Welcome to the latest edition of This Week in Pensions! We have gathered the best stories about pensions and retirement security from the previous week. This is the news you need to know in the fight for a secure retirement.
Larry Fink and BlackRock Want Retirement Systems to Embrace AI
Larry Fink, CEO of BlackRock, says that artificial intelligence could help address major weaknesses in the U.S. retirement system. Studies have proven that Americans are not saving enough for retirement, while traditional pensions have largely disappeared and workers face inflation, market volatility, longer lifespans, and uneven access to employer-sponsored plans. Fink believes technology could provide more effective, personalized support than traditional financial education alone.
Fink argues that AI could help people make better retirement decisions by analyzing factors such as income, career plans, family responsibilities, and risk tolerance. He also believes AI could help retirees determine how much money they can safely withdraw from their 401(k) accounts while accounting for taxes, healthcare costs, and end-of-life care.
AI carries significant concerns, including data privacy, a lack of federal regulation, and immense environmental repercussions. There is also concern that technology could benefit higher-income workers more than those who are already struggling financially. AI is not equipped to solve broader problems facing today’s workforce, such as low wages, income inequality, or weaknesses in Social Security.
Fink’s argues that AI should complement human financial advisers rather than replace them with a combination of personalized technology and financial education. AI is not a complete solution to America’s retirement challenges, but it could become a more frequently used tool for retirement planning.
Pension Surpluses Spur Ideas for Expansions, Reopenings
Private-sector corporate pension plans are in a much stronger position than they have been in recent years, and that is changing how companies think about their retirement programs.
With the 100 largest U.S. corporate defined benefit plans now carrying surpluses, companies are considering reopening frozen pension plans or using cash-balance designs to provide employees with more predictable retirement benefits. One recent example is IBM, which reopened its previously frozen plan last year. Changes under the SECURE 2.0 Act also give certain well-funded plans more flexibility in how they use excess pension assets.
Stronger funding positions also make pension risk transfers less attractive. In the past, companies often transferred pension obligations to insurance companies to reduce risk and avoid certain costs. Companies with large surpluses are now finding more value in keeping those assets to help reduce future contribution hikes and unexpected expenses.
Strong pension funding has encouraged an industry-wide reconsideration of the long-standing practice of freezing or transferring their defined benefit plans.
Gubernatorial Hopefuls Talk Pensions
Public pensions are a hot topic in gubernatorial races across the country this year.
In Alabama, Democratic hopeful Doug Jones discussed his opponent Tommy Tuberville’s approach to public pensions, saying Tuberville called Social Security a “scam”, warning that the U.S. senator has plans to privatize the state’s retirement system.
Connecticut’s incumbent governor, Ned Lamont, who is running for a third term against newcomer Ryan Fazio, is also under the gun from the state’s public sector unions, as the call to improve Tier IV of the state’s retirement system gains more traction.
“Connecticut’s state workforce keeps our roads and bridges safe, cares for children and families in crisis, protects our air, water and food, staffs our colleges and universities, administers critical health and safety programs and provides hundreds of other services that residents rely on every day,” the State Employees Bargaining Agent Coalition wrote in a statement this week. “Few elected officials have more direct influence over those services than the governor.”
Ohio gubernatorial candidate Vivek Ramaswamy has been vocal on the campaign trail about eliminating ESG policies from state investments, and has been pushing for more private equity and cryptocurrency in the state’s financial roadmap.
Be sure to check back next Friday for the latest news in the fight for a secure retirement! For now, sign up for NPPC News Clips to receive daily pension news from across the country directly to your inbox.