Government-Sponsored Retirement Savings Plans: An Analysis of Policy Proposals

1. Government-Sponsored Retirement Savings Plans: An Analysis of Policy Proposals Prepared by: William Dernbach Jr. Da Huo Steven Kulig Stephanie Mabrey John Wilson-Tepeli

2. Background

3. Background

4. Background

5. Research Questions • What are the salient features of recent retirement savings proposals at the state and federal level? • How do the federal automatic IRA, myRA, USA Retirement Funds, and the California Secure Choice compare with status quo when assessed based on criteria that address barriers to adequate retirement savings for individuals 45 years old and under?

6. Research Questions • What are the salient features of recent retirement savings proposals at the state and federal level? • How do the federal automatic IRA, myRA, USA Retirement Funds, and the California Secure Choice compare with status quo when assessed based on criteria that address barriers to adequate retirement savings for individuals 45 years old and under?

7. Retirement Proposals • Considered • Researched • Plan Features • Analyzed myRA USA Retirement Automatic IRA

8. Retirement Proposals • Considered • Researched • Plan Features • Analyzed myRA USA Retirement Automatic IRA

9. Retirement Plans • Defined benefit vs. defined contribution • Default levels of contribution • How funds are invested • Unique tax incentives • Thresholds • Political status • Considered • Researched • Plan Features • Analyzed

10. Retirement Plans: Plan Features

11. Retirement Plans: Plan Features

12. Retirement Plans: Plan Features

13. Retirement Plans: Plan Features

14. Retirement Plans: Plan Features

15. Retirement Plans: Plan Features

16. Retirement Proposals • Considered • Researched • Plan Features • Analyzed myRA USA Retirement Automatic IRA

17. Research Questions • What are the salient features of recent retirement savings proposals at the state and federal level? • How do the federal automatic IRA, myRA, USA Retirement Funds, and the California Secure Choice compare with status quo when assessed based on criteria that address barriers to adequate retirement savings for individuals 45 years old and under?

18. Criteria • Ease of Access • Minimization of Cost • Minimization of Risk • Implications of Plan Portability • Implications for Adequacy of Overall Savings

19. Criteria • Ease of Access • Minimization of Cost • Minimization of Risk • Implications of Plan Portability • Implications for Adequacy of Overall Savings

20. Ease of Access • To what extent would the policy increase ease of access to retirement saving options? • Low and middle-income individuals

21. Ease of Access

22. Criteria • Ease of Access • Minimization of Cost • Minimization of Risk • Implications of Plan Portability • Implications for Adequacy of Overall Savings

23. Cost • What parties would administrative costs? • Plan providers • Low and middle-income employees

24. Cost

25. Criteria • Ease of Access • Minimization of Cost • Minimization of Risk • Implications of Plan Portability • Implications for Adequacy of Overall Savings

26. Minimization of Risk • What would be the change in anticipated risk associated with adoption of the policy? • To employees • To plan providers

27. Minimization of Risk: Employees

28. Minimization of Risk: Plan Provider • Defined benefit (higher provider risk) • Financial liability for benefits • Defined contribution (lower provider risk) • No financial liability for benefits

29. Minimization of Risk • What would be the change in anticipated risk associated with adoption of the policy? • Automatic enrollment, default contribution levels, risk pooling, reinsurance, adjustable benefit

30. Criteria • Ease of Access • Minimization of Cost • Minimization of Risk • Implications of Plan Portability • Implications for Adequacy of Overall Savings

31. Implications of Plan Portability • To what extent would the plan’s level of portability impact employer competitiveness and employee labor market decision-making?

32. Implications of Plan Portability: Employees • Increased mobility • Reduced likelihood of multiple plans • Reduced likelihood of early withdrawal penalties

33. Implications of Plan Portability: Employers • Potential for decreased competitive advantage in the labor market

34. Implications of Plan Portability • An inherent tradeoff between employee and employer benefit • Tradeoff should be carefully considered by policymakers in plan design

35. Criteria • Ease of Access • Minimization of Cost • Minimization of Risk • Implications of Plan Portability • Implications for Adequacy of Overall Savings

36. Implications for Adequacy of Overall Savings • To what extent would the policy increase overall levels of retirement savings?

37. Implications for Adequacy of Overall Savings • Set contribution rate • Plan with overall contribution limit less effective

38. Key Features and Limitations • Key features: • Automatic enrollment • Risk pooling • Default contribution level

39. Key Features and Limitations • Key features: • Automatic enrollment • Risk pooling • Default contribution level • Limitations: • Inherent tradeoffs • Uncertainty regarding proposals

40. Thank You William Dernbach Jr. dernbachw@yahoo.com Da Huo dhuo2@wisc.edu Steven Kulig shkulig@gmail.com Stephanie Mabrey smabrey@wisc.edu John Wilson-Tepeli jcwilson3@wisc.edu

41. Reference Slides

44. Plan Access and Participation by Income Level, All Workers

45. Retirement Plan Participation Rates, Private Sector by Plan Over Time

46. Retirement Plan Participation by Plan Type in 2013, All Employees