TIAA Pushes 6% Default Contribution Rate in New Retirement Security ‘Policy Roadmap’
TIAA this morning unveiled its retirement security Policy Roadmap, a new framework that aims to provide an actionable, bipartisan path forward for employers, workers, and policymakers to improve retirement outcomes for America’s workers.
One of the more notable actions the Policy Roadmap calls for is for defined contribution plan sponsors to set default employee contribution rates at 6% with annual auto-increases, and for retirement policymakers to require minimum default contribution rates of 6% for plans with annual auto-increases.
Thanks to SECURE 2.0, as of 2025 new 401(k) and 403(b) plans must automatically enroll all eligible employees at a default contribution rate between 3% and 10% of their salary, unless an alternative rate is selected by the employee. The most common default deferral rate for plans with auto-enrollment is 6%, but employers currently have the flexibility to choose a rate anywhere between 3% and 10%. If the starting rate is below 10%, it must increase by at least 1% each year until it reaches a minimum of 10% (but no more than 15%). Employees can still opt out or change their contribution rate at any time.
3-pronged approach
TIAA’s new Policy Roadmap takes a three-pronged approach, outlining specific actions for each critical stakeholder group: Employers, Workers and Policymakers.
Employers can:
• Establish auto-enrollment for new employees to encourage participation
• Set default employee contribution rates at 6% with annual auto-increases
• Provide default investments with guaranteed returns and income
• Promote comprehensive lifetime income education on how savings convert to retirement income, including guaranteed lifetime income options
• Allow older workers to leverage catch-up contributions
• Provide an employer matching or year-end contribution
Workers can:
• Participate actively in workplace plans and save at least enough to meet employer match, if provided
• Make use of education and advice tools
• Take advantage of age-based catch-up contributions
Policymakers can:
• Encourage re-enrollment of workers who chose not to participate
• Create federal auto-IRA and expand state-sponsored plans where applicable
• Require minimum default contribution rates of 6% for plans with annual auto-increases and approve age-based default contribution rates
• Help plan sponsors offer a menu of distribution options including guaranteed income options
• Allow 403(b) plans to offer the same investments as 401(k) plans
• Let gig workers and 18- to 20-year-olds participate in workplace plans
• Seek solutions to help family caregivers save for retirement
• Allow income options in retail products like IRAs
• Include lifetime income solutions in state defined contribution plans
“America’s retirement system is at a critical juncture: traditional pensions have largely disappeared, Social Security replaces only about 40% of pre-retirement income for the average worker, and nearly half of U.S. households risk running out of savings in retirement,” said Chris Spence, TIAA’s head of Government Relations and Public Policy. “TIAA’s Retirement Bill of Rights established the fundamental principles every worker deserves. Now, TIAA’s Roadmap translates those principles into concrete actions. By employers expanding access to workplace retirement plans, policymakers creating incentives for lifetime income solutions, and the industry innovating to make retirement savings more accessible and effective, we can close retirement access and savings gaps and ensure every American worker has a pathway to a dignified retirement.”
SEE ALSO:
• TIAA Broadens Access to Financial Advice with Latest Campaign
• TIAA Presents ‘Bill of Rights’ Aimed at Retirement Security
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
