SPARK Institute Makes a Case for 401(k)s

Seems as though lately everyone wants to 'fix' the 401(k), but a new whitepaper suggests a different take.
The SPARK Institute issued a white paper, “The Case for Employer-Sponsored Retirement Plans – Coverage, Participation and Retirement Security,” that it said “defends 401(k) and similar workplace retirement plans that have been criticized recently based on misunderstandings and misconceptions.’
“Alarmed” Bells
According to the whitepaper, the SPARK Institute is “alarmed by any proposal that appears to give IRAs preferential treatment based on misconceptions about them and, in some instances, based on the successes of 401(k) plans,” notably in the area of automatic enrollment.
The whitepaper notes that “the proposed mandatory IRAs would appear to create a system similar to the ‘403(b) plan system’ prior to the IRS and Treasury adopting rules and regulations requiring greater employer involvement in the operation of those plans,” and goes on to note the experience of those programs where “employees could open up retirement savings accounts with virtually any investment provider of their choosing.” It goes on to note that, “as a result, there were challenges in monitoring 403(b) plans which resulted in violations with respect to contributions and withdrawals,” and that “the use of a mandatory IRA would result in some of the same issues that faced 403(b) plans prior to January 1, 2009, including a lack of education for participants, higher fees and the inability to monitor compliance with regulations because of the limited role of the employer.” The paper goes on to note that “Congress and regulators made 403(b) plans more like 401(k)s with respect to oversight and monitoring. However, the proposed mandatory IRA system would likely create the next unsupervised, loosely managed and hard-to-regulate retirement system, and mimic the concept that was just fixed in the 403(b) world.”
The SPARK Institute believes that all American workers should have access to retirement savings accounts, but cautions that “…the current voluntary system should be maintained so that employers, particularly small businesses, can devote their resources to starting and maintaining their businesses and creating jobs before they are forced to provide certain employee benefits.”
In the paper the SPARK Institute goes on to cite its support for mandatory automatic enrollment of employees as a method to increase participation in workplace savings plans, as well as mandatory automatic escalation of employee contributions “…so that, when combined with Social Security, they will provide appropriate income replacement at retirement.” It also calls for changes in design that help workers “avoid taking distributions of the money they have in their accounts before retirement, appropriately diversify their savings through asset allocation, protect their savings from market volatility, particularly as they get closer to retirement, provide a steady stream of income throughout their retirement, and minimize the risk of outliving their savings.”
The SPARK Institute is a voice in Washington for the retirement services industry. Collectively, its members serve over 62 million defined contribution plan participants.

The white paper is available at