WASHINGTON, DC — Nancy M. Pfotenhauer, president of the Independent Women’s Forum, provides testimony today to the U.S. Treasury Department that, ?labor force trends as well as societal changes have made innovations in pension approaches a necessity — not a luxury.
Pfotenhauer is testifying at a hearing held by the Treasury Department regarding rule making concerning cash benefit pension plans.
“Today roughly twice as many women as men retire in poverty,” Pfotenhauer testifies. “Traditional retirement and pension approaches simply are failing to meet the needs of our changing society. Succinctly, they do not reflect the work patterns and demographics of American women. Balancing the twin pressures of job and family means that we frequently take time out of the workforce, choose part-time employment, or change jobs in order to gain the flexibility we need to take care of children or elderly parents as we also contribute to our family’s finances.”
Pfotenhauer notes that an individual who leaves the labor force for just 7 years out of her 40-year career will get only half the pension benefits of someone who worked without interruption. Women average 11.5 years out of the workforce, compared to 1.3 years for men.
“Pension innovations in the private sector hold promise and would provide portability. Cash balance, pension equity, and other hybrid pension plans have many attractive features of a traditional defined benefit and contribution plan. Benefits in these hybrid plans grow more evenly over a worker’s career and are distributed more equitably across short-, medium-, and long-service workers. For the vast majority of employees who no longer spend a full career with one employer, a hybrid plan will produce higher benefit levels than a traditional benefit plan at equal cost.”
Pfotenhauer strongly urges the Treasury Department and the Internal Revenue Service to quickly issue guidance that will ease the pathway for more widespread application of the cash balance plan approach.
The Independent Women’s Forum, founded in 1992, is a nonprofit, nonpartisan educational organization.