State Street, Harvard Professor Unveil U.S. Retirement 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.”