The following remarks were made by Anna Burger, Chair, Change to Win [1] and International Secretary-Treasurer of the Service Employees International Union [2] on October 21, 2009 at the Re-Envisioning Retirement Security [3] conference.
I want to tell you about Willie Lucas. Willie is a union member who has been an electrician at Howard University for 32 years.
Willie was planning to retire in two years. For three decades, he and his employer paid into his 401(k). He wasn’t expecting to retire rich—but during the boom years his 401(k) was doing pretty well and he knew he’d have enough to get by.
But then the economic crisis hit and wiped nearly $50,000 out of his account.
Willie is 53 years old. He’s worked hard all his life in hopes of retiring with some dignity and some financial security. Now he’s had to put that goal off another 10 years or more.
Willie is not alone. Millions of Americans have seen their 401(k) accounts plummet in the last year. And they’re pushing their retirements back years and even decades in hopes of building back what they lost.
Our current economic crisis highlighted what ordinary working people have known for years... Our country’s retirement system is broken and we need to act now to fix it.
It used to be that after a lifetime of hard work you could retire with security and dignity with a pension and Social Security benefits. That’s the American Dream—and it was the way our country worked for decades.
Then it all changed. Employers started eliminating pensions and Americans started counting on 401(k)s and market-based retirement accounts.
But even in the boom years, these accounts were not meeting our needs. In 2007, near the peak of the stock market, half of households with retirement savings accounts had less than $45,000 in these accounts.
Today we’ve hit rock bottom. American families lost $11 trillion in wealth in 2008, nearly 18 percent of their net worth. And those of us lucky enough to still have pensions have seen the worst losses in 30 years.
Employers are using the economic crisis as a way to cut benefits even further—and many families have even had to borrow against their dwindling retirement savings just to get by.
Half of all workers in this country have nothing but Social Security to rely on when they retire. We know that Social Security is the most fair, durable and efficient social insurance and retirement system this country has ever created. We need to preserve, protect and improve it.
But as we’ve seen, Social Security is not enough to allow all Americans to retire with dignity and a decent standard of living. For the average retiree benefits are $1160/month. That is less than the income of a full-time minimum wage worker.
Even those who have a pension have reason to worry…
The huge mismanagement of risk by the Goldman-Sachs’ of the world and the complete failure of regulatory oversight and enforcement over two decades brought on the near collapse of the capital markets last year which has placed enormous stress on most defined benefit plans—putting nearly 60% of multiemployer plans in the red or yellow zone. We also believe that 60% of the single employer plans are under-funded. Without any change in the current Pension Protection acts more will continue to slide.
Those like Willie, in defined contribution plans, have to figure it out themselves. In most plans participants have no power to bargain, demand or even beg their employers to help make up their losses.
Ordinary people doing ordinary jobs --- in factories, fields, on construction sites and highways, in offices, hospitals, and food stores--work hard to provide services we all rely on. When they have to fight to make a decent wage and secure affordable healthcare and paid sick days, retirement security sounds like an unthinkable goal.
So what can we do to change the way we value work in this country? What can we do to ensure that workers can retire with dignity and prevent their worst fears—becoming burdens to their children?
We need to fundamentally change the way business is done on Wall Street. Our financial markets should be structured and regulated to build long-term value and not skewed by compensation schemes that encourage risky behaviors.
We need financial markets that are regulated to protect against systemic risk and that encourage innovation to provide reliable and sustainable products rather than complex and opaque derivatives that benefit the few at the expense of many.
And finally, we have learned from healthcare reform how long it takes and how focused we have to remain to secure change that works for all Americans.
We know that a key piece of retirement legislation, the Pension Protection Act of 2006 is sun-setting at the end of 2014. It’s end gives us the opportunity to rewrite the law and make the changes we need.…
Now is the time to act.
And in doing so we must preserve the parts of our system that do work and put in place a new retirement system for those who are not adequately covered.
At Change to Win we started down this road more than three years ago.
You will hear later today about a new type of hybrid defined benefit plan from the United Food and Commercial Workers.
In 2006 SEIU adopted eight criteria for a better retirement system which mirror the principles of Retirement USA and we put out a proposal for a multi-employer hybrid plan.
All our unions have been hard at work to strengthen our defined benefit plans in the aftermath of the meltdown in the capital markets. We are working with a broad coalition of multi-employer plans and with our employers to secure legislation that will strengthen the PBGC and give our defined benefit plans more time to fix the damage caused by Wall Street greed.
To provide immediate relief we are encouraging:
--longer amortization scheduled for the 2008 investment losses
--extending the period for implementing rehabilitation and funding improvement plans
--allowing new ways to partition the effects of bankrupt employers on otherwise healthy plans
--modifying the rules on fund mergers
And we are working with service providers to come up with new models for managing our members’ retirement assets.
The experience of Change to Win’s 5.5 million members has given us a first hand understanding of all aspects of this issue.
Our members work both in the private and public sectors.
They work in the service industries, manufacturing, transportation and construction where they are employed by companies of all sizes. They work for state, county and local governments and for non-profit organizations as well.
Many are covered by private sector defined benefit plans, primarily multi-employer but also single employer plans.
And virtually all our public sector workers are in defined benefit plans.
But as I have mentioned, we also have hundreds of thousands of members -- most of them organized within the last 10 years -- who are covered by defined contribution plans or have no coverage at all.
As we move forward, we should preserve the parts of our current system which have worked well for many workers and get rid of those that don’t. And we should build something new which borrows from the best of all systems and protects us from the worst of what we have today.
We know what a 21st century retirement system needs to look like. It needs to cover everyone, it needs to provide adequate benefits to all workers, and it needs to be secure and not linked to the volatility of the market. Our retirement assets must be invested in markets that are transparent, accountable and fair.
We know how hard this will be. That’s why we came together. That’s why we’re here today.
And while the challenges before us are great, I believe the opportunities are greater.
Last year we elected a President who understands how profound this crisis is—and he experienced it firsthand.
President Obama walked a day in the shoes of homecare worker Pauline Beck and her nearly 90 year old client Mr. John in Alameda, California.
Mr. John passed away this month—but the care Pauline provided for Mr. John allowed him to live the last years of his life in his home with dignity.
By walking in Pauline’s shoes, President Obama experienced the challenges facing low-wage workers like Pauline and retirees like Mr. John. Mr. John was wheelchair bound and counted on Pauline’s assistance to meet his daily needs. And like most seniors, Mr. John struggled to stay in his own home while coping with rising healthcare costs and living expenses.
Without Pauline, Mr. John wouldn’t even have been able to get out of bed in the morning—and he probably would’ve been forced into a long-term care facility.
Pauline makes $10.50 an hour with few benefits. At 63 she should be ready to retire herself—but she has no retirement coverage and she doesn’t know when she’ll be able to stop working.
Our President understands what Pauline is facing. He understands the challenges Mr. John faced every day. We just heard from Secretary Solis—the President stands with us make retirement security for all Americans a reality.
We are coming to the end of a decades-long struggle to achieve affordable healthcare for all in our country. What seemed impossible for so many years is now becoming a reality.
Retirement security is that same seemingly impossible goal for Americans today. But I know that the lessons we have learned on healthcare will allow us to achieve a new retirement system in months and not decades.
Together, we can restore the promise of the American Dream and ensure that every worker earns a paycheck that supports her family, that she has healthcare, and that she can retire after decades of hard work with security and dignity.
Together, we can make this the most transformative time for workers in more than 70 years.
Let’s go get it done.