Preserving and strengthening the retirement system in the United States is not just a concern for workers and employers. Policy-makers on Capitol Hill play a fundamental part in the nation’s retirement provisions and options. Following the passage of the Pension Protection Act of 2006, Portfolio spoke with Representative Ben Cardin (D-MD) and Senator Mike Enzi (R-WY). These two members of Congress are from different sides of the country, different political parties and different houses of Congress (at press time, Cardin was seeking election in the U.S. Senate), who provide a window on congressional efforts to ensure Americans can achievecomprehensive retirement security.

Portfolio How do Americans fare in terms of their preparedness for retirement, as well as their understanding of retirement savings options, and why?

Enzi: Americans are not doing enough to prepare for retirement. The Pension Protection Act of 2006 made important advances in EGTRRA (the Economic Growth and Tax Relief Reconciliation Act of 2001), automatic enrollment and escalation, and easing the rules on rollovers. However, much remains to be done.

Cardin: Only 65 percent of full-time employees participate in employer-sponsored retirement plans—a significant decline from 91 percent in 1985 and 80 percent in 1995—as the number of traditional pension plans has declined. Many people have trouble deciding how much money they should save to ensure a secure retirement. Employers need to offer good retirement plans—such as pension plans or 401(k) plans with a good match. I am pleased that the recently enacted pension bill contained provisions that show enormous promise for younger and lower-wage workers to save.

Portfolio How will your constituents become informed about the various retirement savings options available to them?

Cardin: It's important for families to take an active role in saving and planning for their future. Employees with employer-sponsored retirement plans now have access to investment information to help them understand their options for saving. The Department of Labor, The Pension Benefit Guarantee Corporation and the IRS all have informative Web sites about retirement options.

Enzi: Encouragement, education and investment advice in the workplace go a long way to helping new employees develop good habits for saving and preparing for retirement. The recently enacted pension bill expands the level of useful information that plan participants receive, and enhances their control of their retirement savings.

Portfolio In what ways can investors benefit from the inclusion of a real estate option and REITs in their retirement savings plans?

Enzi: Real estate, including REITs, can be a good investment for retirement savings plans and can also be a key component of the underlying assets of a defined benefit plan. These investments also diversify a portfolio.

Cardin: Diversification is one of the most important principles in investing because it mitigates risk and helps to ensure that investors get a good return on their money. REITs provide a lower-cost and lower-risk way for smaller investors to invest in real estate.

Portfolio What further government policies should be considered or adopted in this area?

Cardin: I would like to see the low and moderate-income savers credit, which was indexed for inflation and made permanent in the recently enacted pension bill, become refundable, so that people could take advantage of this savings incentive that has already helped millions of Americans.

Enzi: It is important that taxpayers do not have to deal with a sea of changing or conflicting rules on their benefit plans. We should do more to simplify the rules regarding these plans and we should increase and improve portability of retirement benefits. I am particularly impressed by the potential in the so-called DB(k), a portable defined benefit pension plan that plugs into the cash balance safe harbor. The DB(k) utilizes the hybrid plan design but currently is limited to small plans (those under 500 participants), and holds a lot of promise for small, medium and large sized companies.