June 27, 2016 01:00 AM
Four proposals for improving retirement security
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Their remedies are different, but speakers at P&I's Global Future of Retirement conference agree on one thing: The U.S. faces a retirement crisis, and there's no time to waste. In keynotes and other presentations throughout the conference, speakers offered their plans for improving the retirement security of Americans. What follows is a look at the similarities and differences among four proposals outlined at the conference. | ||||
| The proposals | The Bipartisan Policy Center's Report of the Commission on Retirement Security and Personal Savings, presented by retired U.S. Sen. Kent Conrad and James B. Lockhart III | A Comprehensive Plan to Confront the Retirement Savings Crisis, presented by the Blackstone Group's Hamilton "Tony" James and co-authored with The New School's Teresa Ghilarducci | A National Framework for Closing the Retirement Savings Coverage Gap, presented by State Street Global Advisors' Ronald P. O'Hanley | The Universal, Secure, Adaptable (USA) Retirement Funds Act, sponsored by retired U.S. Sen. Thomas R. Harkin |
| Enrollment | Starting in 2020, employers with 50 or more employees would be required to do one of the following: sponsor a retirement savings plan; automatically enroll workers into what the plan describes as a retirement security plan designed and operated by a third-party servicer; or automatically enroll employees in a MyRA. | Every U.S. worker, part-time as well as self-employed, would be enrolled in a guaranteed retirement account, managed by professional portfolio managers, if they are not covered by a workplace pension plan. All businesses with more than five employees would be required to provide a retirement plan or a GRA. | All private employers would be required to automatically enroll both full- and part-time employees into a defined contribution plan and implement auto escalation of contributions. | Employers with more than 10 employees that do not have a workplace retirement plan would be required to make an automatic USA retirement fund enrollment available to qualifying employees. |
| Contributions | Employees contribute a default 3% of pay, with auto escalation up to at least 8% of pay. | GRA contributions would total 3% of pay, equally split between employers and employees. Employees could make additional contributions. | Employees would contribute 6% of salary in the first year and be automatically escalated by 2 percentage points per year for three years, up to 12%. No employer contributions required. | Participants would be automatically enrolled at a 6% contribution per year, with the choice of raising, lowering or stopping contributions. Employers would be permitted to make an annual contribution of up to $5,000. |
| Incentives | The plan would establish safe harbors for employers, including an exemption from regulators' "complex annual testing requirements" if employers implement automatic features. Also, the BPC proposes clearing barriers to automatic enrollment, as well as improving the the tax credit for retirement savings for younger workers. | Employees would receive an annual $600 federal tax credit, which the proposal states would make the program free for a family with a household income of $40,000 or less. | Tax credits for small employers would be increased to cover the administrative costs of implementing retirement savings plans, to $5,000 from $500. The proposal also aims to open multiemployer plans, which currently require affiliation among employers. | The bill would amend the Employee Retirement Income Security Act of 1974, declaring that an employer shall not be a fiduciary when it comes to administration, management or selection of a USA Retirement Fund. |
| Social Security | Aims to reform Social Security, balancing changes to benefits and revenues. Also, the report proposes increasing the Social Security survivor's benefit for all but the highest earners. | No changes to Social Security benefits. | No changes to Social Security benefits. | No changes to Social Security benefits. |
| Investment management | Individuals' retirement security plans would be similar to the investment-options framework of workplace 401(k) plans. | Participants would contribute to a pooled trust, overseen by a manager of the participant's choice, a move the authors said would provide higher returns and lower fees than individual direct accounts. Upon retirement, 100% of the balance would be converted to a federal government annuity. | The plan emphasizes a 401(k)-style framework, along with default investments such as target-date funds. | The plan's framework is similar to a 401(k) plan. |
| Potential challenges | Changes to Social Security would require significant legislation. | The proposal includes eliminating the current 401(k) plan structure in the U.S. | The plan states it uses existing programs that have previously received bipartisan support, but how that support would evolve depends on the upcoming U.S. elections. | The bill was introduced in the Senate in 2014 and stalled. |
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