Experts Tell Congress Pension Funds Are Economic Engines, Provide Critical Investment Capital

WASHINGTON--(BUSINESS WIRE)--At a hearing today before the U.S. Joint Economic Committee (JEC), a panel of witnesses testified that pensions are fundamental to ensuring retirement security for American workers. But, less understood is the critical role pension funds play in stimulating the U.S. economy and providing long-term, patient investment capital for businesses, technology, and medical advancements.

The hearing entitled, “Your Money, Your Future: Public Pension Plans and the Need to Strengthen Retirement Security and Economic Growth” was convened by U.S. Senator Robert P. Casey.

“We are pleased that Congress is studying the value of pensions,” said Beth Almeida, executive director of the National Institute on Retirement Security. “Pensions are much more than the cornerstone of retirement security. As noted in the testimony, the assets held by pension funds make a significant contribution to the economy and provide capital to create new businesses and jobs. This aspect of pensions is all the more important in these tough economic times,” she added.

In opening remarks, Senator Casey highlighted the role of pensions in providing retirement security, recruiting workers, stimulating the economy and providing investment capital. He also stated his concerns that “moving billions of dollars of retirement assets from defined benefit plans to defined contribution plans adds substantially to the risk we are asking ordinary Americans to take.“

Mr. Sherrill Neff, Partner, Quaker BioVenture, testified that “the US venture capital industry would not be the economic engine it is today without the strong investment participation from defined benefit plans.” He also warned the Committee that a shift in the private sector from pensions to individual savings accounts is having a detrimental impact on the availability of capital. This is forcing venture capital firms to fill the gap with capital from foreign investors.

Citing NIRS research in his testimony, Dr. Christian Weller, Associate Professor at the University of Massachusetts and Senior Fellow at the Center for American Progress, testified that troubling financial insecurity trends make it clear that “policy solutions are necessary to restore the promise of a retirement in dignity for the working families in America.” He suggested that policymakers “focus on elements of our retirement system that are working well” and that “state and local pension plans stand out as an example of what works when it comes to achieving broad-based retirement income adequacy at a reasonable cost.”

Mr. Will Pryor, a firefighter and chair of the Los Angeles County Employees Retirement Association testified that, “Local governments support defined benefit plans as a cost effective measure to pay for a sustainable retirement for employees and to allow for recruitment and retention of a well trained work force.” Pryor told the Committee that public pensions also play an important role in local economies, as well as providers of long term investment capital.

The Government Accountability Office was represented at the hearing by Barbara Bovjberg, Director, Education Workforce, and Income Security. GAO testified that the nation’s largest state and local public pension plans are well funded and on track to manage future pension obligations.

Sen. Charles E. Schumer and Rep. Carolyn Maloney are Chairman and Vice Chair of the JEC, which was established under the Employment Act of 1946 to review economic conditions and to analyze the effectiveness of economic policy.

About NIRS

The National Institute on Retirement Security (www.nirsonline.org) is a not-for-profit organization established to contribute to informed policymaking by fostering a deep understanding of the value of retirement security to employees, employers, and the economy through national research and education programs. Located in Washington, D.C., NIRS seeks to encourage the development of public policies that enhance retirement security in America.