The gig economy continues to grow, providing flexibility, opportunity and alternative work options for millions of Americans. Just one problem—saving for retirement.
While tech stalwart Uber recently teamed with robo-advisor Betterment to offer drivers in select cities access to a retirement plan pilot program, overall efforts have been far too slow, according to Mario Lopez, president of the Hispanic Leadership Fund, an advocacy organization for public policy.
Citing Professors Lawrence Katz of Harvard and Alan Krueger of Princeton in The Hill on Thursday, Lopez noted that the percentage of individuals pursuing “alternative work arrangements” rose by almost 50 percent from 2005 to 2015, to close to 16 percent of the workforce.
However, “the lack of a strong savings culture has been a long-time challenge in the United States, a trend that is continuing into the 21st century and has particular impact in the gig economy.”
The solution?
Open MEPs, which Lopes explains are permitted under the yet-to-be-passed “Retirement Enhancement and Savings Act of 2016 (RESA).” While the Senate Finance Committee unanimously approved RESA in 2016, that’s as far as it’s gone.
Multiple employer defined contribution plans, a hot topic among 401k advisors, “cover employees of completely unrelated employers,” he adds. “Should RESA become law, businesses would have the ability to voluntarily cover their gig economy workers under an open MEP—the gig worker’s sole proprietorship could elect to join the open MEP, without any burden or cost for the gig worker.”
Under an open MEP, he concludes, “it would be very simple for gig workers to make 401(k) to their own retirement plan, and for the business to make matching contributions. It is our understanding that MEP providers already have systems already in place to allow workers to take advantage of this option in short order once RESA passes.”