Private Pensions: Participants Need Information on Risks They Face in Managing Pension Assets at and during Retirement

GAO-03-810 Published: Jul 29, 2003. Publicly Released: Jul 29, 2003.
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The decisions that retiring workers make about how and when to draw down their pension plan assets determine in part whether they will have pension income that lasts throughout retirement. Individuals will need pension and other retirement income to sustain them over a longer period of time than in the past. Moreover, the continuing trend towards pension plans with individual accounts has increased participants' responsibility for managing their pension assets during retirement. As such, our objectives were to determine: (1) what benefit payout options and accompanying information pension plans make available to participants at retirement, (2) what benefit payouts plan participants receive at retirement, and (3) the actions available to help retiring participants preserve their pension and retirement savings plan assets.

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Matter for Congressional Consideration

Matter Status Comments
To improve public awareness and understanding of important considerations related to managing pension and retirement savings plan assets at and during retirement, the Congress may wish to consider amending ERISA so that it specifically requires plan sponsors to provide participants with a notice on risks that individuals face when managing their income and expenditures at and during retirement. Also, the Congress could consider stipulating that this notice must be provided to participants at certain key milestones, such as at enrollment in the plan, when participants receive or when changes are made to certain plan documents, when participants reach various years of service, when a participant separates from service, and/or at retirement among other instances.
Closed – Not Implemented
The August 2006 passage and enactment of the Pension Protection Act (P.L. 109-280) provides for improved disclosure to defined benefit plan participants regarding plan funding, termination information, and PBGC guarantees of benefits. However, information about investment risks appears to be limited to highlighting the importance of asset diversification in personal accounts, including holding no more than 20 percent of total assets as employer stock, and does not specifically address risks of managing and preserving plan assets at and during retirement. The Employee Benefit Security Administration published an information pamphlet for retirees entitled "Taking the Mystery out of Retirement Planning", in which Chapter 5 discusses the different options for receiving retirement benefits and the risks and benefits of annuitization.

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