“They won’t have much in there”
Walsh, a longtime labor activist and former Boston mayor, spoke for about 15 minutes before leaving, apologizing to take a call. He touted his long tradition of supporting retirement plan options and education. He also endorsed the need for auto-enrollment and auto-escalation plans, two key features of SECURE 2.0 legislation currently before Congress.
“If the option to put [money] in a 401(k) is your option, so often Americans will say, “Wait a second, I need the money now.” I will see when I retire when I retire,” Walsh said. “And if they don’t put the money into their retirement plan now in front, chances are that at the end of the day there won’t be much in there.”
As the days tick toward the end of the 117th Congress, the financial services industry is scrambling to make sure members know about SECURE 2.0. It’s the rare question that enjoys bipartisan support, but whether the time exists to push it through remains the unknown variable.
EBRI panelists called the retirement program a good step in helping Americans save more for retirement. But more is definitely needed, Murphy said. He cited consolidation within the industry as helping to reduce plan management costs as companies seek to expand.
“You’re looking at $75 to $100 per participant, per year, in full costs,” Murphy said. “That’s not much for the services that companies like Empower and others provide.”
But obstacles remain, he added, around administrative expertise and fears of litigation and fiduciary liabilities.
CalSavers the first
After more than a decade of work behind the scenes, CalSavers launched on July 1, 2019. Since then, several additional states have moved to adopt similar programs to fill gaps in retirement plan options, primarily for small employers.
The program is off to a good start, Selenski said, with about 65% of employees remaining enrolled in CalSavers.
“We’re incredibly proud of them, especially considering they don’t really get any financial incentive,” she noted. “The state does not provide matches. Employers, unfortunately, are not permitted to provide matches.”
Much of CalSavers’ participant pool comes from California’s most vulnerable populations, Selenski explained. Two-thirds are people of color and half are Latinos. The median income is $30,000, Selenski said, and many participants tend to work part-time, shift work or work seasonally.
Ninety-eight percent of participants accept self-escalation, Selenski said, giving them an exponentially better chance of building some sort of retirement fund despite their modest incomes. A big key to the whole system of easier access to retirement plans is portability, Walsh said.
This came up frequently when Walsh addressed the issue as mayor of Boston.
“Time and time again, we’ve heard how difficult it is to transfer savings from job to job with smaller amounts of people cashing in their savings rather than dealing with bureaucracy,” a- he declared. “Through our research, EBRI discovered that $92 billion was lost out of the system in a single year. Ninety-two billion that should be in retirement savings accounts for people in our country. Lack of portability is a major reason.”
Editor-in-chief of InsuranceNewsNet, John Hilton has covered business and other beats in more than 20 years of daily journalism. John can be reached at [email protected]. Follow him on Twitter @INNJohnH.
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