Below are just a few of the examples of policy proposals developed to expand the availability and accessibility of retirement savings for American workers.
Introduced by the Bipartisan Policy Center’s Commission on Retirement Security and Personal Savings in June 2016, this report addresses six key challenges:
- Improve access to workplace retirement savings plans by requiring employers with 50 or more employees who do not already offer a plan to offer to their employees nation-wide Retirement Security Plans administered by a third-party or the federal myRA program. Smaller employers would also have access to the nation-wide Retirement Security Plans and an enhanced federal myRA program.
- Promote personal savings for short-term needs and preserve retirement savings for older age by clearing barriers that discourage employers from automatically enrolling employees into multiple savings accounts separately dedicated to short-term needs and retirement.
- Reduce the risk of outliving savings by improving lifetime-income products and information offered within retirement savings plans.
- Facilitate the use of home equity for retirement consumption and ending subsidies for the use of home equity for pre-retirement consumption and strengthen programs.
- Improve financial capability among all Americans through improved personal financial education through K-12 and higher-education curricula and better communicating the consequences of claiming Social Security early, for example.
- Strengthen Social Security’s finances and modernize the program by adjusting Social Security’s tax and benefit levels reflect the changing demographics and better target benefits to those who are most vulnerable and more rewarding work to extend working years and claim benefits later.
Introduced by economist Teresa Ghilarducci at The New School and Hamilton “Tony” James at Blackstone in March 2016, the plan details a framework where everyone would have a Guaranteed Retirement Account (“GRA”) managed by professional portfolio managers. Under this model:
- All workers will save enough to retire by building upon the 12.5% of income that workers are already mandated to contribute to Social Security and mandating an additional 3% contribution, to be split between workers and employers. The mandated contribution would be offset by a revenue-neutral federal tax credit.
- Savings would be invested in lower-risk, longer-term ways that generate a higher rate of return.
- Participants would be guaranteed lifelong annuitized benefits, no matter how long a retiree lives. An individual’s own annuity will be bought with their own savings, but the actual monthly payments would be made by the Social Security Administration.
- A combination of employer incentives and employee savings bonuses would make it easier for older Americans to be able to work longer, if they desired, and have more time to save for retirement.
Introduced by NCPERS in September 2011, the Secure Pension Plan (SCP) is designed as a public-private enterprise for private-sector workers currently without a pension and is not intended to replace existing pension plans. It will work in conjunction with Social Security and personal savings to help close the retirement savings gap. ERISA and other federal laws would be amended to permit any state to establish a plan through enabling legislation. Each SCP would be a multiple-employer defined benefit plan based on the cash balance model with the following design elements:
- The actuarial risks of plan funding would be spread across participants.
- SCPs would be subject to the ERISA minimum funding requirements and would utilize ERISA funding rules that currently apply to private-sector multi-employer plans.
- Adjust benefit accruals for changing economic conditions.
- Provide options to serve as a backstop for underfunding.
- Allow participants a guaranteed minimum retirement income through a default life annuity benefit, with an opportunity for additional earnings through period dividends if the SCP’s actuary has certified that such dividends would not materially impair the full funding of the retirement fund.
Introduced by David C. John and J. Mark Iwry in 2007, this paper introduces the “automatic IRA.” This approach offers most employees who are not covered by an employer-sponsored retirement plan the opportunity to save through regular, automatic payroll deposits. Under this approach:
- Employers above a certain threshold that have been in business for at least two years and do not sponsor any plan for their employees could allow employees to save their own money through a payroll deduction IRA.
- Employers would receive a small temporary tax credit based on the number of employees who participate.
- The arrangement would be market-oriented. IRAs would be provided by the same private financial institutions that currently provide them and could be chosen either by the employer or by the employee. There could be a default IRA option provided through an entity like today’s federal Thrift Savings Program.
- Savings is automatic unless an employee chooses to opt out.