D.C. Pension Geeks
Welcome to DC Pension Geeks, a conversation with top retirement-related policymakers and regulators in and around Washington. Hosted by Brian Graff, an attorney, accountant, former Capitol Hill staffer, and now CEO of the American Retirement Association, it’s an inside view of the ups and downs, ins and outs and sometimes surprising turns Washington takes on the road to ensuring a secure retirement for millions of hard-working Americans.
D.C. Pension Geeks
Barbara Marder - What's Happening in the Washington Retirement Policy Debate?
American Retirement Association Brian Graff routinely argues that no one grows up wanting to be a D.C. Pension Geek—it just sorta happens.
But Barb Marder actually DID want to be a D.C. Pension Geek at a relatively young age.
The president and CEO of the Employee Benefit Research Institute (EBRI) joins Graff for a fascinating discussion about EBRI's mission, its role in the Washington policy debate, and why the current retirement system is constantly attacked.
Employees really weren't, unlike me, who stayed with Mercer for 40 years. People really weren't staying with one employer for their full career and if you don't, you really don't get the full benefits of a defined benefit plan.
Speaker 2:DC Pension Geeks brings you exclusive conversations with top retirement policymakers and regulators in and around Washington DC, hosted by Brian Graff, an attorney, accountant, former Capitol Hill staffer and CEO of the American Retirement Association. If you're looking for an insider's view of all the twists and turns that Washington takes on the road to ensuring a secure retirement for millions of Americans, you're in the right place. Welcome to DC Pension Geeks.
Speaker 3:All right, everybody. Welcome back to another episode of DC Pension Geeks. I'm Brian Graff, ceo of the American Retirement Association and with me today, very fortunate to have our guest Barbara Marder. And Barbara is the CEO of the Employee Benefits Research Institute. Or is it president Barb?
Speaker 1:President and CEO.
Speaker 3:President and CEO. You got both titles. Good for you. Apparently, yeah, I only get one CEO. Woe is me, anyway. So, as I indicated, she's president and CEO, or she indicated president and CEO of the Employee Benefits Research Institute, which is a significant player in the policy world here in Washington DC with respect to employee benefits, and a particular note to us is obviously their role in retirement policymaking, and we're going to get into that. But, as tradition has it, we're going to start with a little bit more about you personally, and what we'd like to ask is you know, how did you end up being a pension geek and get into the retirement world? Because, like me, no one actually thought about doing this when they were in elementary school.
Speaker 1:Well, you're right, brian, I did not think about it in elementary school, but I will say that I ended up being a pension geek before I left college.
Speaker 3:Ooh intriguing.
Speaker 1:Yes, In my senior year of college I was a math and economics double major and my advisor said you should look into being an actuary and I had never heard of that. So they arranged for me to have an internship with a pension actuarial consulting firm and I did that part-time. My senior year took my first actuarial exam and they hired me out of college. So there I was, all of probably 21, a pension actuary or a budding pension actuary, and I stayed with that firm just for about another six months and then in 1983, I joined Meidinger at the time, and then Meidinger went through a whole series of mergers, ended up being merged with Mercer, and I spent 40 years of my career at Mercer.
Speaker 3:So so you knew you wanted to be a pension actuary when you were starting the SOA exams. Is that what I heard?
Speaker 1:Yeah, I did. I mean I did Again. Until my senior year of college I had never heard of being an actuary or the actuarial profession but then really investigated the profession and I even interviewed like for the job. I even interviewed a social security. I interviewed with some insurance companies and actually the sort of the people I interviewed suggested you'd be great in consulting, you should definitely head into the consulting field and I continued with the exams and the rest was history. So a pension geek at a very early age.
Speaker 3:Fantastic. So did you? I mean, did you focus obviously focus primarily on larger defined benefit plans? I assume yes, both single employer and multi-employer.
Speaker 1:Yes, Both single employer and multi-employer Mostly single employer, Mostly single employer. A few public plans versus private, but mostly large private defined benefit plans. And then I'm going to say about maybe 10 years in, I was exposed to the defined contribution side as well and did a fair bit of consulting on that side. And at one point at Mercer I was the global defined contribution consulting leader. So I actually organized people around the globe at Mercer who were leading that country's defined contribution consulting work and it was pretty fascinating because it, you know, the idea really was what can we pick up from one country that could help inform the other? So that was really, it was really a meeting of kind of thought leaders to try to help predict what might be coming and to actually bring best practices and maybe worst practices, making sure we knew about them and we could bring them to the different countries.
Speaker 3:So you kind of saw, you know, in your practice.
Speaker 3:You were firsthand witnessing the kind of transition away from larger defined benefit plans to defined contribution plans and sort of consulting with large employers on, on and on how to do that.
Speaker 3:Obviously, some of the controversial, you know, going back into the nineties, or the conversions to cash balance plans among and then and then the controversies around you know the of, essentially, you know terminating plans and having them bought out by insurance companies to de-risk the employer's liability. On the DC side, you know, one of the things that we hear from in Washington is this sort of woe around this transition that has occurred over the last several decades and that wistful thinking about the good old days when everyone had a defined benefit plan, although I sometimes question how really good that was, because you know only certain people at certain employers did have those things, but when they did they were great. I mean, do you have any thoughts yourself as to? You know why that happened and is it realistic? As you know, someone like Bernie Sanders would like to see to go back to those days of primarily defined benefit plans.
Speaker 1:Yeah, I do have fond memories of defined benefit plans and, you know, was even fortunate to be working with organizations when, you know, the interest rate environment was very favorable and many of these plans had surpluses and you know our big job was figuring out how to spend those surplus assets to benefit participants Right. So you know there were really the some of the good old days of defined benefits.
Speaker 3:Particularly in the 90s, there were the proposals that were also controversial, to allow employers to take money out of the plan.
Speaker 1:Yes, yes, so there were right. There were kind of good intentions and perhaps not as good intentions about the use of those surplus assets, for sure, but that's. The issue is that you know what was once a very favorable interest rate in economic environment, then it wasn't. And you know corporations can't. It's very difficult for them to deal with that kind of volatility, and you know balance sheet volatility and the accounting rules, and so it's. I think it's understandable that companies were skittish about the plans. And then I do think, combined with the changes in the workforce and the fact that employees really weren't unlike me who stayed with Mercer for 40 years, people really weren't staying with one employer for their full career. And if you don't, you really don't get the full benefits of a defined benefit plan. And then you know again, back in the day, vesting schedules were much longer. People had to be with an employer a fairly long period of time to even get anything.
Speaker 1:So, they weren't. You know, they weren't everything to everyone. They were definitely great for some and I know retirees who have defined benefit plans. They're typically very, very happy, very comfortable, satisfied in retirement. That's great. But there were just too many other economic and kind of corporate factors that went into that equation that made it really not a sustainable model.
Speaker 3:And I've looked into this, spoken about this before. I agree with you. I actually I specifically point to the change in the accounting rules by the Financial Accounting Standards Board that were really the death knell for corporate-defined method plans. Because of that balance sheet volatility, that became unacceptable and if the leadership of publicly held corporations' job is primarily to enhance shareholder value, it was very much contrary to that.
Speaker 1:Yeah, and then once you know, sort of once one large company made the decision, you know, then you're also looking at competitive advantage or disadvantage. So if they do not have that kind of balance, reliability and I keep mine, you know where does that leave me from a competitive standpoint? So it started to kind of get that's where I feel like a lot of the momentum came from Agreed.
Speaker 3:So let's go back to EBRI, so tell the audience you know what is EBRI, what is it, what's its mission, what's its focus and you know what its role is in policymaking today.
Speaker 1:Absolutely. And again, thanks for the opportunity to talk to your audience about EBRI and what we do. So we are a member-funded nonprofit research institute and our mission is to provide objective, independent, nonpartisan research to inform and educate policymakers, as well as inform the rest of the industry in terms of product development and market innovation. We're not a trade association. Ebrd does not advocate or lobby, but we are very comfortable with our you know just the facts the best data and information being used by those who do advocate to be sure that those who are talking to policymakers have the best possible information in their hands.
Speaker 1:And then EBRI does directly educate policymakers, whether that's through the research that we publish. We have policymakers all the time coming to our website looking at our research, using our research. It's quoted often by many, many different government organizations. And then we also do directly have educational sessions with staffers and people on the Hill, again with the idea to let's just make sure that, as these policymakers are making decisions, as they're hearing from the lobbyists and the advocates, that they also have the information to be able to challenge the information, to be able to challenge, ask the right questions and make the best decisions. And I think it is a unique role that EBRE plays, because we are unique in that we're providing this information, but we don't take positions one way or the other.
Speaker 3:So, and you're right, I do think it is an important and unique role and we're, as an organization the ARA is very happy to be involved with, as a member of, and we're very happy to have you as a member prominent things from a subject matter, substance standpoint, that you guys produced the Retirement Confidence Survey, as well as the simulation model that sort of projects out how American workers will do under various proposals. Can you talk a little bit about both those?
Speaker 1:Absolutely. The Retirement Confidence Survey, I think, is one of the most robust pieces of research. It's a survey of both workers and retirees. We've been doing it for 30 years. We're able to not just look at current sentiment and confidence in retirement but actually look at changes in that over a year, so it's really interesting. But it really covers such a wide range of topics from how confident are you that you'll be able to live a secure and financially secure retirement? But we asked questions about guaranteed income and I thought one of the just really a fascinating finding from the 2023 survey is we asked workers you know how many of you what percentage would be interested in having purchasing some kind of a guaranteed income product at retirement. And it's around 80%, which I think is substantial.
Speaker 1:When we looked at that by age, the youngest people, those in the 25 to 29 age group 93% said they would be interested. So it's very interesting to me that this youngest generation is probably looking out. They're seeing what's happening, maybe even looking at family members or you know what's going on and saying, wow, you know, I should try to find a way to make sure I have some kind of guaranteed income in retirement, probably not thinking that Social Security will be one source of that. They may not think of those two together. We do ask questions about Social Security and confidence that Social Security will be there, et cetera. But people are pretty confident that it will be.
Speaker 1:But you know, it's very interesting. So that's retirement confidence has lots of different facets to it and the retirement security projection model is very interesting. It's a stochastic model and it allows us to look at the impact of different policy changes on the overall savings US savings gap. So we can really get very specific about whether a particular policy will increase the shortfall. The saving shortfall will reduce the saving shortfall by how much, and then we can look at it by all kinds of different demographic cuts and ages and income. So it's a very powerful tool to look at the impact of different changes.
Speaker 3:So, talking a little bit more about the retirement confidence survey, there's a huge gap in perception about the? U the sky is falling. And then there's others who feel economists that feel that you know everything's completely misconstrued by those economists. And quite the contrary. The IRS data, for example, shows that seniors are actually doing quite well, in fact arguably better, than their younger working counterparts to some degree. So do you see that distinction in the RCS between people actually kind of who are nervous as they encroach retirement and then when they get there, oh well, this is not so bad.
Speaker 1:Yeah, actually, the confidence and satisfaction levels in retirement are pretty, I mean, they're pretty optimistic.
Speaker 1:It's not like a third of people are confident they'll have enough money in retirement or that they're retiring and will have enough to last the rest of their retirement. The numbers are in the 60, 70% that they're confident they will have money to live throughout their retirement, which, again, that's pretty optimistic. So so agree with you that you know you do see surveys all across the board and you know, clearly, looking at current retirees versus people who won't be retiring for another 30 years, I mean you'll definitely see differences. But I would say, all in all, our surveys are relatively optimistic about having enough for a secure retirement.
Speaker 3:So you mentioned Social Security, so you mentioned Social Security. Sometimes, when I'm attending sessions or talking to policy folks, particularly economists, about the retirement system, it's almost as if Social Security doesn't exist, and one of the things that is a frustration for me is that lack of recognition that we actually do have a mandatory retirement system and it's a defined benefit plan, by the way and the critical role that it plays in conjunction, the foundational role that it plays in conjunction with the private system, and I think you guys are working on trying to link those two together in a more holistic way to demonstrate that value proposition.
Speaker 1:Yeah, you're right, I mean we think about the three-legged stool or whatever we want to call that value proposition. Yeah, you're right, I mean we think about the three-legged stool or whatever we want to call that now. But clearly the US system is a private-public partnership and, as you say, social Security is a very important piece of the equation for many, many workers. And we did. In fact, craig previewed some research at our December Policy Forum. In fact, will Hansen was on the panel where we discussed it. And you know the replacement. We were looking at replacement ratios. So we were looking to see if you combine for a full career, if you combine Social Security with the income that you would expect to get from a defined contribution plan. Obviously we have many assumptions underlying that. The replacement of pre-retirement income when you bring the two together was strong. Again, now I'm talking about a full career. You know a 30-year career worker, but you know that doesn't have to be with one employer.
Speaker 3:You know which is sort of used to be in the defined benefit. I mean, I think your model assumes that there might be some gaps in contributions in the private sector, which is pretty typical, but in general, you know, throughout that 30 years you're obviously in the social security system but you're also, for at least a sizable portion of that 30 years, contributing to a defined contribution plan.
Speaker 1:Exactly least a sizable portion of that 30 years contributing to a defined contribution plan? Exactly, yeah, but the result I mean, and especially for middle income you know, I know there is some talk about that the current private defined contribution system really only benefits the most highly paid, but our numbers definitely show the impact on the middle class of you know, the current, the current private defined contribution system plus Social Security.
Speaker 3:Right, you know some people say that Social Security for the does a pretty good job for lower income individuals in retirement.
Speaker 3:But you know it's the middle class that would really be suffering in the absence of a defined contribution system, absolutely so recently there's been this Washington DC love affair among some of the policy wonks with our good friends down under in Australia, and they call it the superannuation system, which is their version of a mandatory retirement system, which one of the things that drives me crazy about these comparisons is that people tend to compare the Australian system with the 401k system, and it's really apples and oranges, because the Australian system is a mandatory retirement system. The 401k system is a supplementary retirement system, private, on top of our mandatory retirement system, and I've tried to stress to some of these academics, to no avail, that the real comparison should be between the Social Security system in our country and Australia's mandatory retirement system, which is, you know, a DC system versus a DB system. Right, and why do we have that gap of understanding about how the US system really is a dual system, when everyone seems to be making these comparisons?
Speaker 1:either, without really contemplating the fact that we do have this dual model. Yeah, I think you know. I think it's complicated because when you look at either system, as you were saying, there's different components to it. There's, you know, the Social Security, the safety net component that actually both countries' retirement systems have.
Speaker 3:Although the Australian fallback, they have a quote old age pension default. For someone who you know who is but the A, it's very minimal.
Speaker 1:It's quite low.
Speaker 3:Yeah, it's very small and it's only for a very limited number of people, based on their incomes, whereas Social Security, you know, provides benefits yeah, particularly again for middle income folks who would be not anywhere close to a reasonable income percentage of replacement income in the absence of Social Security. So, yes, there is that, you know, minimal component of if things go awry but it is a DC model that we're depending on the economy assets could go down.
Speaker 1:Right, exactly, exactly. I mean, I think, those enamored of the Australia system and you know I did. Actually, mercer puts out a global pension index every year.
Speaker 3:I always think it's interesting to see where you know, yeah, I'm aware, and I get frustrated with it.
Speaker 1:You know clearly Australia is way ahead of the US. But interestingly, when you look at the subindexes as it goes to adequacy the sort of the adequacy I'm just looking so Australia's adequacy subindex was like 68.4 and the US was 63.9. It's not that radically different. There are other parts of the index that really drive the comparisons, not as much on adequacy, but I think it really gets to that the fact that it's mandatory, which means there's broader coverage.
Speaker 1:We have a mandatory system too, right, right, but people don't like. Again, it's complicated because people are comparing apples and oranges. But you know again, with a mandatory system you get, you know, broad coverage of workers and different kinds of workers self-employed, even self-employed, you know, part-time.
Speaker 3:So I think that's it's like Social Security does.
Speaker 1:Right, but that's where I think people get really enamored with the system as, as well as other mandatory systems that are that look like our defined contribution system, you know, but are, but are mandatory.
Speaker 3:So I feel like that's where so the way, so the way I view it is if we have a mandatory defined benefit system and yes, it needs to get funded, but I'm I'm completely operating under the assumption that that will get figured out, it'll be fixed. Yeah, it's going to get addressed. Fixed may be too strong a word but it's going to get addressed because politically there's no choice and it's going to be maintained as a defined benefit system. It's not going to be privatized as the political word that's been used about the social security system before. So we're going to have a DB system and then we're going to have a DC system.
Speaker 3:And I think the question is would it be a good idea for the government to be running both? And my view, I think our view as an organization, is that's not a good idea. We like the idea of the government running the DB component, but we don't want the government centralizing and running the DC component. That would be a concern from a diversification standpoint. I think people would love, people like the idea of having that dual model because of that diversification.
Speaker 1:Yeah, I mean the private-public partnership has served us really well with the retirement system and it feels like a very radical shift and maybe unnecessary to go in that direction. Again, you know EBRE doesn't take positions, but we certainly support the employer provided, the employer provided system. We are the Employee Benefit Research Institute after all, so the I mean. The other thing that I think is interesting is there there's more to come in terms of legislation that's already been passed, that hasn't been, you know, that hasn't gone into place yet. That will continue to address some of the gaps, whether it's, you know, coverage gaps or it's, you know, things like auto enrollment to increase savings rate, especially among lower income, the savers match.
Speaker 1:There's lots of things that have already been passed that will go into place over the next few years that will continue to fix some of the challenges to the current public-private system, public-private system. I'd love to see how those things shake out, how they work. I don't think we're necessarily done. I think there's plenty of other tweaks. I'm not saying there will be a secure 3.0 or whatever, but there are plenty more things that I think are being considered. I know, you know, I've heard lots of different things.
Speaker 3:I'd love to see the impact of those before we, you know, go to some radical change at this point and there are proposals, I certainly agree with you, and, by the way, there will be a Secure 3.0, it's just a question of when and, along those lines, you know there are ideas being talked about to try to, as you said, not only do we want to see what happens with the implementation of things in Secure 2.0, but there are further ideas being considered to try to close the private coverage gap amongst those employees that don't have access to a workplace retirement plan. And, frankly, something you mentioned, the gig work, the, you know, the gig economy. There's a, there's a growing number of workers in this country and that probably that shift is probably not going to reverse anytime. Yeah, who are not, you know, who are self-employed in some capacity, and we want to try to make it easier for them to save on a, on a on top of social security too.
Speaker 1:Absolutely. Yeah, I think. I think there are so many things that are being kicked around that you know. Again, I'd love to see what will happen over the next few years, as both things already enact, you know, things already legislated and others come into play. So I think it'll be interesting and in the meantime, I'm sure we'll continue to hear the debate about you know where we should scrap everything and go do this and do that, but you know those kind of very radical changes. I'm not sure the industry is ready for that, but you know.
Speaker 3:You know, I'm not just, not only the industry, but I'm not sure the, you know, I'm not sure the American people are ready for that either. I mean, I think the idea of having, you know, the government controlling all of my retirement savings is something that, at least among certain quarters of our country, there'll be a lot of resistance to that. So I think building on the success of the current system, which isn't perfect by any means, is a lot more pragmatic and likely to occur than, you know, throwing the whole thing out, which is something I've tried to stress to my academic friends, who are more inclined to throw everything out, like, listen, let's work together on things to make the current thing better, as opposed to fighting each other over. You know, having the thing completely blown up, which you know is, as you said, unlikely to happen anytime soon. Listen, this has been great. Really appreciate your time. Is there one thing that you'd want the people in the retirement industry to know about what EBRI's doing in the future that they should be looking for?
Speaker 1:Oh, good question. We have a very, very ambitious research agenda for 2025, both on the retirement side, the health side, financial well-being. We're actually we're just in the process we look at financial well-being benefits being offered across employers. We've typically done that only for large, large employers. We're now actually looking at that for small and medium-sized employers. So we are trying to take a look at the research that we're doing and making sure it's, you know, as broad and covers as many different types of businesses as possible. So you know I'm excited about that. I know Craig actually just released retirement security projection modeling, results of the auto, all the different auto features, auto enrollmentportability, auto-escalation. So I mean there's lots of interesting things that we're going to be looking at in the course of 2025. And I hope people will continue to check us out and you'll continue to see EBRE quoted in the media pretty much every business day of the year.
Speaker 1:And to find out more information about EBRE, go to day of the year and to find out more information about EBRI, go to EBRIorg and you can look at the membership information, and lots of EBRI information is actually available to the public. That's part of our mission. And then, of course, there is some of our research. That's for members only.
Speaker 3:That's EBRIorg. Well, thank you so much for your time. Thanks for having me.
Speaker 1:Really appreciate it. Thanks for having me, brian, appreciate it. Thank you.