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The report examines the employer-based voluntary retirement system and explores a variety of potential changes through a three-part analysis:

• The first part focuses on the 401(k) system and documents the extent and nature of portability, the flow of money to IRAs, and leakage from both systems. It summarizes resulting problems and potential solutions.
• The second part explains the coverage gap among traditional wage and salary employees and assesses potential options for shrinking the gap.
• The third part looks at the separate challenge of covering workers in non-standard employment, who would tend to be left out of fixes for traditional workers.

The overall objective is to summarize what is currently known using analysis of existing proposals and, where relevant, examples from other countries, and to provide a wide (though not comprehensive) list of available options.

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Key Takeaways

• Multiple procedural barriers impede 401(k) portability, such as the absence of requirements for plans to accept incoming rollovers when individuals change jobs. Lack of portability often results in workers holding multiple small accounts, which are harder to track and can be lost, potentially undermining workers’ ability to adequately save for retirement. This report recommends enhancing portability by minimizing procedural barriers to moving money between employer plans.
• About half of private-sector workers are not covered by employer-sponsored retirement plans; this percentage has not improved since the late 1970s. Two main factors may cause this: first, many employers―particularly small employers―do not offer retirement plans; second, workers who do have access to plans do not participate due to inertia or ineligibility. Some solutions to increase coverage include auto-enrollment of employees who are not covered; increasing the availability of retirement plans suitable for small businesses; requiring employer contributions to employee plans; and shifting responsibility of providing retiree benefits from the employer to a third-party platform.
• The growing number of nontraditional workers are left out of the employer-provided retirement system, and coverage solutions are beginning to emerge. Creating an auto-enrollment process or introducing an individual coverage mandate could increase coverage for this group.

Citation

Munnell, A., Belbase, A., Sanzenbacher, G. (2018). Center for Retirement Research at Boston College. An Analysis of Retirement Models to Improve Portability and Coverage. Chief Evaluation Office, U.S. Department of Labor.

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The Department of Labor’s (DOL) Chief Evaluation Office (CEO) sponsors independent evaluations and research, primarily conducted by external, third-party contractors in accordance with the Department of Labor Evaluation Policy and CEO’s research development process.