Mayor Pete Proposes Public 401k Option

Pete Buttigieg Public Option 401k

Democratic presidential contender Pete Buttigieg has a 19-page retirement reform plan

Earlier this week, Pete Buttigieg became the latest Democratic presidential candidate to weigh in on the issue of retirement security when he proposed a government-run public 401k option that would be attached to Social Security as part of his “Dignity and Security in Retirement” plan released on his website.

“Mayor Pete,” the 37-year-old South Bend, Indiana mayor who has been rising in the polls (particularly in Iowa and New Hampshire), included the 401k option among other proposals intended to help every American be able to maintain a decent standard of living when they retire.

The highly detailed plan outlines how he would “fundamentally transform” the long-term care system (paid for by greater tax enforcement on the wealthy), preserve Medicare Advantage and allow seniors to choose among private health plans if they want (as opposed to “Medicare for All”), stabilize Social Security by adjusting tax rates for high earners, and require employers to have some “skin in the game” to help employees save for retirement.

“I am determined to usher in a new era for older Americans, one that empowers them to age and retire with dignity. One that equips them and their families with a sense of security over their futures, allowing them to see it as a time filled with possibility,” Buttigieg states on his website. “In this new era, we will uphold that unshakable promise that every American should be able to maintain a decent standard of living when they retire.”

The Public Option 401k

The last three pages of Buttigieg’s 19-page plan are devoted to outlining a “new Public Option 401k with employers’ skin in the game,” but without automatic enrollment.

Workers who do not currently have a defined benefit pension or a “robust 401k savings option” will be able to opt into the Public Option 401(k) to increase their nest eggs with an employer match, the plan states.

What follows is straight from the proposal (minus multiple footnotes):

The Public Option 401k is designed to complement Social Security’s vital bedrock by achieving three key goals: expanding savings for retirement with employer support, expanding savings for pre-retirement emergencies, and expanding worker benefits and options. The Public Option 401(k) both levels the retirement savings playing field—which currently works best for high earners—and also helps workers weather pre-retirement emergencies.

The Public Option 401k comes with the following features:

Reasons for skepticism

Small businesses that don’t currently offer a retirement plan may find the Public Option 401k’s employer mandates a bit hard to swallow. That 3% match might well come out of employee salaries, for instance.

Another question would be how effective the plan would be at getting people to participate without auto-enrollment, like OregonSaves and many other state-run retirement plans require.

A Buttigieg spokesperson told Yahoo Finance that Buttigeig’s proposal is “uniquely well-positioned to ensure high enrollment even without auto-enrollment” given that the contributions go first into a rainy day fund that can be withdrawn at any time without penalty.

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