Outlining various priorities of the Department of Labor, Secretary of Labor Marty Walsh called on policymakers and industry stakeholders to work together to expand access to retirement savings plans, particularly for those in underserved communities.
Speaking Dec. 1 before EBRI’s 2022 Retirement Summit, Walsh noted that after engaging in conversations with industry stakeholders and citizens during a series of roundtable discussions, the department learned that there are three problem areas they believe need solutions — providing greater access to retirement savings plans; the ability to make retirement savings more portable within the system; and the ability to generate lifetime income.
Accordingly, the DOL Secretary explained that the DOL is focused, not only on how they can make the retirement system better for those who are in it, especially in underserved communities, but also on how they can get more workers into a retirement system in the first place.
Concerning underserved communities, Walsh observed that for Black households ages 55 to 64, only 36% have any retirement savings. But for Hispanic households, the number is even lower, at 30%. “This is a crisis that we have to address. In other parts of the world, when you go to Europe, they don't have the same problem, but we have it here in the United States of America,” he stressed.
As to potential solutions, Walsh highlighted how millions of workers have coverage through traditional ERISA plans, and now 12 states have also enacted savings programs, making it easier for businesses to offer employees a way to save money. “Workers have saved over $500 million so far and it's not been a major burden, quite honestly, on businesses,” Walsh suggested.
The DOL Secretary further noted that the second thing they learned in conversations is how hard it is to take savings from job to job, resulting in people cashing out their savings rather than dealing with rolling the savings over to their new job. Walsh pointed to EBRI research showing that $92 billion in retirement savings has been lost out of the system in a single year as a result of leakage.
“$92 billion that should be in retirement savings accounts for people in our country — the lack of portability is a big reason, so we’re interested in the recent industry developments to address the problem and we’re continuing to watch and work in this space,” Walsh noted.
A third issue Walsh cited was lifetime income, observing that it’s hard for people to budget when they don't know how long their money will last. “Now there are defined contribution plans that do provide lifelong benefits, but what we heard is these products are complicated and difficult to understand,” the DOL Secretary noted.
Observing that the nation can’t necessarily depend on the federal government to provide relief similar to the approach with multi-employer pension plans, he stressed that all stakeholders — employee, employers and the government — have to engage in conversations and be part of the solution. There is a great desire for solutions, and these are areas that the nation and industry should and can address, he further stressed.
“Retirement security is a fundamental need that all working people have and it's part of our mission at the Department of Labor, and it's been a priority with some of the steps that we've taken,” he further emphasized.
To that end, Walsh further cited the American Rescue Plan providing special assistance for at-risk multi-employer pension plans, the final rule on allowing plan fiduciaries to consider ESG factors, as well as what he called “important reminders” about the risks involved with investing in cryptocurrency.
“We think about the plans that are already set up in America and making sure the investments that folks are making are safe moving forward and there's more to come,” he noted.
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