Mandating employers to provide access to automatic IRAs could reduce the nation's retirement savings deficit by 15.2% and raising the auto-escalation cap would bump that reduction to 17.3%, according to a study released Friday by the Employee Benefit Research Institute.
The study, Under the Dome – A Closer Look at Legislative Proposals Impacting Retirement, examines elements of several legislative proposals aimed at improving coverage, reducing plan leakage, increasing the use of annuities, changing required minimum distributions and allowing for open Multiple Employer Plans.
The EBRI study, which examined how various proposals would impact employees 35 to 39, projects that under the current system, such workers will experience an average retirement deficit of $49,182.
Along with mandating that employers with more than 10 workers provide access to auto IRAs and raising the IRS' auto-escalation cap to 15% from the current 10%, EBRI calculated that auto-portability of all defined contribution assets through a clearinghouse would reduce the retirement deficit by 27.1%.
"With that combination, we can take care of a quarter of the retirement deficit alone for that age cohort," Jack VanDerhei, EBRI Director of Research and the study's author, said in an interview.
EBRI also projects further reductions from using half of 401(k) or 403(b) balances at age 65 to purchase an immediate annuity and changes to RMD requirements. Workers 35 to 39 who could benefit from an open MEP could see their retirement deficit reduced by 26.7%.