Millions of working Americans don’t have access to a 401k plan—a problem a new report seeks to address.
Citing a “clear need for portable retirement benefits,” the report calls for an expansion of retirement plan options to meet the needs of workers who lack access to tools needed to help them secure a financially sound retirement.
The Aspen Institute Financial Security Program (“Aspen FSP”), a national nonprofit and non-partisan voice on Americans’ financial security, has collaborated with mission-driven Canadian retirement security firm Common Wealth to release a report that proposes an approach for expanding retirement plan coverage to meet the needs of today’s workforce.
The report focuses on portable non-employer retirement benefits—retirement arrangements that are workplace-based, but not tied to any single job or employer.
“Alarming conditions” highlight need
The report says there are more than 55 million Americans who lack access to a workplace retirement plan, three-quarters of Americans are worried about their ability to maintain their standard of living in retirement, and nearly six in 10 Americans do not own a retirement account.
Poverty among American seniors is nearly twice that of other OECD countries.
These alarming conditions, the report says, create a clear need for portable retirement benefits that are owned by workers, can accommodate contributions from multiple sources, and which are open to all workers – independent, gig economy, and traditional.
“The employer-based retirement system in the U.S., while working well for some, is failing millions of others. The ‘stack’ of benefits needed by today’s workforce is simply not what it was even 10 years ago,” said Ida Rademacher, vice president at the Aspen Institute, and executive director of Aspen FSP. “The problem will only get worse as the nature of work continues to change at such a rapid pace. We must come together as an industry on this critical issue. We need fresh thinking and bold leadership to deliver retirement security in ways that work for today’s reality. This paper and our collaboration with Common Wealth move us toward a new, stronger social safety net for hard-working American families.”
Trying to get portable benefits ball rolling
Rademacher notes there has been increased conversation about the idea of portable benefits in recent years, but says there is still a very long way to go.
“We’re encouraged by policymakers taking early steps – with a regulation on association retirement plans being proposed by the Department of Labor, various auto-IRA programs being implemented in the states, and legislation on multiple employer plans and portable benefits being drafted by a number of lawmakers in recent months. But we also believe the environment is ripe for the creation of new market solutions,” Rademacher said.
The groups say expansion of portable non-employer retirement benefits would help fill the gaps not covered by the single-employer-based system.
Building a larger market for such benefits would require innovative thinking, new types of plan sponsors, and bold leadership to build a retirement system that is workplace-based, yet also portable, inclusive, accessible, and high-quality.
The report explores six potential models of portable non-employer retirement benefits, led by different groups ranging from associations to labor unions to payroll or platform companies to faith groups.
It includes examples of action already being taken across the globe, with hopes of spurring experiments and pilots within the retirement industry and among employers in the U.S.
Based on the findings in the report, Aspen FSP held an event last week to build momentum toward action, with participants including executives from Prudential, Etsy, Workers Benefit Fund, AARP, Center for American Progress, Omidyar Network, CFSI, Stride Health, United Way Worldwide, Fidelity, Pew Charitable Trusts, and others.
While the report focuses on identifying and shining a spotlight on existing examples of innovative retirement solutions that meet the changing needs of today’s workforce, the event brought together leaders with the ability to make real change, to identify which tools workers today need to achieve a secure retirement and to think of additional opportunities to build those products.
“This partnership with the Aspen Institute Financial Security Program has deepened our conviction that portable, collective retirement benefits offer a major opportunity to strengthen financial security in both Canada and the United States,” said Alex Mazer, founding partner of Common Wealth. “Building an occupational retirement system for the 21st century will require innovation, new forms of collaboration, and benefits that are tailored to the unique needs of a diverse range of uncovered workers. Despite its retirement security challenges, the United States is primed to take further action on this critical social and economic issue.”
For more information visit the Aspen Institute Financial Security Program website, or Common Wealth’s website.