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Updating retirement promises headaches
© St. Petersburg Times, WASHINGTON -- Members of President Bush's commission were warned Wednesday that it may be difficult for the government to administer private investment accounts for more than 175-million Americans who are accruing or receiving Social Security benefits. Roger Mehle, executive director of the Federal Retirement Thrift Investment Board, the agency that oversees retirement savings for more than 2-million federal workers, told the commission that record keeping has been his biggest challenge. In fact, he said his agency just fired a company that has been trying without success since 1997 to create an up-to-date record keeping system for the program. Likewise, James Wolf, executive vice president of the 3-million-plus-member Teachers Insurance and Annuity Association College Retirement Equities Fund, said it costs his company an average of $11 to handle every telephone call it receives from an investor. The cost of fielding calls from retirees average much more: from $35 to $4O each. Although the teachers fund offers information to many plan participants through recorded telephone messages and on its Internet site, Wolf said, "We still have a big cohort that likes to talk to a real person." These were just a few of the administrative headaches that were discussed during the third public meeting of the 16-member commission, which was created by Bush with a mandate to come up with a plan to create individual investment accounts for all Americans. The commission is expected to make recommendations to Bush later this year. Commission members, all of whom favor creating private accounts, seemed undaunted by the difficulties outlined by Wolf and Mehle. Many of them said they were more impressed that investors in the teachers fund's stock market accounts had received an average annual rate of return of about 12 percent since the stock fund was created in 1952. Commission co-chairman Richard Parsons, a top executive of AOL Time Warner, acknowledged that administration of private Social Security accounts would be complex. "Is it something that can be fouled up?" he asked. "Yes." But he insisted that "off-the-shelf" modern technology could solve whatever problems arise. The commission also dismissed warnings from Democrats that the dwindling federal budget surplus would restrict the ability of Congress to create private Social Security accounts. The Office of Management and Budget issued new estimates Wednesday showing the projected budget surplus for the fiscal year ending Sept. 30 is $123-billion less than previous estimates. Parsons' co-chairman, former Sen. Daniel Patrick Moynihan, D-N.Y., said the commission is concerned about the long-term security of the nation's retirement system, not short-term budget issues. Former Rep. Tim Penny, D-Minn., said the size of the surplus will not be "a pertinent issue" until Bush proposes legislation and Congress takes it up. Commission members also were eager to disprove critics who argue it would be too risky for Americans to invest a portion of their Social Security contributions in the stock market. Parsons demanded to know whether any teachers fund investors had lost all the money they had contributed. "As far as I know, no," Wolf replied. Parsons added that he doubted that less than "a fraction of 1 percent" of the teachers fund investors had reaped less money than they put into the fund. "I don't know," Wolf said. Parsons told reporters he expected the commission would advocate creating "some kind of safety net" to make certain that retirees who invest unwisely will still be assured of receiving a reduced retirement benefit. Neither the Thrift Savings Plan administered by Mehle nor Wolf's teachers fund serve nearly as many people as Social Security, of course. But none of the members of president's commission mentioned that the problems outlined by these two men would likely be magnified if the Social Security Administration tried to administer private accounts. Mehle said that while most retirement investment accounts offer quarterly benefit statements, his agency provides them only twice a year. He said he had hoped to move to quarterly statements back in 1997 when he hired American Management Systems to devise a new record keeping system. Instead, Mehle said his agency fired the company and sued it on July 17 after nearly five years of waiting for the company to do its work. Mehle predicted that a newly hired contractor, MATCOM, would be able to operate a new, improved record keeping system for the plan by this time next year. Currently, the program for government workers is administered by the Agriculture Department's National Finance Center in New Orleans. Although Mehle said the Thrift Savings Plan's administrative costs amounted to only a fraction of 1 percent of the $100-million fund, David John, Social Security expert for the Heritage Foundation, said the services provided to government-employed investors is far below standard. Likewise, Wolf acknowledged that his company does not provide some of the services to investors that Social Security recipients receive. For example, Social Security provides advice for participants in a wide variety of languages; most of the employes who answer the teachers fund's telephones speak only English.
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