US - In a bid to strengthen the country's defined benefit pension system to ensure retirement security for all workers and retirees, the American Academy of Actuaries is recommending seven fundamental principles for guiding pension reform.
The principles, which form part of the analysis detailing major steps for pension funding reform for single-employer plans, include: 1) Solvency; 2) Predictability and Hedgeability; 3) Transparency; 4) Incentives to fund and flexibility; 5) Avoidance of moral hazards; 6) Simplicity, and 7) Transition.
The analysis, which was delivered to key lawmakers on Capitol Hill during meetings held this week, encourages the development of new funding rules that will help employers maintain their defined-benefit pension plans, increase the number of employees protected by the income guarantee provided by defined-benefit pension plans, improve pension plans' funding levels, and reduce the risks and costs to the PBGC and participants.
Kenneth Kent, vice president of the Pension Practice Council said: Whether reform is comprehensive or incremental, following these principles will result in creating a viable, sustainable retirement system.
“Total underfunding in private, defined benefit pension plans is an estimated $450bn, according to the US Department of Labor. The current funding rules are overly complex and lack transparency, which has weakened the defined benefit system just as a large number of America's population is planning to retire,” said a statement released by the Academy.
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