Retirement Plan Would Be a Win-Win for Working Families, Employers

(Cont’d …)

Pension plans have traditionally placed all the risk—primarily investment and longevity risk—on employers, who responded by moving away from pensions and toward 401(k)s. However, that move did not eliminate the risk—it just shifted it onto individuals who are even less able to bear it. 

USA Retirement Funds would make offering a pension benefit more attractive by eliminating all the risk to employers. Instead of shifting all the risk to individuals, USA Retirement Funds would act like insurance and spread the risk across all participants in the plan. That means benefit levels would have some flexibility to adjust to long-term market conditions, but the risk on any one individual is greatly reduced. 

Just to be clear, USA Retirement Funds would be managed by the private sector and overseen by a board of qualified trustees. There would not be a government guarantee, and the proposal relies on market forces—for example, competition between USA Retirement Funds—to keep costs low. 

Many employers currently offer excellent benefits, and they could certainly keep those plans. However, we know that about half the work force lacks access to a retirement plan, and those people are statistically much less likely to save for retirement. Therefore, under my proposal, employers who do not offer a pension or a 401(k)—without automatic enrollment and a match—would have to automatically enroll their employees in a “default” USA Retirement Fund and make modest contributions. Employees could opt out if they wanted.

After two years of hearings and countless discussions with industry experts, I believe USA Retirement Funds are a win-win for working families and the employers. However, I intend for my proposal to be the starting place in an evolving discussion, and I want to work with the plan sponsor community to find practical solutions that improve retirement security for everyone. If you have ideas, suggestions or anything else to share, I encourage you to contact me at Retirement_Security@help.senate.gov.