“These are ideas that some people in Washington are already very comfortable with, while others are not,” said Roger Ferguson Jr., president and chief executive of New York-based TIAA-CREF and a former Federal Reserve vice chairman. “So that's why we need to start addressing many of these issues right away.”
Specifically, Mr. Ferguson, whose company manages more than $276.8 billion in defined contribution assets, said that he's a strong believer in automatic enrollment and automatic savings increases in 401(k) plans, as well as offering an annuity option to participants.
While the PPA encouraged employers to enroll workers automatically in 401(k)s several years ago, only 35.6% of companies now actually do this, according to data from the Profit Sharing/401k Council of America in Chicago. Meanwhile, only 33% of employers automatically increase workers' contributions to 401(k)s, and only about 20% make annuities available in their plans.
“The PPA gave employers a nudge in the right direction,” said Teresa Ghilarducci, professor of economic policy analysis at The New School for Social Research in New York. “But it's pretty clear that people need to be shoved.”
Ms. Ghilarducci has testified in front of Congress on 401(k) reform.
Such a broad mandate would clearly have a substantial — and immediate — impact on participation and savings rates in retirement plans.
“Participation is where we have to start,” said Kristi Mitchem, managing director head of the defined contribution business at Barclays Global Investors in San Francisco. “There's nothing to reform if people aren't participating and saving in their retirement plans in the first place.”
Ms. Mitchem, who recently testified in front of Congress in a hearing regarding 401(k) fees and disclosures, noted that both of these issues must be formally addressed as well. And Mr. Reynolds' reform calls for increased transparency and “plain-English” descriptions of 401(k) plans' fees and risks — concepts that are already at the center of legislation introduced by Rep. George, Miller, D-Calif., last month.
Some retirement experts have suggested that Mr. Miller may look to broaden his focus over the next several months to include pieces of other 401(k) proposals, such as the call for annuities and auto-enrollment. He was not available for an interview to discuss those ideas.
“There have been a number of ideas and proposals to fix specific pieces of the 401(k) system, but there could be need for some comprehensive legislation that looks at the big picture,” said Mark Warshawsky, director of retirement research at Arlington, Va.-based Watson Wyatt Worldwide and a former assistant secretary for economic policy in the Department of the Treasury.
And this “big picture” is precisely what Mr. Reynolds said he's attempting to get the investment industry to focus on over the next several months.
However, some industry observers have indicated that a potential roadblock for any larger retirement reform may be that President Obama is focused on an even bigger picture.
“The administration has made it clear that the economy, health care and energy are the immediate priorities,” said David John, senior research fellow at The Heritage Foundation in Washington and one of the creators of the automatic-individual-retirement-account proposal that was included in the president's 2010 budget. “Retirement reform may have to wait a bit, even though it would have an incredibly significant impact on the economy.”
E-mail Mark Bruno at firstname.lastname@example.org.