Employers should be required to offer a minimum pension and contribute a minimum of 50 cents per hour worked for every employee into a retirement plan, said a report released Tuesday from Third Way, a public-policy think tank and advocacy organization based in Washington.
The contributions would total about $1,000 a year per employee, considering a 40-hour workweek, the report said.
In aggregate, the contributions would total $49.3 billion annually for the 49.3 million full-time employees the report cites as not currently participating in an employer-sponsored retirement plan.
The minimum contribution would grow to $160,000 for an employee, assuming minimum contributions from age 22 until retirement at 67 and average historical investment returns, an amount in excess of the$42,000 median private retirement savings of a married couple in 2010, the report said.
Under the idea, the minimum contribution would be indexed for inflation, the report said.
The group sent the report to leaders in the Senate and House, Michael Schmidt, Third Way director of communications, said in an interview.
Employers contributing at least the minimum in existing employer-provided retirement plans would satisfy the requirement, while employers without plans may direct contributions to a new investment vehicle, said the report — “Why Not a Minimum Pension?”
A minimum pension law would address the gap in retirement savings for the 46% of full-time employees without an employer-sponsored retirement plan, the report said, citing data from other sources.
“For many employers with plans already, there is no new cost or burden,” the report said. “For the companies employing … workers not participating in retirement plans, the minimum pension will impose some costs.”
“Any employer with more than 50 workers choosing not to offer a plan will make direct contributions” to automatic individual retirement accounts, selecting “a qualified investment company as the default vehicle,” the report said. But “employees would be allowed to opt into an IRA of their own choosing.”
Employers “with fewer than 50 workers may choose to contribute” to a newly created savings plan for universal retirement, consisting of unsubsidized, privately managed individual accounts overseen by a government board. For SPUR accounts, “employers would not be held to the same fiduciary standards as they are for 401(k) plans, due to the program's oversight by the federal government.
“SPUR accounts and auto IRAs should have limited investment options,” offering a few core funds and lifecycle funds, the report said.
The report calls for Congress to provide a tax credit for the minimum contributions for up to 100 employees, excluding employees earning $117,000 or more.
“This relief to businesses, whether delivered through a tax credit or by other means, will send them a strong message: Don't use the minimum pension as a justification to cut take-home wages,” the report said.