EBRI Testifies to Ways and Means on Importance of IRAs

PlanSponsor.com [free registration required] is reporting, "EBRI Testifies to Ways and Means on Importance of IRAs". The testimony of Dallas Salisbury, President and CEO of Employee Benefits Research Institute (EBRI) is available here.

Some interesting factoids on IRAs from the testimony:

• IRAs are the largest single vehicle for retirement in the US
• Asset growth mostly due to rollover distributions from qualified plans
• As of the year end 2007, total IRA assets have reached $4.75 trillion!
• (as compared to "only" $3.49 trillion in DC plans)
• 7.9 million taxpayers age 65 or older withdrew money from an IRA in 2004, amounting to
  $76.8 billion

Other important findings:

• EBRI's surveys have shown a lack of employee demand for retirement savings among small employers
• Surveys have shown that workers tend to put health insurance first among all benefits
• Recent EBRI "Health Confidence Surveys" have shown that over a third of workers have reduced retirement savings due to rising health care costs

The GAO report (regarding which the testimony was presented) seems to support tax credits for employers to adopt IRA-based retirement savings plans - specifically some forms of "payroll-deduction IRAs. According to Mr. Salisbury's testimony, it appears that this might of little use except perhaps among a small population of very small employers.

Interesting statement:

"However, there is support among small employers for sending additional retirement contributions as part of theirexisting payroll tax deposits and letting the government deal with all of the administrative issues."

A government sponsored IRA, you say?

"...research conducted by EBRI on the administrative issues in individual Social Security accounts suggests ways in which an “automatic IRA” could be made available to all workers, were accessibility and accumulation the primary objectives. It could be done with lower administrative expense and lower business burden than proposals that are more limited in their scope, but rely on payroll deduction. This is the case because of the significant portion of the workforce that is not paid through automated and linked payroll systems."