Workplace retirement plan access: More needs to be done

Recent efforts to improve access to workplace retirement plans are a step in the right direction, but more work needs to be done to provide workers with the means to save for retirement.

That was the prevailing theme of a recent webinar on retirement planning and wealth generation presented by the Aspen Institute’s Financial Security Program.

Edmund Murphy, president and CEO of Empower, praised the bipartisan political and public sector effort to improve American workers’ retirement savings, beginning with the enactment of the Employee Retirement Income Security Act in 1974. The enactment of the SECURE Act and SECURE 2.0, as well as a number of state laws establishing auto-enrollment in retirement plans, “are constructive and I think we will see more of that going forward,” he said.

Although Murphy said he has seen a great deal of innovation in the small-employer retirement plan space, “it remains a work in progress.”

“We have so many tools at our disposal, but we need to do more to leverage those tools and help people save more,” he said.

Even though there is increased access to workplace savings plans, “we still have more work to do,” said Yie-Hsin Hung, CEO of State Street Global Advisors.

“We need more of a federal mandate on auto enrollment,” she said. “And we see a lot of disparity in terms of participation by women and minorities.”

The majority of wealth held by Americans is in their homes and their retirement accounts. But for many Black Americans, low rates of homeownership and low workplace retirement plan access prevent them from building wealth, said Yemi Rose, founder and CEO of Ofcolor.

“More than 70% of employees of color work in front line occupations where they don’t earn enough to save for retirement or don’t have access to a retirement savings plan,” he said. “The system that exists right now was not built for us.

“We need methods that can provide short-term solutions while we stop the bleeding. I think all employers should offer auto enrollment that auto escalates and should take steps to encourage participation. We’re still going to rely heavily on Social Security because the wealth gap is real and it’s hard to swim against that tide. Access is an issuem but even when people have access, they often aren’t able to participate.”

Systematic retirement saving can put people on a trajectory to building wealth, “but our financial system was not designed to meet the needs of people with low incomes,” said Leigh Phillips, president and CEO of SaverLife, a national nonprofit that helps working families achieve prosperity through savings.

“It’s not that most people don’t know to save for retirement, it’s that they cannot afford to,” she said.

The 401(k) account was established by Congress in 1978 as part of the Internal Revenue Code.

“What we have learned from the 401(k) is how to accumulate retirement savings. But if we want all Americans to have access to retirement savings, it won’t come from this,” said Kathryn Edwards, an economic policy consultant.

Edwards described retirement as “a report card.”

“You can make a high income one year and low income the next but how well the economy treated you is reflected in your retirement,” she said.

 

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected]. Follow her on X @INNsusan.

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