ICI President: Keep DC Plan Default Options As They Are

Washington, DC, July 2, 2007 - A current Labor Department proposal to make saving through defined contribution plans more effective should remain as is, according to a commentary provided to Forbes.com by ICI President Paul Schott Stevens.

Background
The current DOL proposal gives employers the chance to choose from three "default" options --lifecycle funds, balanced funds and individually managed accounts -- to maximize retirement savings. Not included among these default options are so-called "stable value funds" (SVFs), which typically hold investment-grade bonds and interest-bearing insurance contracts known as GICs, or guaranteed insurance contracts.

ICI Position
America's retirement policy should be oriented toward the long term. Congress has strongly endorsed this principle, and the Labor Department embodied it in its proposed regulation.

Stable value funds emphasize principal protection and are entirely appropriate for short-term holdings or as a fixed-income portion of a balanced portfolio, but they are not appropriate as a long-term investment for the bulk of a worker's retirement assets.

America's workers have much to lose if their retirement savings are placed by default in investments that emphasize safety over long-term growth. Research finds that a 401(k) account invested in a lifecycle fund would yield twice the retirement income as would the stable value product.

Related Links
This site includes a 401(k) Resource Center featuring the latest developments in the 401(k) market.