Former U.S. Senator and Democratic vice presidential nominee John Edwards and former Congressman and Republican vice presidential nominee Jack Kemp launched an initiative today calling on corporations to offer Automatic 401(k) options to help increase the financial security of middle- and lower-income American families.
Edwards and Kemp said they were joining forces with The Retirement Security Project, a Washington-based research institute, to launch the “Savers Society” campaign in response to surveys showing that half of American workers near retirement have $15,000 or less in retirement savings. Recent research shows that among recently hired workers earning less than $20,000 per year, an estimated 13 percent now participate in their company's 401(k) plans. With the Automatic 401(k), a system in which new employees are automatically enrolled in a company 401(k) plan unless they actively opt-out, participation rates increase to 80 percent.
“This is an important step to ensure that seniors don't fall into poverty once they retire,” Edwards said. “We must do much more to help Americans accumulate assets so that they are able to spend their retirement in dignity.”
“American workers are taking more and more responsibility for their financial future,” said Kemp. “The Auto 401(k) is a simple way for corporations to make it easier for their employees to assume this responsibility.”
The launch event was held at the Pentagon City, Virginia branch of Costco Wholesale, a company that Edwards and Kemp cited as a best practice firm.
According to Peter Orszag, Director of The Retirement Security Project, “Most Americans are busy working and raising families, and it is often hard for them to make the time to focus on retirement savings. This is a common sense solution to a real world problem.”
Costco CEO Jim Sinegal said, “Our employees take care of every aspect of our business, so taking care of them isn't just altruism, it's good business.” Sinegal added, “Making it easier for our employees to save for a secure retirement through our Automatic 401(k) is extremely important, and just one of the ways we show how much we value them.”
The number of corporations that offer Auto 401(k) plans has been increasing quickly in recent years. A recent survey found that over 30 percent of large 401(k) plans (with over 5,000 participants) have adopted automatic enrollment and this initiative is aimed at accelerating that growth. More than 68,000 Costco employees benefit from the company's automatic retirement savings plan.
Tawanna Freeman, a payroll clerk at the Pentagon City location, shared her experiences as a beneficiary of Costco's employee benefits plan, “I think everyone who comes to work here now is really lucky because they get signed up for the plan automatically. It's made easy for them, they can start saving money right away without really having to think much about it.”
A webcast of the event and additional information on automatic retirement plans will be available on The Retirement Security Project website, at www.retirementsecurityproject.org.
For additional information, please contact Laura Bos at 202/483-1397.
About The Retirement Security Project
The goal of The Retirement Security Project is to work on a nonpartisan basis to make it easier and increase incentives for middle- and lower-income Americans to save for a financially secure retirement. RSP is dedicated to promoting common sense solutions to improve the retirement income prospects of millions of American workers. RSP publishes evidence-based policy briefs, policy and legislative analysis, discussion papers, original research, and working papers. RSP is supported by The Pew Charitable Trusts, in partnership with Georgetown University's Public Policy Institute and The Brookings Institution.
About Automatic 401(k)
The Automatic 401(k) points workers in a pro-savings direction. It changes the default option at each phase of the 401(k) savings cycle to make sound saving and investment decisions the norm. With Auto 401(k), employees must make a conscious decision not to save; they must opt-out of the plan rather than opt-in. They are automatically signed up for the plan; their contribution rises gradually over time; and their investments are prudently allocated and diversified. In each case, however, workers can always choose to override the standard options and make their own choices or opt-out altogether.
Pew is no longer active in this line of work, but for more information visit the Retirement Security Project on PewHealth.org.