CEO faces headwinds in Washington after pitched battles over Obamacare.
Robert Reynolds has reiterated his call for employers to put workers and their retirement plans on autopilot.
“Let's go 'full-auto'— auto-enrollment, auto-re-enrollment annually, auto-escalation to higher deferrals plus automatic default to qualified target date or balanced funds and protection from litigation — for every workplace savings plan in America,” Mr. Reynolds, president and chief executive of Putnam Investments Inc., said in a speech in at the National Press Club in Washington today.
In addition to making plan features automatic, Mr. Reynolds said that every employer should be required to offer a plan.
“What I'm saying is that everyone subject to [the payroll tax] mandate should also have the individual option to save for their own future — on the job,” Mr. Reynolds said during his keynote address at a retirement savings forum sponsored by the U.S. Chamber of Commerce and AARP. “We can inoculate generations to come against the risk of elderly poverty.”
Putnam research shows that employees who participate in a 401(k) plan at work replace 73% of their work-life incomes in retirement, compared with a 41% rate for workers whose employers don't offer a savings plan.
“We need to recognize that the only real solution to America's retirement savings challenge lies in payroll deductions plans at the workplace,” Mr. Reynolds said.
He also called for the savings rates in payroll plans to rise from the current 7% to 10% or more.
“There is no more powerful driver of retirement success than deferral rates — and I feel a fiduciary duty to call for 10%-plus as the new industry baseline,” Mr. Reynolds said.
The Chamber and AARP, on opposite sides of other debates, align on workplace savings.
“Payroll deduction retirement saving, especially when combined with automatic enrollment and automatic escalation, has proven to be the most efficient and effective method to increase participation and retirement savings,” the groups said in a statement.
Mr. Reynolds, who has been sounding this message for several years, is facing a strong head wind in Washington as he seeks legislation — or regulation — that would implement his ideas.
Measures that would establish automatic payroll deductions into individual retirement accounts for companies that don't offer their own retirement plan are languishing. One reason is that legislators, especially Republicans, are reluctant to impose requirements on small businesses in the wake of fierce fights over Obamacare mandates.
“Proposals like the auto-IRA have been stymied — so far — by opposition to the very idea of a 'mandate,'” Mr. Reynolds said. “But can we not encourage policy thinkers to design incentives that make simple savings plans so attractive that even very small businesses would be motivated to offer them?”
Mr. Reynolds emphasized that workers would maintain their financial freedom.
“At the individual level, auto-enrollment in workplace savings is absolutely not a mandate,” Mr. Reynolds said. “It's a choice, provided there is an easy opt-out.”
Although Washington is not focused on retirement saving at the moment, Mr. Reynolds is optimistic that his proposals could be enacted.
“It's within the realm of possibility in the next couple years,” he told reporters after his speech.
