Retirement Plan Reforms in the Absence of a Retirement Policy

Abstract

The US retirement system is currently characterized by tremendous diversity of instruments, institutions, and intermediaries in pursuit of the same goal. While the goal – achieving financial security in retirement – is widely accepted by policymakers and participants, for individuals in the United States, the nature of the “investment” experience in the retirement context varies considerably based on the identity, savviness, and size of the intermediaries, as well as the particular legal regime to which such intermediaries are subject.

This chapter traces the evolution of retirement saving in the United States and catalogues the multitude of intermediaries that currently channel workers’ money into retirement savings programs. It shows that while retirement savings in the United States remain largely tethered to employment – with individual employers still serving as critical intermediaries – the last decade has witnessed the rise of retirement plans that limit the role of employers. Such new arrangements include retirement plans sponsored by professional employer organizations, pooled plan providers, and state and local governments. Furthermore, in a significant departure from the status quo, newer legal regimes for retirement savings have also moved away from the traditional employer-as-fiduciary regulatory model by both shifting retirement plan responsibilities to third parties and by relying increasingly on rules rather than standards to regulate the conduct of retirement plan intermediaries. The experience of participants in such plans is likely to shape retirement policy in the coming years.

This material has been published in The Cambridge Handbook of Investor Protection edited by Arthur B. Laby (available at https://doi.org/10.1017/9781108987622). This version is free to view and download for private research and study only. Not for redistribution or re-use. © Cambridge University Press.

Keywords: retirement, policy, fiduciary, 401(k), ERISA, employers, employees, pensions, investments, intermediaries, pooled employer plans, professional employer organization, state-sponsored, auto-IRAs

JEL Classification: J26, J44, J32, J21, J24, H53, K22, K20, L22, L84, M12, M52