Ghilarducci and James are not the first to propose a mandatory retirement saving system. The Obama administration has long promoted auto-IRAs, which would be offered to all workers who do not already have a 401(k). It took a step in that direction last year with the introduction of the MyRa, a federally sponsored voluntary starter retirement account featuring payroll deduction, no fees, conservative investments and a guaranteed rate of return. And a number of states are pushing to create their own mandatory plans.

Ghilarducci and James also point to the experience of other major industrialized countries -- Britain, Australia and New Zealand among them -- that have moved to universal, mandatory savings plans.

Looming Debate Over Social Security

Despite the political toxicity of mandates, their plan could gain traction as part of a bigger legislative deal focused on both retirement saving and Social Security reforms.

Congress will have to address Social Security sometime soon. The program's two key trust funds -- for retirement and disability programs -- are on track to be exhausted in 2034, according to the Social Security trustees, absent an injection of new revenue, benefit cuts or some combination of the two.

Progressives hope not only to restore the trust fund's health, but to expand Social Security benefits as part of the reform debate. They hope to inject new revenue into the system by lifting or eliminating the cap on wages subject to the payroll tax and gradually increasing payroll tax rates. Conservatives will push for savings via higher retirement ages and possibly means-testing of benefits.

The BPC report will provide a useful proxy on how the debate could shape up in Congress.
The commission will reflect at least some of the Ghilarducci-James approach, focusing on improved access to workplace retirement accounts, plan design and automatic enrollment. The Social Security recommendations are likely to include higher revenue and benefit improvements for widows, spouses and low-income beneficiaries. But higher retirement ages also have been part of the group’s debate, according to Shai Akabas, BPC’s associate director of economic policy.

“Many groups have looked at Social Security or 401(k)s or tax preferences,” he says. “We are looking at how the pieces interact as a system.”

 

First « 1 2 » Next