Automatic enrollment, set contribution levels and risk pooling are all tools that could boost Americans’ retirement savings, La Follette School students report in a study prepared in the spring Workshop in Public Affairs.
The students look at three federal and four state proposals, plus two state plans, to increase retirement savings. “We examine each proposal or plan’s ability to increase access to retirement plans, minimize costs, and reduce risks,” says John Wilson-Tepeli, who wrote the report with William Dernbach Jr., Da Huo, Steven Kulig and Stephanie Mabrey. Professor J. Michael Collins taught the workshop.
“For example, USA Retirement Funds and California Secure Choice would increase access because of their automatic enrollment feature. USA Retirement Funds would further increase access by covering self-employed workers,” Wilson-Tepeli says. “While administering a retirement plan can be costly to employers and employee, California Secure Choice would use a small portion its assets to cover the costs of the program. Similarly, myRA would assess virtually no fees on participants.”
The students also considered portability of the retirement plan and the implications for adequacy of overall retirement savings. “All of the federal plans we assess provide large increases to plan portability in comparison with status quo,” Kulig says. “California Secure Choice also provides an improvement in plan portability, but to a lesser degree, as it is restricted to the geographic boundaries of California. While these proposals and plans would improve plan portability for the employee, the employer could be faced with a decrease in competitive advantage in the labor market.”
The different plans have tradeoffs, the students note. “Key features such as automatic enrollment, set contribution levels and risk pooling could be added to existing proposals and plans,” Mabrey says, “and thus likely the overall adequacy of retirement savings.”