OP-ED: America’s retirement system is a mess. This new legislation can help
April 24, 2019 by Martin Neil Baily and Benjamin H. Harris
The American retirement system is in urgent need of repair. Projections show that around half of all American households are not saving enough for retirement. Many Americans don’t have access to saving plans at work, and those who are saving need better options for turning their wealth into security.
Policymakers are taking action. The Senate recently introduced the Retirement Enhancement and Savings Act (RESA) and the House Ways and Means Committee passed the Setting Every Community up for Retirement Enhancement (SECURE) Act. These bills both work to improve the issues with today’s retirement policy.
An important first step in fixing the nation’s retirement system is expanding access to saving plans at work. As we recently outlined in a paper with Brookings scholar Mark Iwry, many of today’s workers, especially those at small companies, don’t have access to a 401(k)-like plan or company pension. For many employers, the administrative cost and burden of offering a plan often leads to them foregoing the benefit altogether.
An important provision of both the RESA and SECURE acts would make it easier to create multiple employer plans, or “MEPs,” which are retirement plans sponsored by a collection of small employers. MEPs spread the fixed costs of running a retirement plan over a larger number of employees, and thus keep costs down.