DALBAR Study Highlights ERISA Flaws

(Boston – January 12, 2004) DALBAR today released the results of its 2003 study of methods to improve retirement income security through increased saving rates. The study identifies hurdles to adequate savings and recommends actions to increase these rates. Among its findings is the method for employees to painlessly increase retirement savings and leapfrog over the restrictions of qualified plans. The 2003 Quality Versus Quantity study highlights the colossal failure of ERISA to achieve retirement income security. Instead of provisions to increase savings, as its name implies, ERISA has created disincentives for employers to help employees to save adequately. Nothing in current ERISA legislation explains or encourages after tax savings to overcome the hurdles of qualified plans.

Key findings of the Quality Versus Quantity study are:

  • ERISA diligently protects the retirement nest egg that does not even exist for millions of workers.
  • A disproportionate share of resources is dedicated to assure the quality of investment decisions and hardly any is expended on achieving a greater quantity of saving.
  • Any one or more of a number of entities can independently act to correct the quantity of retirement saving, including Congress, State Governments, regulators, retirement plan providers, employers, and technology providers.
  • After tax saving plans are an ideal adjunct to qualified plans to avoid restrictions and constraints inherent in tax deferred saving.
  • Painless saving, funded solely by a portion of future salary increases, produces as much retirement income as qualified plans.

The 2003 Quality Versus Quantity study findings are based on the 45-year history of inflation rates, interest rates and investment returns of stocks and bonds.

DALBAR, Inc., the nation’s leading financial-services market research firm, is committed to raising the standards of excellence in the financial-services industry. With offices in both the US and Canada, DALBAR develops standards for, and provides research, ratings, and rankings of intangible factors to the mutual fund, broker/dealer, discount brokerage, life insurance, and banking industries. They include investor behavior, customer satisfaction, service quality, communications, Internet services, and financial-professional ratings.