid by individuals. on the earlier panel is a discussion of debt. more and more dead people have to deal with.

people are either saving for or supporting their kids and grandkids. lots of reasons why people don't participate in addition to the design discussion that's been had on previous panels. >> thank you. that's a good segue, and i want to give stacey and paula opportunity. our conversation today is focusing on coverage and participation opposite as shaun has started mentioned are challenges for workers in terms of savings, but i think there are also challenges for plan sponsors. if the did you could address what challenges plan sponsors also might be facing in any advice you are recommendations for overcoming those. >> i'll start with that one. and i'll start by telling you about our demographics. so over 43,000 boeing employed i'll go to retire right now. 28,000 are able to retire in the next five years.

and an additional 21,000 are eligible to retire five years after that. so as you can see, we have an enormous workforce issue that we are facing. which is why we have been continuously and vocally talking about a concept of safe retirement. we have seen a pattern where some of our most highly skilled technical workers retire and begin to draw their pension, and then go back to work. and early retirement subsidies that we provide are likely providing an incentive to terminate employee gushing employment. you don't want to grow out of that. they're taking the subsidy and retiring if they feel valued even if they have high level of job satisfaction. it's actually causing them to retire early. earlier than even want to. and for an employer retained expertise and experience is

critical. so we are hoping not that employers are living longer, we are having these issues that face retirement is right to talk about now. last year the face retirement for federal workers was enacted. the commentary on that's going to close very soon, and actually i was just reading the comments yesterday, and the proposed in 15 states the proposed is -- be filling these positions are more expensive employees who are preparing for for retirement by encouraging them to remain. so if this is a valuable goal to the special government, then why not allow such flicks build with respect to the private sector? we feel there are huge public policy benefits or encouraging face retirement, not one to the employees. they can continue to earn wages and transition to retirement on

their own terms. so it's not going from one miles an hour to zero. they actually get to essentially take back and take control of what retirement looks like. because the id of retirement we feel needs to change. for employers it's a huge issue. for us we don't want these major disruptions in our workforce. the so-called brain drain. we need these people to stay on. we need them to transfer that knowledge to the next generation. then for the federal government. so we have people in the workforce, we're going to continue to provide them with their health care benefits, they will continue to contribute to the tax base and then with that we field would reduce a burden on some of the endowment programs. we think there's a huge public policy benefit for pushing face retirement open to the public, for the private sector.

>> paula, would you like to address some of the challenges from small business perspective and maybe even beyond that, just comment generally on plan sponsorship and coverage rates and the small business sector. we've heard a lot about that earlier. i would like to give you a chance to talk about that. >> i would like a chance to talk about that, because it seems to me statistics have been throwing around this morning you would think there was a small business -- there wasn't a small business out there providing coverage. and i think everyone should look at a recent study that was published in the socials revolting in 2011 but it was done, and for those of you know, jules lichtenstein over of your small business administration counties in the office of chief counsel. what they found was remarkable, and what they decided to do was use actual data. so they went to w-2s to compile their data. before this when people were doing studies on whether someone was covered by a plan or not they would ask the employee.

now, some of us sort of laugh about auto enrollment and auto escalation and default investments, because we know that there are a number of employees who seem to really be on autopilot. and i if you ask them are you contributing to a plan they could very well say no, even though they are. if you ask them are getting current plan contributions, they could also say no, even though they are. and apparently that is exactly what these three folks found out when they went to the w-2s. so i'm going to read this like it's a statistic exactly what. 77% of all employees who work in companies with 10 or more employees are offered a retirement plan. at 77% starting with companies as low as 10 employees. and of those employees, 62% make 401(k) contributions. and then they broke the data down for the and they said 60%

of small businesses with at least 25 employees but less than 50 offer retirement plan. company of 25 employees is a fairly small company. so 60% of those are offering retirement plans. 70% of businesses with at least 50 employees but less than 100 offer retirement plans. that is a really good number. we are doing really well. instead of everyone saying we are doing so badly, there's another side to this, which is we are doing well. the final statistic was 84% of businesses with more than 100 employees offer retirement plans. it did not go to the $500 i don't know how that would've looked. also the data i think with small businesses is skewed somewhat because also small business administration 2012 found about half of all new businesses fail in the first five years of life. and about a third of all new

businesses, only about a third of all new businesses survive the first 10 years. so when you put all those statistics together, i would say small businesses are doing pretty darn well at getting retirement plans in as soon as they are sort of able to do so. again, why is that? that's because that's how the owners are going to be able to retire. so you know, there's a reason that small businesses to sponsor retirement plans and that's why, as soon as they can. there's another thing about small business retirement plans, which is somewhat strange but it's largely based, or maybe based on the tax code discrimination rule, but the contributions that go in or not highly compensated employees and small business retirement plan are often very high. so it's not at all unusual to see a 3% contribution, a 5% contribution. you can even see 7.5 to 10%

contribution. and you can say, well, how can this small business be doing that? well, it's doing that so that the owner can get the contribution levels the owners want it and it's all tied together in the tax code. and i would say tied together very well because when the owners are doing a cost-benefit analysis, at least as far as contribution levels today, tax, income tax rates today, it's all working so when the owners of sit down with whoever is sometimes judy miller will say someone has to sell the plan to these owners. well, that could be a broker. it could be a plan administrator advisor. but what they're really doing is they're running for a cost-benefit analysis saying does it make sense to sponsor the plan. and answer apparently is yes. 77% of all cases for companies with 10 or more employees. so i would say i don't know where these statistics are coming from. i think it's easy to say small

business doesn't cover the people but i think that's wrong spent i want to give a chance for questions from the audience, if you have one. >> and thank you. do the panelists feel that there is room in the retirement area for what might be considered or kind of a public option? perhaps something similar to i think proposal number two on the aarp is hand out? in other words, people to voluntarily opt to have certain monies taken out of the day, putting two, for example, a long-term government bond fund which would hopefully offer a fair amount of security as an alternative to various private

plans now available? >> who would like to start with that? >> we haven't asked our employees that because we have, we feel confident that the benefits we provide our great. and it's probably a better question for some of the smaller to midsized employers. >> so, you know, i think some of the things that we heard today from there is speakers include everyone needs to save for retirement throughout their career. they need to save substantial amounts of money. i've heard 10%, 15% here today. others have found that numbers like 12%. we for the most people are not saving enough. where that workplace access is

really important. bob reynolds said that. jamie kalamarides has said it. we know tens and those of workers don't have access in the workplace. so the question is what you do about that? on the spigot talk of things that you could do to incense or encourage or make it easier for employers to offer something. but still lived up to the employers. and i think what you're suggesting is where employers are unwilling to do that and/or unable to do that should workers have access to something. and i think the answer is yes. as i started out saying everybody wants to be able to retire. and i think generally people should be able to retire. and if we think access to some kind of retirement plan through the workplace is the essential

way to do that, t too by retirement security on top of social security, i think sort of the basic ideas is a no-brainer. >> i think i'm going to approach that question by going around it and then end up with a, i hope. so one of the statistics i don't think has been said today it is critically important is one that was published in 2013 which they found that workers were 14 times more likely to save any workplace retirement plan and to set up an ira on their own. what that indicates to me is the less the employee has to do, and unless they're able to access the funds, the better off they are saving. ..

of us that they're sort of in the trenches working with small-business retirement plans, it seems like every time we turn around there is a new notice that we are supposed to prepare or give to employees. i feel like we are dealing with the will of perfection. like if every one of our employees was a ph.d. and wanted to know everything possible they could possibly know about everything, this is the notice. and what happens though in the real world is you write the notice exactly to comply with the regulation and you hand it to an employee -- i can'tll