The SPARK Institute Issues White Paper Defending 401k
SIMSBURY, CT, May 18, 2009 -- The SPARK Institute today issued a white paper, "The Case for Employer-Sponsored Retirement Plans - Coverage, Participation and Retirement Security," that defends 401k and similar workplace retirement plans that have been criticized recently based on misunderstandings and misconceptions. "401k plans are the best vehicles for saving for retirement, however, improvements can be made and our paper makes a number of recommendations," said Larry Goldbrum, General Counsel of The SPARK Institute. The white paper is available at www.sparkinstitute.org/comments-and-materials.php.
Nearly 700,000 401k and other workplace retirement plans currently provide savings accounts for almost 92 million workers, said Goldbrum. The average participation rate today is approximately 77% and is increasing with the adoption of automatic enrollment programs. "We believe that the current voluntary retirement program system should be maintained, but if policy makers decide that a mandatory system is necessary to force more people to save and to save more, we recommend that employers offer 401k plans as the primary savings vehicle," Goldbrum said. "Some workers are always likely to refrain from saving for reasons that have more to do with personal circumstances, such as the inability to put money aside for retirement when current financial needs appear more pressing, than with the type of plans being offered."
The SPARK Institute opposes a mandatory automatic IRA requirement that gives preferred status to IRAs as a substitute for 401k and similar workplace plans. "Ironically, an underlying basis for mandatory IRAs appears to be the success of the automatic enrollment feature that was developed by, and first used in, 401k plans," said Goldbrum. "We are also concerned that mandatory IRAs may create an environment similar to the '403(b) plan system' prior to the IRS and Treasury adopting new regulations requiring greater employer involvement in the operation of those plans. They would likely result in the next unsupervised, loosely managed and hard-to-regulate retirement system, and mimic the concept that was just fixed in the 403(b) world."
About the SPARK Institute
The SPARK Institute is the leading voice in Washington for the retirement services industry. Through the combined expertise of its member companies, The SPARK Institute provides research, education, testimony and comments on pending legislative and regulatory issues to members of Congress and relevant government agency officials. Collectively, its members serve over 95% of the nation's 401k participants and more than 90% of all 403(b) plan participants.
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