Specifically, how retirees draw down their defined contribution plan balances. Congress recognizes the widespread adoption and popularity of defined contribution plans among private sector employers and their employees, and these plans have become the cornerstone of retirement security for millions of Americans. There is now an opportunity to build upon this system by expanding lifetime income options. This hearing will evaluate whether today's workforce would benefit from additional or more flexible payout options from the defined contribution plans as retirement needs continue to evolve.
The retirement industry and congress can work together to support predictable income streams and help retirees manage longevity risk and market fluctuations during retirement. Maximizing retirement savings is a shared goal. I look forward to discussing how the committee can continue its efforts to protect ERISA plan participants and strengthen their benefit plans. I wanna thank our witnesses for joining us today. Each brings, frontline experience helping defined contribution plan participants convert retirement savings into lifetime income.
We will hear about our how retirees manage their savings in retirement, the products that can help them, do that, and an employer plan that has tailored an investment and payout option specifically to provide a lifetime income stream. At the same time, we must remain committed, preserving the ability of retirees to choose how and when their retirement savings are paid out. This hearing will explore whether defined contribution plans should offer lifetime income options and how plans may do so while maintaining flexibility for their participants.
With that, I yield to the ranking member for an opening statement. Thank you, mister chairman. I wanna thank all the witnesses for being here. This is a profoundly important issue. It may be very dry to a lot of people except for staff who study these issues. But in an era where our working people have more and more stress and less disposable income to invest in anything, retirement or, their family or health care. This is just really discussion. And I hope we all are mindful that we want everyone to benefit from this. Nothing wrong with private investments.
We still need Social Security, of course, because more Americans depend on that than ever. But what's happened with investment is really gonna be concerning just generationally, and that's why this this is really should be a completely nonpartisan issue about how do we manage these opportunities to help the economy but make sure it helps for everyone. And as people prepare, for retirement and people who aren't preparing for retirement as we all did most likely when we were in our twenties and thought we would live forever, this is a really important discussion.
In 2008, the Department of Labor issued a regulatory safe harbor regarding the selection of annuity products in retirement plans. And then in 2019, Congress took bipartisan action to establish a statutory safe harbor that makes it easier for retirement plans to offer annuity products, may makes it much easier. If there is a bipartisan interest in going beyond that, Congress has already done, we must proceed carefully, as I said in my first comments, as these kinds of investments can be costly, opaque and complex.
And we want to be easy for everyone to analyze their risk assessment. But I think it's important for us to take a step back as well and be mindful that we're having this discussion about lifetime income and four zero one campaign Kim plans at a time when there are far too many workers, as I've said, struggling to earn a decent income over their lifetime. Right now, many workers across the country are struggling to pay their bills and meet basic needs, let alone save retirement. It is incredibly hard for workers to save the retire for retirement when according to
the Federal Reserve, such as a simple $400, unexpected expense like a car repair could force them into a really dire financial situation. I think the numbers from the Fed are more than forty percent of Americans are $400 in unexpected cost and going into a dire financial situation, just a cash flow problem. So it's very important with our failures so far to extend, the premium tax credits
under the Affordable Care Act or have a meaningful discussion about how do we address that important fixed cost in American household health care. That's gonna make it more difficult for those 20,000,000 Americans. And in this committee, we've had extensive hearings over the last four years about the 120,000,000 Americans who get their health care from employer based. Bad for the employer, bad for the employee. The chair and I have had multiple conversations about how we could work to make sure that both for employers and employees, those those health care plans are also addressed
because the quality of care and the cost is going up as well. So in all of that context, average Americans trying to decide how much they can contribute to retirement given the pressures on housing cost, health care, transportation, education, all the other fixed cost and the lack of discretionary income makes this a really important long term discussion that really should be bipartisan in my view and has been historically in this committee. And I I think the chairman and I have worked, collaboratively. And I'd like to really thank, Doctor.
Reeve for being here. Go Bears, representing a district that I like to say if you go up to the Berkeley Hills, I have the pleasure of looking down for my district at Berkeley. So thank you for being here. I have nothing but respect for the Labor Institute, which I've had a lot of interaction with over the years and your testimony as well as the other, witnesses. So we must work to fix these inequities. I've mentioned the ranking member of the full committee, mister Scott, and I consistently make the case that retirement security is fundamentally aligned with workers' wages.
If you don't make enough and you don't have enough discretionary income to be able to make decisions in investments for retirement, it makes it that much more difficult. The more people earn, the easier it is for them to plan and save for retirement. At a minimum, we must support policy that increase workers' wages and strengthen their ability to organize and collectively bargain. The data is clear that unionized workers have greater access to retirement plans and higher participation rates than their nonunified con, counterparts. And the research also is clear for nonunion counterparts is their ability, the union members,
to be able to negotiate a fair retirement plan helps nonunion as well. But we shouldn't stop there. In 1935, president Roosevelt signed the Social Security Act into law. And when doing so, he said, quote, well, this will give some measure of protection to the average citizen and to this to his family, his and her family against the loss of a job against poverty ridden old age. Remind people that before Social Security, if you were old and you're an average American, you were poor. Social Security remains one of the nation's most effective, successful, and popular programs.
It currently provides lifetime income to over 67,000,000 Americans. According to the Center for Budget and Policy Priorities, for four in 10 re retirees, it provided at least 50% income. And for one in seven retirees, it provided at least 90% of their income. There have been Republican led attempts to privatize or destabilize Social Security in the past. But fortunately, those misguided efforts were rejected, and we must now work together to protect and strengthen Social Security for future generations who who will all be and baby boomers,
of which I am one, who will all be at least 65 by 2030 for future generations. Finally, mister chairman, today's hearing is happening at a precarious time for retirement savers. Risks are increasing while core protections are being abandoned or attacked. For instance, the current administration is walking away from a sensible rule protecting workers and small businesses from harmful retirement investment advice, often related to certain annuity products, while the administration is also finalizing a regulation to make it easier for retirement plan sponsors to
offer offer risky investments, such as crypto in workers' four zero one k plans. At the same time, my colleagues across the aisle appear intent on advancing legislation, some of my colleagues, that would make it harder for retirement savers to seek justice in courts when charged with excessive fees. It seems that such legislation may be connected to today's hearings. I hope not as Republican witness prior hearing testified that litigation and the threat of it were impacting four zero one campaign. And fast lastly, just a few numbers that to me are staggering that Doctor.
Rhee will, talk about. Among near retirement households, the share of four zero one ks IRA assets held by the bottom 70% has substantially decreased since February to 4.9% reflecting growing retirement inequality is a survey of consumer finances. The top 20% of households in this age group held 86% of four zero one k IRA IRA assets in 2022, which is a reflection of the earlier numbers about
how how many Americans completely or largely rely on Social Security because they can't afford to get into four zero one k's. So with that as a as an opening statement, I hope that you take these and from a perspective of we wanna work to make the system work and not have high risk, or low risk, high reward for some investors and high risk, high or low return for other investors like 80% of the American public. Mister chairman, I really appreciate this hearing and look forward to working with you to make sure that Americans have secure retirement for generations to come.
The ranking member yields, pursuant to committee rule eight c, all members who wish to insert written statements into the record may do so by submitting them to the committee clerk electronically in Microsoft Word format by 5PM fourteen days after this hearing. And without objection, the hearing record will remain open for fourteen days to allow such statements and other extraneous material noted during the hearing to be submitted for the official hearing record. I will now turn to the introduction of our four distinguished witnesses, and thank you
very much for being here. Our first witness is mister, Suryar Calera Caleri, the head of the TIAA Institute from Boston, master master Mass Massachusetts. Our second witness is mister Ken Levine, executive director of Global Retirement Strategy at RTX from Charlotte, North Carolina. Our third witness is doctor Neri, Ri, a director of the retirement security program at UC Berkeley Labor Center from Berkeley, California.
Our last witness is mister Wayne Chapas, the president and chief executive officer at Insured Retirement Institute from Washington, DC. We thank, again, the witnesses for being here today. We look forward to your testimony. Pursuant pursuant to committee rule, rules, I would, ask that you each limit your oral presentation to a three minute summary of your written statement. As committee members have many questions for you, the clock will count down from three minutes. Pursuant to committee rule a d and committee practice, however, you will not cut off
your testimony until you reach the five minute mark. I would also like to remind the witnesses to be aware of their responsibility to provide accurate information to the subcommittee. I will first, recognize, mister Khaluri, for your testimony. Chairman Allen, ranking member DeSonyer, and distinguished members of the subcommittee, thank you for inviting me to testify, on the steps we can take to continue to modernize our retirement system. I'm Surya Kalluri, and I serve as the head of the TIA Institute, a division of the retirement service provider TIAA.
And at the institute we are dedicated to conducting research on enhancing financial security for Americans. For example, our research shows that American workers today face challenges that we can address. 45% of American households in our research we show are projected to run short of money, in retirement. I'm gonna make a couple of psychological points. 64% of Americans worry more about running about money than about their own mortality. And a third of who have already retired cite, not addressing potentially outliving their savings
as their top financial regret. So we call that regret research. So defined contribution plans have succeeded in helping workers save for retirement. They often fall short in helping them convert them into a guaranteed income, that lasts throughout their retirement. We call this the guarantee gap. Congress has taken important bipartisan steps to address these challenges by passing, Secure Act and Secure Act two point o. In particular, grateful to chairman Wahlberg who first introduced the annuity provider, safe harbor probation.
I would like to highlight three policy proposals to address this guarantee gap. The first, is congress should further encourage guaranteed lifetime income products as part of the default investment offerings in plan. This can be done by amending the safe harbor regulations of the department of labor's Qualified Defined Investment Alternative, QDIA. The Lifetime Income for Employees Act, the bipartisan legislation previously introduced by Chairman Wahlberg and Congressman Norcross takes towards addressing this.
The Department of Labor can also take steps to encourage plan sponsors to integrate lifetime income solutions. Second, congress should pass legislation requiring defined contribution plans to offer a participant menu of qualified options. We call them coupons. There could be a whole bunch of choices people can have to make withdrawals in a systematic basis. Third, policy makers should take steps to address what an institute we call longevity literacy. That is an understanding of how long an individual is going to likely live in
retirement. In our research, we find that savers tend to underestimate, how long they're gonna live, thus incurring longevity risk. So providing workers with enhanced longevity literacy education can help them plan better. So thank you for your leadership on this critical issue and for this opportunity for me to testify. When the time is right, I'm happy to answer questions. Okay. Thank you, sir, for your testimony. Now I recognize mister Levine for your testimony. Mike, sir. You're mic.
And if you would, hold it closer to you, that would be great. Thank you. Is it on? It is on. You got it. Thank you. Thank you for that. Chairman Allen, ranking member DeSaulnier, members of the subcommittee, thank you for inviting me to testify today on the important topic of modernizing retirement policy for today's work force. I'm Ken Levine, Executive Director of Global Retirement Strategy and part of the pension investments team at RTX. I'm an actuary by training and have worked in the employee benefits arena with a focus on retirement for nearly forty years, twenty nine of them with RTX and its
predecessor companies. RTX, formed by the April 2020 merger of United Technologies and Raytheon, is today one of the world's largest aerospace and defense companies. The retirement industry, thanks in no small part from congressional actions, has done an excellent job at promoting and enabling workers to accumulate significant account balances in their four zero one k plans by the time they retire. However, Americans have been left to their own devices to figure out how to decumulate. Generally needing to choose between retaining control over their assets, figuring it out for themselves,
how to invest and spend down in retirement versus opting for this, certainty of fixed income in exchange for giving up the control of their assets. Solving this decumulation enigma has become more critical with fewer workers having access to traditional employer provided defined benefit pension plans. RTX collaborated with the investment firm Alliance Bernstein Bernstein to develop a four zero one k plan investment option that accumulates as effectively as a target date fund while also
building retirement income guaranteed for life. The result lifetime income strategy was introduced in 2012 as the plan's default investment option. Making it the default was critical to ensure that it would deliver lifetime income to as many employees as possible. Supported by more than thirteen years of experience, lifetime income strategy has proven to be an effective way for RTX employees to build meaningful retirement income guaranteed for life without sacrificing on the accumulation of their account.
While it is an annuity, it does not require annuitization, that irreversible exchange of assets typically associated with annuities. Instead, it's a personalized target date fund that continues into retirement and embeds insurance with a modest, explicit, transparent fee that guarantees that retirement income will continue for life. Investing in lifetime income strategy turns a four zero one k into an individual pension account, an IPA. Employees accumulate their account just like they would by investing in a target date fund,
then in retirement, decumulate by withdrawing directly from their account a monthly pension like payment. There is no irreversible exchange of assets nor a rollover to an IRA. The retirees four zero one balance remains their four zero one balance with the potential for continued growth if investment markets perform well, increasing income during retirement, but protection, of that income in down markets. Until the account is depleted, it is invested, fully liquid, accessible, and passes to heirs
upon the retiree's death. If the guarantee withdraw fully depletes the account, the insurance steps in to continued the monthly income. When RTX introduced lifetime income strategy, we anticipated other plan sponsors would follow suit. But to date, few other plan sponsors have. My view is the lack of take up has to do with misperceptions about guaranteed income products and limited knowledge among the investment consulting and plan sponsor communities. However, there has been renewed interest and some innovative solutions have recently come to market.
The purpose of my testimony today is to let you know that not only is it possible for employers to provide a modernized retirement plan by embedding insurance into a four zero one k. But RTX has already successfully done it, and other plan sponsors can too. Thank you, mister Levine, for your testimony. Next, I recognize doctor Ree for your testimony. Good morning, Chairman Allen, ranking member de Saulnier, and distinguished members of the subcommittee. Thank you for having me here today to testify on this important topic. So my name is Nari Lee, and I direct the UC Berkeley Labor Center's retirement
security research program, focusing on the challenges facing most American workers in the current retirement system. So today, I would like to talk about some of those challenges, and also take some time to highlight the need for strong guardrails if we're going to be talking about further congressional action to further integrate lifetime income products into four zero one ks plans. So first of all, big picture. As we discuss modernizing retirement policy, it's important to understand that the current system is
set up to work for the few, and fail the many. Nearly half of wage and salary employees in this country, mostly low and middle wage workers, are not covered by an employer sponsored retirement plan, whether a pension or a four zero one ks. Two out of five working age households have nothing saved in a retirement account. And for about a quarter of Americans, Social Security is going to be their entire lifetime in old age excuse me, lifeline in old age. So while there are record assets held in four zero one ks's and IRAs, there's
very little trickling down to the middle or even much less the bottom. The median retirement savings balance, counting all working age households, is $8,000 For households approaching retirement, it's just $20,000 aged 55 to 64. So that is counting all households, not just the people who are lucky enough to have four zero one accounts. And within this pre retirement cohort, the bottom 70% owns less than 5% of assets. And basically, four zero one have accelerated wealth inequality in The United States.
So much of this is driven by a growing economic inequality and economic insecurity for the mass of workers. We've had forty plus years of wage stagnation at the middle and bottom of the labor market, sixteen years of a frozen minimum wage, and more and more income going to the top earners. We also have increasingly insecure employment relationships, and especially for hourly employees and gig workers, unpredictable monthly income. And all of that makes it extremely difficult to plan ahead and save for retirement.
So I want to move on to the topic of lifetime income and further policy action. So as more workers retire with a defined contribution plan rather than a defined benefit plan as their primary employer plan for retirement, I do think that the interest in lifetime income is legitimate. I will mention just for identification purposes that I'm on the board of trustees of the Cal Savers auto IRA program run by the state of California to try to close a little bit of the retirement savings gap for low wage workers.
And you know, I've talked with fellow researchers about the possibilities of offering annuities and plans. But there are significant questions when you talk about defaulting annuities into a product like that, especially in terms of any changes to worker protections. Annuities vary widely, in terms of the nature of the guarantee, the the level of complexity, the benefit structure, the cost structure. Annuity pricing can be opaque because there are key drivers of costs that are not
made public or or may disclose are disclosed to consumers. And that includes, the life tables underlying the benefits and also, you know, sort of variable annuities. Often there are some undisclosed costs as well in terms of the upside that you're giving up. And importantly, some annuity products do involve long term contracts for participants. And all of this means that there should be a high level of fiduciary care. This is not like a target date fund. Right? It's a lot more complicated. Because of this, congress should not compromise existing standards of protection under ERISA.
Any move to expand the use of annuities as a default investment must include strong guardrails to protect employees' hard earned savings. Three points on that, we need careful standards for defaulting participants into annuity products, both in terms of the kinds of products, the quality of the insurers, and the thresholds for defaulting employees. Laws and regulations should protect participants against excessive costs. This includes actuarial fairness. Disclosure requirements should allow employees to make informed decisions comparing products in the apples to apples spaces.
So to circle back, the most important retirement system is, the Social Security system, which is a bedrock of American retirement, and that needs bolstering. Thank you. Doctor Brea, thank you for your testimony. Lastly, I recognize mister, Chapas, for your, testimony. Thank you. Good morning, chairman Allen, ranking member DeSaulnier, chairman Wahlberg, ranking member Scott, members of the health, employment, labor, and pension subcommittee. I'm Wayne Chopas, president and CEO of the Insured Retirement Institute, which represents the full supply chain of the insured retirement industry, including life insurers, distributors, asset managers, and solution
providers. Thank you for the opportunity today to address a challenge that impacts every American worker and retiree, and that is transforming the dream of retirement into a secure reality marked by confidence and peace of mind and the assurance that savings will last. This challenge can be understood through three realities. First, Americans are living longer, but retirement readiness has not kept pace, especially the risk about living savings. A recent study showed that sixty four percent of Americans worry more about running out of money than about death itself.
Second, the private sector retirement saving system has fundamentally changed. We've moved from pensions that provide a guaranteed lifetime income to divine contribution plans where all the responsibility is placed on individuals to save and to turn those savings into sustainable retirement income. Lastly, while Secure and Secure two point o have expanded and integrated lifetime income solutions into, defined contribution plans, gaps still remain. Annuities can close those gaps by, providing protected guaranteed income.
They work in harmony with IRAs, four zero one k's, Social Security by uniquely removing longevity and market retirement vehicles just cannot match. Just as Americans insure their homes and their cars and their health, annuities insure against the risk of outliving your savings. They guarantee a steady stream of mailbox money. Income that retirees will receive monthly regardless of market conditions. An example is is, is certainly personal to me. My parents are both retired. They both have defined benefit plans.
They do not have significant savings, but they sleep well at night because every month without fail, checks arrive from their employers, and it's income they know they cannot not outlive. And that peace of mind is largely missing today. Across every congressional district, thousands of workers and retirees lie awake anxious about outliving their savings. Annuities provide that mailbox money to ease financial stress and replace uncertainty with the steady reassurance of monthly checks that arrive like clockwork, lifting a burden from retiree shoulders.
By expanding access to lifetime income solutions as IRI recommends, Americans can step boldly into retirement, protected and confident, free from the shadow of financial uncertainty. IRI is ready to work, with you on our shared mission to ensure all Americans have access to a secure, dignified, and financially independent retirement. Thank you, and I look forward to your questions. Thank you, mister Choppas, for your testimony. Under rule nine, we will now question witnesses under the five minute rule. I'll recognize myself for five minutes.
Mister, Chupas, your written testimony cites a 2025 study by Capital Group finding that sixty percent of investors of all ages believe generating a steady income is more important than growing assets. Based on your experience, what features or options do retirement plan participants value the most for converting defined contribution balances to lifetime income? Great. Thank you for the question. And first, I'd like to just thank you and and everyone, in here on both sides of the aisle for the work done on Secure and Secure two point o
to lay the groundwork to help Americans with their greatest concern, which is outliving their savings. I think Americans have spent their entire lives accumulating and saving, but, to borrow phrase from our partners at, TIAA, ultimately, income is the outcome. And in retirement, I I believe consumers are seeking the benefits that annuities, have such as predictability, guaranteedstreamoflifecom income that you cannot outlive, the longevity protection that comes with that,
the downside protection, it provides in, certain markets, And I believe the flexibility to convert that savings, from the four zero one k, the defined contribution, into an annuity, we'll take the number, which, again, a TIA number that only 18% of consumers are very confident they'll have enough money to last through retirement, and improve that security, boost that number, well above 18 as we move forward. Thank you. Mister Clary, your written testimony states that less than 20% of four zero one k
plans offer participants access to lifetime income action options. Even among plans that offer these options, some are simply systematic withdrawals or other options that do not protect against the risk of outliving savings. What is the most important thing that congress can do in order to encourage four zero one k plan sponsors to offer lifetime income options that protect against longevity risk? Chairman Allen, thank you for this important question. The most important action I think congress can take is to encourage, more lifetime income
options in the default investment in the plan, QDIAs, and require DC plans to offer what I had called before coupons, qualified payout options. And and the reason why I'm saying this is when we are saving for retirement, we have choices. We could invest in a fixed income, we could equities, target date funds. But when we retire, guess what? We get a lump sum. And we've given a very difficult challenge for somebody who's gonna retire with a big sum of money and no guidance on what to do.
So why don't we provide options when we retire as well like we do when we save? So we call them coupons. It it could be, managed payout. It could be a regular withdrawal. It could be a lifetime income. So let's give them choices in addition to the lump sum with some education. So that would be our proposal. Well, the American people want choice. That's that's for sure. Mister Levine, your, written testimony notes there is not widespread adoption of guaranteed lifetime income solutions in four zero one k plans, and yet there's widespread adoption of lifetime income
solutions by your company's four four zero one k, k plan participants. Your testimony also states that in your view, other employers sponsoring four zero one k plans may not be offering lifetime income products because of misconceptions. Can you explain what these misconceptions are and how congress can help correct these misconceptions? Yeah. Thank you, chairman Allen. The misperceptions or myths that I generally hear from other plan sponsors regarding guaranteed lifetime income are that their participants don't need or want guaranteed lifetime income in their four
zero one k plan. Two, putting guaranteed lifetime income solution increases the plan sponsor's fiduciary risk. Three, guaranteed lifetime income products are too complex, expensive, and restrictive. And four, guaranteed lifetime income as a default will lock participants into something that they do not want or will hinder their investment performance. I hope my testimony, my oral and the written testimony I've submitted debunks these myths for you.
I think a a as I said, you know, a large reason why other sponsors have not adopted is they just don't know a solution like this exists. We've talked about heard everyone talking about the problems of decumulation, running out of money. We've actually found a solution that has an explicit insurance cost. And by making it the default, it puts all the participants into it, and then they have their choice to retain their guaranteed income or do whatever else they want
with their accumulated assets. Okay. Thank you, mister Levine. Well, my time is up and I yield back. I now recognize, for the purpose of questioning the witnesses, mister Norcross from New Jersey. Thank you, chairman and, ranking member. Not only for what we are talking about today, but really emphasizing one of the most important decisions we make as humans. As I call retirement, it is the greatest dream and the greatest nightmare.
How do we save enough money for those golden years? When I first met my wife, we were very young and she had a TIAA annuity. I had no idea what that was. It was a young apprentice electrician. We had a defined benefit program set up for us. We knew exactly what was going on. I learned very quickly what this was. She did not have abilities. She worked for a medical system hospital, and they didn't have what we were looking at as a defined benefit.
But we found out about it. But this is a great issue to talk about. I was on the joint employer, the multi employer plan back in 2018 where we were addressing some of the issues, some significant issues with the defined benefit plan. Luckily, we were able to address that. But today, as people are getting ready to retire and I look up here at the dais, the ones with gray hair are the ones who are thinking a lot more about this. Between Secure one point and not everybody has gray hair Blonde hair too.
And two point o, we made some terrific changes that I think will give opportunities because the earlier you invest, the better chance you have. I heard all the statistics about people who are outliving their savings. That's the nightmare. And we're not all experts. We might have a great four zero one plan, but you get the sum of money and what do you do with it? We're not experts. How much do you withdraw each month? For those who wanna take on that risk personally, great. God bless you. Go do it. But annuities do give that opportunity of a guarantee, a promise.
You know what's going to come. And that's why I believe there are a number of issues that you've talked about that we really can change here. This is bipartisan, and I'm really glad to hear that. I have a bill with chairman Wahlberg called the Life Act, which makes some more adjustments in the annuity. But, again, it's a choice for the annuity. Doesn't mean anybody has to take it. I think the guardrails that some of you spoke of. But how did we get to where we are today where there's so many misconceptions? So, mister Clory, you laid out some ideas on what we can go in the
future. How do you think we got here? I understand years ago it was a very different world, but tell us how that's changed in the last ten years. Yeah. So, when I think about my grandparents and their access to defined benefit plans and their peace of mind, we can sense, the the safety and comfort they had. But for a variety of reasons, costs not withstanding, they have been diminishing and we've added a defined contribution plan, in the beginning as an addition.
But with one going down and the other going up, we have swung hard towards and we've done a good job with encouraging people to save. But the time has come with 30,000,000 baby boomers headed towards retirement that we had to now start thinking about how can we provide that lifetime income option. One quick illustration in addition to the parents point that you were making, we had a story the other day that the oldest Czech recipient from TIA was a 104 years old, and that interview was two years ago.
And when we interviewed him, he concluded by saying, Surya, to the interviewer, I think I beat the odds. But having that sustained lifetime income for those many years becomes very important. Thank you. Mister Chopas, when we talk about what plans are available, and you're a 140 years old is pretty good run. The idea of annuities thirty years ago and what they have transformed into, obviously, we want them to be affordable. Transparency is all a great idea.
But then how do we explain to the average person who's not part of the union, who is laid out by fiduciaries that we hire, the average person, how do they make it to the annuity and say, this is a good idea. You're not gonna lay out 30 different plans and have the average person. So what can we do to help change that perception? But, thank you for the question. And I, you know, I've I've seen in my thirty plus years in this industry that the products continue to have, evolve. The, the innovation post secure is starting to ramp up.
And there is, there is a simplicity to how an annuity works, especially from a defined benefit plan or, sorry, defined contribution plan standpoint here that, that I think it is easy for our our consumers, whether it's directly through their plan sponsors or through the use of a financial adviser, to understand the, the straightforward dollar amount today that turns into this amount every month for the rest of your life that you cannot We're running out of time. Thank you, chairman.
I yield back and love to follow-up with you. Thank you, mister chairman, And my good friend and colleague on the other side of the aisle talking about gray hair, at least didn't mention loss of hair. So looking at your, full head of hair, it bothers me a little bit, but we'll let it go. Thanks to the witnesses for being here. Mister Cullery, in in your written testimony, you state the greatest fear of 58% of retirement savers is outliving their assets, and 64% of America's worry about running out of
money more than death, and probably death and taxes. You have to put them together. Right? If defined contribution plans do not incorporate lifetime income solutions, What are the risks that you would state for us that Americans will outlive, their savings? Chairman Walter, thank you for this question. First of all, we really appreciate your work with, Congressman Norcross and the Life Act. We are huge fans and supporters of it. This question about longevity, I'm very passionate about.
And if you don't mind, I'm gonna show you a picture. This is our latest report that we did and the title of it is retired for how long, which puts a focus on longevity. Now the good news is, as humanity, we have really increased longevity. In fact, if I think about the last fifty years, we have doubled the time in retirement. So let's celebrate that. But at the same time, we need to address risks. There are two risks. One is physically you could just run out of money, but the second is when we ask the question of survey respondents across America, they underestimate how long they expect
to live. And I think it's because we dial in infant mortality into that number. And so it's about ten years. And so both the understanding of it and the actual outliving of it are two risks that I think we need to solve. And by having lifetime income in plan, I think we can address that. Yeah. Well, thank you. I think that type of information needs to get out more so and to give more confidence, to people as well to make the right decisions. Thank you. Thank you. Mister, Chopas, drawing on your thirty three years of, experience in the retirement income industry,
how do you think, expanding access to annuities and defined contribution plans will ease workers and retirees concerns about running out of money? Thank you for the question. I, I think if you as we've stated, we're moving away from a defined benefit world to a defined contribution world where the onus is on the the consumer or the individual. They are looking for protections that only annuities can provide in terms of lifetime income and downside protection and peace of mind. And through SecureONE and through SecureONE and through wherever we go in the next step
of this modernization discussion, if you just look at the some of the biggest statistics, the ones I've already quoted on the sixty four percent of Americans were, worried about running out of money, than death, and then you couple that with a survey we saw last year that ninety seven percent of annuity owners, feel that it will help them worry less about, running out of money in retirement. To me, the the more access again, not requirement, but the more access we have to, lifetime income options throughout the retirement plan landscape, it it can do nothing but
decrease consumer anxiety over running out of money. Yeah. More choice again. And choice. Of course, we want good counsel too. But the more choice gives that opportunity. Right. Thank you. Mister Levine, over the last several decades defined contribution plans have replaced defined benefit plans as you've mentioned as a predominant type of employer sponsored retirement benefit. Could you discuss whether employer contributions to defined contribution plans are generally meant, to be a replacement for defined benefit plan accruals?
Yeah. Thank you, chairman Wahlberg, for the question. What many employers have done, RTX included, is to replace defined benefit plan accruals with what are called non elective employer contributions. So the employer puts a percentage of pay directly into the employee's four zero one k account. That was generally designed as the replacement for the pension that the company was no longer providing. Employers also do offer matching contributions to, enhance the the employee's own contributions.
So with the demise of the DB plans, the four zero one k has become the primary vehicle. And with those non elective employer contributions, we can truly make it an individual pension account where the employee has their account and can take their pension from their own account and address the concerns about living their assets and the, other things that we've been talking about today. Okay. Thank you. My time has expired. I yield back. Our chairman yields. Now I'll call on missus Beth from Georgia for her five minutes of question.
Thank you, Chairman Allen and ranking member DeSaulnier, and thank you to our witnesses for being here today. You know, there's so much, that Congress can do to ensure that every worker is taking advantage of a retirement plan that will sustain a dignified life for themselves and, you know, definitely after they retire. And I'm one of those that thinks about that every day too. No American should be forced to work well into their seventies or even their eighties just to feed themselves, but that is the reality for so many in our country
every single day. Congress has allowed this to happen for far too long. And I am glad to see our bipartisan efforts to ensure that more Americans are taking advantage of employer sponsored retirement plans, and that those plans are providing a good quality of life for people as they live longer. As people live longer and life in this country becomes more and more expensive, many workers underestimate how much they're really going to need to retire on. And when separating from a company, they must often make life altering decisions about lump
sum worth tens to hundreds of thousands of dollars without the information that they need to make the best decisions for themselves, or how they're going to make that money last. When implemented with strong guardrails and affordable fees, lifetime annuities help ensure that workers have what they need to retire with dignity for as long as they are blessed to remain here on earth. Americans, you know, they work their entire lives for this moment. Your dreams of retirement, wherever and whatever they might be.
The pride of passing down some of what you worked so hard for to the next generation for your family. Spending your golden years, how you want to spend them, not how you have to spend them, in order to cobble together enough money to survive. These things must not be taken away from someone because the entity responsible for managing their money put its own interest in profit over the person whose money they, have responsibility for.
That is not common practice, but it's exactly the type of behavior Congress must prevent when expanding access to these products. A more effective way that my Republican colleagues can support Americans in retirement is to protect and to expand Social Security, and this is not to be called an entitlement. It is not an entitlement. Americans pay for Social Security in every one of their paychecks. They earn it every day at work, and it is dishonest to say that it's otherwise. Using the word entitlement is a tactic to try to trick the American people into
believing that your Social Security isn't really yours. They're trying to convince you that the pay that you give up every month doesn't really belong to you at all. That you should expect to lose those benefits that you paid your entire life for. It's an attempt to break the promises made to you and your families for generations. As we begin a new year, our country inches closer to cutting benefits for all Social Security retirees. Unless Congress acts a typical couple that retires after benefits are scheduled to be cut in 2032, just a few years from now, will lose $19,000 in payments every year.
Benefits that they already paid for and rely on to survive. Social Security was never meant to be the American people's sole retirement plan, but that is the unfortunate truth for almost half of our population. Almost half of working Americans have no savings at all in a retirement account, which means they're just a few years away from losing their only source of income in retirement. It is a problem that we cannot afford to ignore any longer. I appreciate the majority taking time to explore bipartisan solutions to ensure that every American
can retire with dignity, but the most effective way to solve this problem is to save Social Security. I look forward to working with Chairman Wahlberg and Chairman all Allen on expanding access to retirement plans and lifetime income options, as well as getting Chairman Allen's Retire Through Ownership Act through the House and signed into law by the president now that it it has been marked up and passed out of the Senate. And I yield. The gentlelady yields.
And now I'll call on mister Wilson from the great state of South Carolina and my neighbor You're here. Across the river for his, five minutes of questioning. And indeed, thank you very much for your leadership, chairman Rick Allen. And, I'm really grateful you see bipartisanship today. This is really remarkable, with somebody we all, love and respect, Don Norcross leading the message of bipartisanship, and then Lucy Macbeth backed it up. And so you're, it's real life right here, in Washington. With this in mind, indeed, mister Levine, I I am happy, to be your neighbor.
And I'm to the south at Columbia, South Carolina, and, of course, we're adjacent to Augusta, so, Georgia. So, hey. And we love to, consider that Charlotte is the largest city in South Carolina. And so and so and please don't get that anymore confused. With that in mind, it it really is impressive to me that, RTX savings, that, the assets you have, dollars 59,000,000,000, dollars 212,000 participants, it has been successfully designed and incorporated a lifetime income strategy investment.
This investment has qualified for safe harbor protection under the Department of Labor's qualified default investment alternative rules. Why aren't other retirement plan sponsors using this investment strategy? I'm sorry. Why haven't others Yes. Started using it? Yeah. It it goes back, I think, to the the the lack of knowledge that a product like this exists. We've, you know, where an employee can accumulate their assets and decumulate directly from their account with that backing of insurance that will continue to pay for life.
Most people think of annuities as giving up an exchange giving up their assets. And I I think it's it's it is the lack of knowledge, and it's, I think, helpful to have discussions about this, to let others know that products like this exist, and we've made it very simple for employees by making it our default investment option. And and I'm very confident, that doctor Rhee is gonna educate people on this issue. So I, it's truly impressive to have everybody here today. And Mr. Chopas, this committee and Congress has taken steps to encourage lifetime income and define contribution
plans, including providing clarity of fiduciary rules and fiduciary state payments and annuity selection under the Pension Protection Act of 2006, Secure Act of 2019. What other steps can congress take to ensure lifetime income and define contribution plans? Well, I think the, to to the question and also, next steps on, the fiduciary safe harbor, the SECURE Act did allow plan sponsors to rely on state commissioners for certification around the company, but not necessarily the product.
And we've worked hard, and believe congress can boost confidence on that front if the clarification could come out that also, indicated that it covers, the product as well. I think at this point, that clarity would certainly spike the amount of lifetime income products being used in divine contribution plans. Thank you very much. And indeed, mister Clourey, thank you for promoting life long financial security. As the past chairman of the India caucus, I particularly appreciate your heritage. Additionally, I appreciate as the current, Korean caucus chair, miss doctor Ri, hey.
It, it's exciting to see the people who are here today and what a contribution you make to American society. With that in mind, it's, reassuring to see the bipartisanship and respected leaders like, Chairman Tim Wahlberg and Congressman Don Norcross with the LIFE Act. And so what would be the strongest argument that we can make and presentation we can make, to promote this bipartisan legislation? Yes. Thank you for the question. I would say with all the discussions that we've had so far, the fact that
it's a very complicated decision to make, to have a lump sum and figure out what do I wanna do? To buy a car is difficult. To make a decision on a a sum of money that's we have saved for retirement is even more difficult. So to make it easy providing, what the Department of Labor can do, a tips sheet to plan sponsors to say, here are your options and here's the merit and demerit of each of these options for your circumstance. And providing both education and the choices at retirement, I think, is gonna be very
helpful that fits nicely Into the life act construct. Well, it it really is exciting. I'm glad you brought up about buying a car. People need to know in the big beautiful bill, that president Donald Trump successfully, achieved, the, in the interest on the, car payment now is deductible, something that, is appealing to many of us. And so thank you for your presentation, and I yield back. I thank the gentleman for yielding. We have a, classified briefing, here that's scheduled, shortly.
So pursuant to the previous order, the chair declares the committee in recess subject to the call of the chair. I apologize to the witnesses for this, but we'll plan to reconvene promptly after the briefing, that many of us here, need to attend. The committee now stands in recess. The education and workforce health employment, labor, and pensions subcommittee is back in order. I recognize myself, for five minutes.
Well, thank you to all the witnesses for being here today. We apologize for the interruption. I wanna start, with you, mister Levine. Of course, as you know, the retirement industry, the Trump administration, Congress, and this is a bipartisan effort, I believe, have made efforts to promote and enable Americans to save for retirement through four zero one k plans. R t RTX has, of course, as you testified, developed a way to incorporate the security of a lifetime pension into its four zero one k plan called the Lifetime Income Strategy.
The Department of Labor recently issued an advisory opinion, September clarifying that Lifetime Income the Lifetime Income Strategy is a Qualified Default Investment Alternative or or QDIA. I wanted to follow-up on on some things you said in your testimony. The, I wanted to clarify. You you said there is no, universal exchange of assets within your within that plan. I think I know what that means, but I'll, could you explain that? Sure. Thanks, for the question. Yeah. So there's no irreversible exchange of assets.
Irreversible. I can't read my own handwriting. Right. Irreversible. Mean, you know, that that people typically think of when they're purchasing an annuity. You hand over a pot of assets to the insurance company, and in return, you get the guaranteed income. With lifetime income strategy, the income actually comes out of your own account, and you still have full access to that account. The insurance doesn't kick in until you've depleted your account, and then what's called a
guaranteed lifetime withdrawal benefit would step in and continue to pay you if once you have depleted the assets in your own account. So I think that probably resolves a a a a few concerns people sometimes have about annuity. One is that, I mean, if you look at the stock market the last twelve months, you know, probably outperformed most annuities. So if you're drawing down on your own four zero one k assets, which, you you know, would be a mixture, say, of stocks and bonds That's right.
That might have a a better return year. It it does. In fact, yeah, that that's quite astute. It's how how this really works. The the assets are in a 60% equity, 40% fixed income portfolio while you're in retirement. And that's higher I'm sorry. 60 equity, 40 of portfolio. Yes. Because the insurance is in place, that's a higher growth exposure than most people would invest in during retirement. Yeah. Usually considered higher risk, but That's right.
Not because of the the annuity component. Exactly. So there is a high probability that your account balance will continue to grow in retirement. And each time it does, a new high water market set and your payout rate goes, you know, applies to a higher amount. And I think that perhaps, you know, alleviates, ameliorates another concern people sometimes have about annuities, which is fees. In fact, I think it was page six of of your testimony, Doctor. Reed, where where you, have a graph of return, return or total value of of
one's retirement assets, compared to fees, based on fees. Obviously higher the fees, the less you benefit. But if you're only annuitizing to to, take care of longevity risk, and you're drawing down four zero one k Right. More conventional assets first, I would I would think that would help to minimize the the fees, the costs of the annuity component. So so within that $60.40 portfolio, there the insurance fee is part of the expense ratio.
Right. Right. So it is baked in there. And so, the returns but again, we we believe it's it's a higher return than a typical portfolio because of the higher Yes. Growth exposure, covers essentially covers that insurance fee. And you still get return in excess of the insurance fee. And how do those that how does do those expense ratios compare to traditional four zero one k's that were maybe just just still parks? Right. So this was probably the biggest, consideration and concern we had when implementing lifetime income
strategy. Because most of the other investment options in our four zero one k plan have very, very low fees there. Right. You know, we're a large plan. Right. You know, we can get very low fees. Yeah. The insurance fee, you know, when the participant gets to retirement age, the insurance fee fully kicks in and it's over 1%. And that's that's a a large fee compared to our other investment options. And that was the biggest thing our risk of counsel, internal and external, needed to get comfortable with Yeah. That this fee is supportable by the value that participants get from it.
Taking care of the longevity risk. Yes. Okay. Well, thank you very much for your testimony. I'll I'll now recognize ranking member Scott from Virginia for one for five minutes. Thank you. Thank you, mister chairman. We've heard a lot about the percentage of, workers who are covered or participating in in plans. We haven't heard much about it, and it's about somewhere around a half. But we haven't heard how many are in plans and have enough of a fund balance to actually retire on. If you use that as a standard, maybe enough to generate about two thirds of
your salary for life, what portion of people have sufficient retirement plans? Is that for me? Sure. Yes? Okay. So, I just ran some numbers last night looking at the proportion of of seniors or those approaching retirement who have an account balance of more than a 100,000. Let's say that say it this way. Among people approaching retirement, about seventy five percent have a balance less than a 100,000.
What a $100,000 will get you in terms of annuity income at age 65, I, you know, I don't overstep with the actuary on the panel. But if you were to say, that's not gonna that's not gonna replace, enough on top of Social Security to get you anywhere near two thirds replacement rates. Okay. That'll give you a few $100. When we talk about, annuity security, these annuities are protected, backed up by insurance companies so that you really have security.
These companies aren't gonna go bankrupt. I think there's this is where I think there needs to be guardrails, which is the strength of the insurance company, in terms of their financial standing. But not just that, the right now, the insurance companies are backed by state guarantee associations, and those also have a lot of differences in terms of how much of the the promised benefits are protected. So I do think that in that regard, congress would need to set some standards, in this room. So not only something we need to look into.
Yes. Yes. Okay. Now, obviously, benefits of annuity are stronger than you know, people would rather have the guaranteed income than no guaranteed income. But, the chairman just mentioned the little fly on the ointment, you pay more for annuities, significantly more. And we had one suggestion that you ought to be able to start investing in annuities from the beginning and presumably be paying higher fees all the way along. That doesn't seem like a good idea. But, how do we compare, apples and apples so that we know if you've got
a retirement fund, how is that comparable? What do you get in terms of annuity? And, I think you were just talking about can you do as well just leaving it in there and taking out a little bit? And I think this is where I raise the issue. There are so many different kinds of annuities. There are good products that are more transparent in pricing, and there are other ones where, it can often be hard to tell how much upside you're giving up. And there just needs to be stronger standards in that regard. I do think that it is fair to pay extra for the guarantee, but I
also have a question pay pay a higher fee? It's the fact that, you know, typically, the market, will ask a certain price for in return for absorbing risk, and that will fluctuate over time depending on how fixed income, you know, bond markets are doing. I will just stop there. Okay. Well, what is you you can do this anyway. What does congress need to be doing? So one thing I think that would be helpful, you know, we talked about these fees and having something that has higher fees involved with it raises the fear of
litigation among plan sponsors. That if we put in something that has higher fees, we'll face a lawsuit saying you're you're providing giving us something that has high fees. So if the, you know, standards of bringing litigation could be raised, or made clear that these types of products, are okay to offer. With unlimited fees. With the yeah. With With unlimited fees.
With unlimited fees? I wouldn't what you want? No. Not On unlimited fees. But, you know, as I explained to mister Andre in our product, the fee pays for itself by allowing a more, aggressive investment allocation, which, which you could have done on your which you could have done on your own. The problem with doing it on your own without the insurance is that you're taking a lot of risk.
And so if investment markets do decline, then you have no income to draw on in retirement. Whereas if you embed the the fee into a more aggressively invested portfolio, still get all the upside. And and and what we've shown is that the net of fee return is similar to what an uninsured portfolio would get. Thank you. The chair next recognizes, doctor Fox from North Carolina. Thank you very much, mister chairman, and I thank our witnesses for being here today.
Mister Chapas, the Insured Retirement Institute has suggested Congress should require defined contribution plans to offer an investment alternative that would provide guaranteed lifetime income as workers save for retirement. That's one answer to mister Scott's question. What benefits would an annuity investment option offer participants as compared to other investment alternatives traditionally offered by defined contribution plans? Alright. Thank you for the question, doctor Fox.
I think what's clear is consumers are seeking choice and seeking optionality. Two thirds of individuals between the age of 65 and 70 don't think that they can, confidently retire during that time frame. So with additional choice, which is what we're talking about here today and modernizing the structure as we go forward, comes additional outcomes and better outcomes for consumers. They're already comfortable with their defined contribution plans and have a relationship, in many cases, for decades, within those plans, the ability now to convert some portion or all of
that portion to guaranteed lifetime income that you cannot outlive, to be protected from market downturns, to get a check every month for the rest of your life brings, an immense peace of mind that, that didn't exist in this form, years past. And and I think, we still have ways to continue to move that forward. My friends will tell you I'm very keen on what kind of language to use. So is optionality the same as options? Optionality in the way I'm using it is, it pertains to choice.
Choice. Okay. Okay. Okay. So then I've never heard that word optionality, so it's a new word for me. Mister Collari, you've suggested that congress should require defined contribution plans, offer participants a menu of payout options that includes guaranteed lifetime income solutions. Annuities are a type of guaranteed lifetime income that eliminate longevity risk and market volatility risk. How does requiring a payout option in a retirement plan differ from requiring an investment
option? Doctor Fox, thank you so much for asking this question because part of the progress we need to make is we're shifting from saving for retirement to withdrawing money while we're retirement. So we we need to change the language. We need to change how we're approaching it. And so your question about investment options versus withdrawal options is very important. So investment options, the way I think about it is when I'm saving, I have some choices. I could put it in equities.
I could put it in fixed income. I could put it in a target date fund. I have all these choices. I get to retirement and what am I left with today? I'm left with I need to take this lump sum and decide on my own what to do. Instead, if you can provide some options in the same way that we had during accumulation, it could be, a a a withdrawal. It could be a lifetime income. It could be a a variety of choices like that that are in the plan that allows people to make the second set of options. So that we are again talking about choice, but choice both going up while we
are saving and choice coming down while we are withdrawing. So that and then my last thought is within the word ERISA, we have I, which is income. So we are finally at the stage talking about introducing the I back in ERISA with these choices. Thank you. Mister Levine, I understand the RTX retirement plan's lifetime income solution offers both a guaranteed lifetime income investment option and a lifetime income payout option.
Why in your view is a lifetime income solution important as both an investment option and a payout option for plan participants? So it it goes, I think, right to exactly what mister Calari was just saying. We allow people through lifetime income strategy to accumulate, as they would within the four zero one k plan investing in a target date fund, and then at retirement, their option is is right there. They can turn on that withdrawal and continue and know it will last for a
lifetime, but they don't have to. They have the choice. They can they've built up a balance, which is comparable to what they would have built up even if they didn't have the insurance. So we're allowing participants to build a balance that's just as big, accumulates just as much if you didn't have the insurance, but gives you that choice of a payout option to take it or take your account balance and move it to an IRA and do however you please with it.
Thanks. And I'd like to offer an answer to mister Scott, although he's not here when he asked what does Congress need to do, as little as possible. Thanks. Thank you. And, the chair next to recognize is mister Takano from the great state of California. Thank you. Yes, we are a great state. Thank you, mister chairman. Doctor Rhee, maybe others on the panel, at what point does this question of of the accumulation and lifetime, income become relevant?
How much do you have to have saved to actually have this be a problem for you? Is it $20,000? Is it 50? Is it a 100,000 as you're facing this issue? Were we talking more like a half million or a million dollars that it really becomes a significant issue? So I will start with that. I would say that, you know, it really depends on your overall portfolio. But if you say you have some, you know, other assets, home equity, you don't have a defined benefit pension, and you have social security, you would still need, I
would say, something in the order of at least a $100,000 to really start thinking about taking a portion of that. The issue is that there there's other costs in retirement. One of the most overlooked ones is medical and long term care. Well, long term care is separate here. Yeah. Yeah. But what I'm saying And I have questions about how we make that happen. But I'm just trying to get to this question of how many Americans is this a problem for? Of you you accumulate a certain amount of money that you are thinking about annuitizing,
either through a program that is at mister Levine's corporation, or not. But it it seems to me that 20,000 doesn't make I mean, if you're like most Americans, maybe you own a home, maybe you don't, maybe you've worked in a job, a public public employee job where you have a maybe you work for a union, work with a union. They often have, defined benefit payout plans. I guess the point I'm trying to drive out here is most Americans are struggling
to even just save it all, And those that do save, the average amount is what? Like, I I thought I heard earlier in some of the testimony, maybe 20,000. Is $20,000 worth this agonizing over annuitizing? Definitely not. So but I say Why? Because You cut so let me, start. So there's about a 150,000,000 workers covered by Social Security today. Right. I would say right now, there's maybe about 5,000,000 workers who have enough to actually start thinking about annuitizing and maybe they have something around a $100,000.
5,000,000 workers out of in America? Out of about a 150,000,000. For whom annuitizing is really an agonizing issue. So for most America I mean, this is a very elite topic. We get accused of being elitist in this institution. Democrats and and and and colleges and universities were, you know, on the side of the but this hearing is really focused on a very elite problem of my god, are we gonna how much fees are we paying? I mean, most Americans don't really understand about the fees that might go into an
annuity. Do you put a million dollars into that annuity and get a guaranteed income? This is a very elite conversation to have because most people aren't gonna even have that conversation. Right? Definitely not. Most people the vast majority of Americans are not gonna have this problem because we're talking about the percentage of Americans that have 2 $250,000 saved for retirement. That's a very small number. It's very small. So annuitization is just this it's a problem for people who have at least maybe a $100,000 saved and most Americans don't even have that saved.
Would you say? I think the bigger problem for us here in this room and in congress is, we have a huge nation of people who are facing retirement only with social security. Maybe a little bit of equity in their houses. And this is the underlying anxiety of America and a huge political problem for us all. They thought the American dream was gonna pay out for them, and it's not. They're not facing a dignified retirement. And I would suggest to the chair the the former chair who's not here that
this is a problem for congress to deal with. How do we help Americans avoid this problem of having a just a meager amount of money to live out in retirement? It's not enough. It's not enough to pay the rent. You can't live on social security and pay the rent. You need more than Social Security, but most Americans are not getting there. That's the problem. I yield back. Thank you, mister Tejano. The chair next recognizes mister Manion from the great state of New York. Thank you, mister chair. Thanks to all of our witnesses today for being here, and your testimonies are, detailed
and appreciated. And I think we can all agree that, there needs to be greater attention on what we're talking about today, and that's why this is an important session. But challenges that are facing retirees, are real. And, what we're talking about today is helpful, and I hope that I can work with my colleagues to find bipartisan solutions. In recent years, there's been a growing interest in, lifetime income strategies, including annuities within four zero one k plans that can help more people achieve retirement security.
I believe all workers should have the access to options that best align with their financial goals and needs, helping them enter their retirement years with confidence and, educated, decision making, you know, having that background. Over the years, the steady decline of defined benefit or pension plans has created real challenges and shifted more risks and responsibilities onto the workers. Some of the information regarding annuities can be intimidating to people who are not financial
planners or proficient in the understanding of how these things work. For generations, pensions have provided workers with predictable lifetime income in retirement, and they still do for many, particularly those in the public sector and union represented employees. As a former teachers association president, I represented educators who cared deeply about having a secure defined benefit retirement. Later, as a state senator, I worked to help strength strengthen public retirement benefits in
New York. And for years, there was a system that asked younger teachers to contribute more out of every paycheck, only for to receive a reduced pension benefit upon reaching a later retirement age. That imbalance was neither fair nor sustainable, and we made progress in improve improving it, but this is after a tremendous negative impact on teacher recruitment and teacher retention. The teachers I represented saw the value of predictable income at the end of their
career and fought hard to protect it, as did I. I'm encouraged to see that shared sentiment in today's discussion of lifetime income products. I'm encouraged to see that and hope to find bipartisan solutions that include appropriate transparency and safeguards. Few questions. First, my first question is for doctor Rhee. While it's unfortunate, in my opinion, that fewer and fewer workers are being offered a traditional defined benefit plan by their employers, It is my understanding and my experience that
unionized workers typically, have them, or there's a higher percentage of union workers that have them. Can you talk about the advantage of being in a union as it relates to that, but also, with our the other folks that are testifying here, how unions have navigated through this and assisted their members along with, their also employees in, in determining what best works for them. Okay.
Great. Thank you for the question. So just overall, the in terms of the remaining coverage for defined benefit pensions in The US, which is relatively stable over the last decade, is, on the one hand, public sector workers, and on the other hand, mostly unionized sectors like the trades. So, obviously, unionized workforces tend to have just better benefits and pay overall than nonunion workers, including being much more likely to have defined, benefit plans.
They also have a positive impact on, state level labor policy and higher standards for all workers. I would say that unions have fought really, really hard to maintain defined benefit pensions at the bargaining table because they know how much it matters to their members. Defined benefit pensions are just simply more efficient than four zero one k's for delivering retirement income. You know, there are no profits. The the annuities are priced perfectly, right, to the actual workforce. That's part of how you run a pension plan. And and it's been you know, I I noted that, with the UAW strike, for
instance, with the auto workers, you know, one of the demands that they didn't wind up winning on, but more and more unions are actually starting to think about how do we get defined benefit pensions back if they had to give it up recently. And what's happened is that, you know, in a lot of cases, as they've switched over to four zero one k's, there's been a both reduction employer contributions and the passing on of risk. And so a lot of workers have not done well in that system when they've been transitioned over to four zero one k's. Thank you. Thank you to everyone who testified today. Certainly very informative for me and, appreciated as we navigate towards the future.
Thank you so much. Mister Sherry, yield back. Thank you, the gentleman for yielding. Now I call on our my friend, our ranking member, miss Sonia, for your question, sir. Thank you, mister chairman. And, for miss Fox, I looked up the definition of optionality, and it is a quality of being available to be chosen but not the obligation. So I'll share that with her more. Miss Chopus, you had a wonderful line that I didn't write down quick enough in your testimony about, how people making a choice just to pay their bills as opposed
to I wrote the word longevity, but I'll could you just repeat your choice of words? So I get it right? Was it the mailbox money, Conner? No. No. Prior to that, you were just which all of you have talked about in various forums about consumers are making choices, but they're not real choices because they've got to decide whether they pay for their health care, whether they put more money into retirement, whether they put more money into child care. So it's not my questions are driven by wages because you have to have people making enough to contribute enough.
But in addition, when in this instance, you've really gotta be able to have that real choice. So you had an interesting terminology about paying your bills versus mortality, I think. I yeah. I think it was, 64% are more afraid about living their income than than death, I think. Right. Yes. What I covered. And I also point out that statistically, annuities are, in many cases, middle income household Right. Products. Right? The average the average income of an annuity holder is $76,000, and I believe 70%
of all, annuity purchasers make less than 100,000 a year. So what they're they're using that for the predictable lifetime income stream, but your point is well taken. That is to to cover any of a myriad of potential monthly expenses. They've just put that predictability and that lifetime guarantee piece behind as they determine how, you know, to respend that lifetime income check. So if you're a small business owner, which I used to be, used to own restaurants, thin margin, you make choices to get good employees to offer benefits, health care,
four zero one ks, it becomes also a a challenge to the the small business as well in terms of liquidity and attracting a good workforce? I think I can't speak to that as it's that's not my specific background, but I do know, highly competitive defined contribution plans with lifetime income streams attached to them are ways to attract and retain, key workers as you move forward. But it goes back to your observation that you've all shared in various forms. This is a choice. So you get how are you gonna pay your bills every month when you get that number from the Fed that almost half of the American public is $400 away
from an unexpected expense to being overdrawn in their bank. Doctor. E, thanks again for being here. Talk a little bit more about the numbers I mentioned earlier about just concentration of investment. I mean, it makes sense. Capital well spent, getting returns. If you got more money, you make more money. But that choice part and, how difficult it is when your wages aren't keeping up, but it's also one of our one of our measurements is dated. Well, a lot of our economic measurements are dated.
Wages are great. You have to bring them up to have people be able to contribute as you've said. But the challenges of mixing all this together, that this your retirement decisions aren't in isolation because the theory of be of choosing is fairly limited for most Americans. You're paying your month to month bills, period. So as I've mentioned in my in my written testimony, American productivity has about doubled over the last few decades, and workers have captured basically been flat.
And so I think what a lot of households are facing is that, kind of costs like housing and health care and also education have gone up, and their income is falling behind. And the consumer price index just isn't adequate to to, actually capture the impact of that in terms of what's happened with sort of some of the larger components of the cost of living over time. So what I see is that, for instance, in the CalSavers program, you know, we saw in, most four zero one ks's that if you do auto enrollment, you get
a 10% opt out rate. What the state auto borrowers are experiencing is 30% opt outs and sometimes even higher and a lot of cash outs. And what that reflects is the economic reality of the low wage workforce that these programs serve. People feeling like they just can't even afford a 5% deduction out of their paycheck, and also, that there's a lot of turnover in people cashing out of accounts, and we saw a lot of that during, you know, the recent, the COVID pandemic and the economic impact on on workers was that they withdrew more and more from their
accounts. So I do think that for for the vast majority of workers, having enough really being able to share enough of the nation's prosperity to be able to actually save for retirement is a privilege. Thank you, mister chairman. I yield back. Thank the gentleman for yielding. And, now I would like to recognize the ranking member for your closing remarks. Thank you, Mr. Chairman. I'm just following up, since I'm talking to a fellow Californian who lives in a high cost area. The other challenge is for people in high cost housing areas. We talked about the other cost, but so many people are living on the equity
of their homes in urban areas and where 65% of the GDP is from. So when you're looking at retirement in its totality, it's really a scary moment to continue this. Mr. Chairman, again, thank you. And I think this is an opportunity for us to work together to a more efficient, safer, retirement system for the country that allows people to really have a choice. But we've got a lot to work on and we're more than anxious to work with you to do as much as we can as soon as we can.
So for millions of workers across the country who are struggling to feed their families and afford the cost of day to day life, as I've said, let alone save for retirement. Unfortunately, this administration and, my Republican colleagues sometimes have not been very helpful in lowering the cost of living. Affordability is important right now in politics, and here's a chance for us in Congress to demonstrate on this issue about affordability and pardon the expression return on long term investments. Instead, prices are too high right now, health care premiums are skyrocketing and wages have
stagnated. To make matters worse, the current retirement system is having leaving many workers behind and may have many more to leave behind if the investors in AI technology get what they want unfettered. Two out of five working age households have no four zero one or IRA assets in The United States. Retirement security goes hand in hand with workers' wages and their ability to choose. If we want to fix America's retirement system and forge an economy that works for everyone, for all Americans, Congress wants to take action, with all due respect to my
friend, from North Carolina, to raise the minimum wage, empower workers' ability to collectively bargain for higher wages, benefit better benefits, and better workplaces. Well, I appreciate today's discussion and look forward to a future working collaboratively in these bipartisan conversations while we can ensure that workers retire with dignity and financial security. I also wanna remind my colleagues that it will be a challenge, but it's a challenge that would be well worth it for us to take up in a bipartisan fashion. Thank you, mister chairman.
I yield back. Thank the gentleman for yielding. Again, I wanna thank our witnesses. Again, apologize for the, break, but, it was important that we get down to that hearing. And so thank you for, hanging with us, today. Obviously, we got challenges. You know, a lot of this came up under the previous administration where it's we experienced over 20% in, collective, inflation over that four year period. We hadn't believe if you were born after 1982, you had never seen inflation in
this country. And all of a sudden, young people, retired folks, and everybody's waking up saying, what in the world happened? And I'm gonna tell you, and I welcome my, Democrat friends. I can tell you the Republicans are working very hard and so is the administration trying to get these prices down. If you've been to the gas pump lately, it's about a dollar 99. And not in, California, but, in Georgia, we're at about dollar 99. Y'all gotta figure it out in California. And, it's a lot less expensive to live in Georgia, by the way, than there
is California. And a lot of your folks are moving our way. So, but we are the best state to do business we're in in the last, ten years. So we experienced phenomenal growth, and so hopefully, we can we can continue to do things the right way. You know, with over a 121,000,000 participants and $8,000,000,000,000 in assets, defined contribution plans, they play a a a significant role in preparing American workers for retirement. Maximizing retirement savings with a view toward, providing a steady income stream during retirement is a goal that is is our ranking member share, this collective.
I mean, both, we want to see folks, in those golden years, be able to, have the confidence that they can pay their bills. I'll never forget my mother. She made me promise one bill that, was in dispute that I if something happened to her, regardless of how much money that I would pay the bill, and I told her I would do it. That's how committed she was to paying off debt. But, the committee understands the need to build and only define contribution plan system, and I think we can do that.
We've heard a lot of great ideas from our our panel today. And, we just need to congress, we need to get our arms around that and, with your help, get this thing, through the house and the senate and, then get it to the president for signature. We heard from our witnesses today that day's workforce may benefit from additional and more flexible payout options. Again, thank you for that information on, certainly, defined contribution plans. Defined contribution plan participants and retirees will benefit from investment and payout options that manage
longevity risk and market, fluctuations in their retirement years, and that's important. Committee is committed to promoting and protecting a secure retirement for American workers. We've made a lot of progress, over the years with the Secure Act and other things, and, we will continue our work with your help. And with that, the meet yes. Chairman, just I I missed one thing. I'd ask unanimous consent to enter into the statement the following statements. One from the United Steelworkers, one from Fiduciary Path and Kathleen McBride, one from CFP
board, and one from AARP. Without objection. Thank you, sir. Okay. With that, we will adjourn. Thank you very much.