State Street Global Advisors (SSGA) unveiled a national framework today that, if enacted, would ensure workplace retirement plan coverage for all private-sector working Americans by 2018.

“We’re trying to make employers feel a greater sense of responsibility about the retirement income security of their employees,” said Brigitte Madrian, Harvard Professor of Public Policy at Kennedy School of Government in Massachusetts.

Madrian was a featured speaker at a press breakfast today hosted by SSGA at the Aquavit restaurant in Manhattan along with SSGA’s Fredrik Axsater and Melissa Kahn.

“In many ways, retirement is a privilege and we need to move away from it being a privilege,” said Axsater, global head of defined contribution with SSGA. “It should be something that we all enjoy, but we need the right public policy in place for that to happen.

Some 40 percent of working households lack access to, or are not eligible to participate in, an employer-sponsored defined contribution plan, according to a Government Accountability Office (GAO) report on retirement security.

“The hope that my kids will take care of me or that I will die early is not a strategy,” Axsater told Financial Advisor magazine. “We need something stronger than hope, which is to move from hoping to planning.”

SSGA’s proposal calls for federal legislation that, among other things, would require auto enrollment at private employers so that all workers can save for retirement with a defined contribution plan.

 

“What we’re proposing that’s unique is this mandate on employers and employees to be auto enrolled, and this will be the most challenging because mandate is a four-letter word in some circles in Washington,” said Melissa Kahn, managing director of retirement policy for defined contribution with SSGA in Washington, D.C.

Three other pillars of SSGA’s proposal include auto-escalation, tax incentives for small employers and the elimination of barriers to open Multiple Employer Plans (MEPs) that allow businesses to band together and offer affordable retirement savings plans.

“We need to get people into the system, which is the access problem, then help them make the money last until they die, which is the retirement income problem,” Madrian told Financial Advisor. “If you get all the building blocks in place, then you’ve shored up the system.”

One way that financial advisors are being asked to assist between now and when the national framework is ever passed into law is by connecting their small-employer clients with existing MEPs.

“MEPs today are known as closed MEPs,” Kahn said. “The American Bar Association has had a MEP for decades and so has the American Dental Association. We want to broaden who can sponsor and participate in a MEP beyond just those who are in the same profession.”

Another goal of the plan is to address problems people face as the age. “We’re leaving people in charge of managing their own resources for retirement and some people don’t have a plan and those who do have plans are left to manage that money on their own. If you’ve got dementia or Alzheimer’s, one of the diagnostic criteria is whether you are making poor financial decisions,” said Madrian. “The elderly are the biggest victims of financial fraud.”