The Future of 401(k) and Social Security
How do we get a larger potion of the work force to think about the future? Approximately half of large companies offer retirement plans and only about 10% of their employees participate.
Should retirement savings be forced on employees? The Administration’s latest initiative would expand automatic enrollment in 401(k) and other retirement savings plans to make it easier for companies, especially those smaller and midsize firms lagging behind their larger counterparts, to sign up their workers and decide whether and how much they should save for retirement
Under these plans, employers deposit a set percentage of each employee’s paycheck into his or her retirement account, and the worker could opt out or invest a different amount. The Government initiative will make it easier for employers of all sizes to adopt automatic enrollment by allowing them to rely on pre-approved language issued by the IRS. Currently, plan sponsors typically must first get the agency’s written approval to amend their plans.
While this idea may not excite lower income workers, recent research has found automatic enrollment programs go a long way toward helping the nearly 78 million Americans who don’t have a retirement savings plan at work. The Administration says there’s a clear need because fewer than 10% of those without a plan at work formally save for retirement on their own.
Another option would be for workers under a certain age to opt out of social security and put the same percentage (or more) in a 401(k) retirement plan. The laws would have to change; under the present social security system, the government prevents the contributions from unconditionally being passed on to the families of those who die before retirement.
Is it time to opt out of the current system? Maybe the answer is a combination of both. Because of all the entitlements that are attached to the Social Security Trust Fund it is being pushed to an insolvent future. A combination of both social security and forced participation in a 401(k) or IRA account would mean major changes in the law. Saving for the future should be encouraged and promoted to all employees. We need to educate employees just coming into the work force to think of the future.
We at Anthros offer all of our clients and employees access to a 401(k) saving plan with our partner Slavic401k. Our adoption agreement allows clients to tailor the plan to meet their needs and the needs of their employees.
Anthros Inc. assists businesses in healthcare compliance, provides guidance for future employer health strategies, and offers consultation as well resources for employees looking to minimize healthcare costs.
About the Author:
Helen Usher – Director of Benefits
About Anthros, Inc.:
Anthros provides expert back-office solutions in human capital management-from payroll and human resources, risk management and workers’ compensation to business consultation and beyond. Anthros focuses on “Human Capital” so businesses can focus on profits.