Letter to the Editor
May 23, 2006
Re: Counter to PSCA's (Profit Sharing Council of America) Response to PBS' FRONTLINE
Editor's Note: You can read PSCA's Response to the PBS Frontline's Program "Can You Afford to Retire" here.
Dear Mr. Meigs:
As an independent fiduciary with accumulated past and present oversight for over 5 billion in qualified plan assets and for well over one hundred thousand participants, I'd like to make an observation about the May 23rd news item posted on your website titled, "PSCA Responds to PBS Frontline's Program ‘Can You Afford to Retire'." The PSCA's response struck me as odd. I watched the entire FRONTLINE program live, and a second time by TIVO playback. I listened very carefully, and compared what FRONTLINE presented with my first hand experience. There was not a single thing reported that I viewed as "sensational," "incorrect," or "dangerous." To the contrary, FRONTLINE has done our nation a great service by being truthful. I believe the program was a fair and factual representation of reality. The following are my observations:
Observation 1: "If people believe that they will have to work until they die, they will stop saving for retirement," said PSCA President David Wray. In my experience, this is a false assumption. Human beings do not behave this way. Contrary to Mr. Wray's assertion, I believe people will ask, "what can I do now so I don't have to work until I die?" The answer is start saving now, or start saving more now. It is my view that the thought of having to work until one dies is a powerful motivator to save more.
Observation 2: "Both plans have pros and cons, and any effort to distinguish one as superior to the other is pointless and counterproductive," Wray added. In my experience this is a false assumption. A superior plan that guarantees $200 or $300 more per month may mean the difference between the ability to buy prescription drugs, groceries or a utility bill. Benefit adequacy (remember study performed by Nebraska entity) is serious business, and is neither "pointless or counterproductive."
Observation 3: "Employees should disregard what was presented in "Can You Afford to Retire" and, if they have not already done so, join their employer's 401k plan today." This is incorrect. Employees should give strict heed to "Can You Afford to Retire" and begin taking responsible, proactive steps to (a) earn more by receiving better training and education, (b) contribute more to any resource available (i.e. 401k or IRA etc.) and seek market returns through intelligent, low cost investing, and (c) work longer if necessary.
One final observation: Most small businesses do not sponsor a 401k plan or a traditional pension plan. In fact, it is purported that only 25% of businesses with fewer than 100 employees do. However (and consider the following in light of the PSCA's press release), how can an employee join their employer's retirement plan when there is a 75% chance their employer does not sponsor one? If the PSCA would please explain their comments in light of the following, I'd appreciate it.
Small firms...
- Represent 99.7 percent of all employers.
- Employ half of all private sector employees.
- Pay 44.3 percent of total U.S. private payroll.
- Create 60 to 80 percent of net new jobs annually over the last decade.
- Create more than 50 percent of non-farm private gross domestic product (GDP).
You see, it's not as simple as the PSCA suggests. 99.7 of all employers are small, and like the FRONTLINE program revealed, there is a serious problem. FRONTLINE has done us all a favor by eliminating the propaganda, and accentuating the truth.
Your readers are free to email their comments to me at matt@erisa-fiduciary.com.
Best,
Matthew D. Hutcheson, MS, CPC, AIFA®, CRC®
MASTER PENSION FIDUCIARY™
5 Centerpointe, Ste 400
Lake Oswego, OR 97035
971.204.0255 Phone
971.275.1065 Fax
matt@erisa-fiduciary.com
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