So I’ll be honest with you: the article I wrote Monday about Aon’s purchase of Willis Towers Watson, in which I observed that the absence of any mention of the two firms’ actuarial practices was an indicator of the further decline of employer-sponsored pensions, well, I expected it to get a readership in the three digits. Instead, it’s looking like every actuary in the country has read it, based on the tally of page views, and I’m asking myself, “what does that mean?”
As far as any pension consulting firm would ever say “on the record,” they are not the cause of the virtual disappearance of employer-sponsored pensions. After all, all they’ve done is advise clients, responding to their concerns about the risk and cost of providing pensions. And there was certainly also a case to be made that employers didn’t get their “money’s worth” out of pensions, because the typical employee didn’t see that promise as offering the value that, in fact, it had in terms of the employers’ costs, while workers, on the other hand, did value their growing 401(k) balances. (See “In The News: To No One’s Surprise, GE Freezes Its Pension” for some statistics on current pension prevalence.) Even relatively recently, while I was still working in one of these consulting firms, I asked a colleague about the status quo and, in his view at least, even those employees who still had traditional defined benefit pensions still did not recognize the tremendous value of that benefit and the cost to their employers.
Now, those same firms’ focus is on Defined Contribution/401(k) plans, in particular, the question of how to get the best “bang for their buck” in terms of employer and employee contributions, asset allocation, fund expenses and the like. (See “What Your Employer Thinks About Your Retirement Future” for more.) Since these firms’ clients are employers, not employees, they focus on such questions as “will your workers have enough money to retire?” and the risk that employees will want to work past a traditional retirement age, even if their employers would prefer to hire younger workers.
But could those firms — Aon, Towers Perrin, Watson Wyatt, and Mercer, back when those firms existed in that configuration — have applied what they call their “thought leadership” to the issue in other ways?
(And, yes, there are other actuarial firms — Milliman, Buck, Segal, and others — but those four are the largest, especially with respect to private-sector, single-employer plans.)
I mentioned, in yesterday’s article, the ERISA Industry Committee’s “New Benefit Platform” proposal from 2007. And this was not the only effort by experts, industry groups, and employers. At Workforce.com (and reprinted at the Society of Actuaries’ site), on September 11, 2007, Jessica Marquez described a number of initiatives under discussion.
“The Pension Protection Act resolved a lot of issues about how employers could fund defined-benefit plans and how they could safely put 401(k) plans on autopilot, but the legislation didn’t solve the bigger problem of making sure that all employees have enough savings for retirement, observers say. . . .
“For this reason, groups of employers, actuaries, academics and industry experts have come together to introduce new plan designs that address many of the elements that the Pension Protection Act left out. Many of these proposals seek to maintain the viability of defined-benefit plans, while including within them many features inherent in 401(k) plans.
“In April, the Society of Actuaries published ‘Building the Foundations for New Retirement Systems,’ which discusses how designing retirement plans differently could mitigate the risk currently taken on by employers in defined-benefit plans and by employees in defined-contribution plans.
“In May, the Conversation on Coverage, an initiative launched by the Pension Rights Center in 2001, came out with proposals for retirement plan designs that include new types of defined-benefit and defined-contribution offerings.
“Also in June, the ERISA Industry Committee, an association of large employers, launched its own proposal. Titled the New Benefit Platform for Life Security, the program would let benefits administrators provide health care and retirement benefits to employers through a new platform.
“While all of these proposals would require legislation to become reality, experts say employers should pay attention to them now. They could affect how they design their benefits down the road.
“’Nothing is going to happen next month, but employers should be paying attention to these proposals because in the long term they might allow them to offer a much more competitive benefits plan to employees,’ says Anna Rappaport, president of Anna Rappaport Consulting, a Chicago-based retirement benefits company.”
And it goes without saying that none of these initiatives ever went anywhere.
To be honest, there’s a degree to which, reading this, it feels so, so long ago — and I suspect many actuaries never even knew there were these discussions at the time, or in the years since. It’s always hard to answer this sort of “why not?” question. Why didn’t these proposals or discussions ever go anywhere? It’s the sort of thing you almost don’t even notice at the time. Was Obamacare and its effect on the private sector such a suck of energy that nothing more happened in other areas? Was there private behind-the-scenes lobbying in Washington which came to a dead end?
I don’t know. And I suspect it’s too late to restart conversations, and time to move to other sorts of retirement advocates.