VEA Vice Chair Nell Minow attended a meeting on Capital Hill to discuss a new proposal for a portable retirement account available to all workers. Some of the highlights:
By 2050, if we make no changes, 1/3 of the elderly will be living in poverty. This is “an issue for everyone,” said Randi Weingarten, President of the American Federation of Teachers, nodding to moderator Caroline Atkinson, who mentioned in her introductory remarks that she and her sister were supplementing their mother’s pension and Social Security. Weingarten said that 40 years ago 80 percent of workers had defined benefit plans; now 80 percent do not. This is “a massive risk shift,” (something we at VEA have been concerned about for some time).
The panel discussed the challenge of millennial investment, when their average net worth is $8000 (and, we note, they came of age during the financial meltdown so are understandably skeptical of Wall Street). It is not just important for their independence and income security when they retire; every dollar of investment savings puts $2.50 into the economy.
Chad Bolt from the staff of Senator Sherrod Brown spoke about the Senator’s white paper, Working Too Hard For Too Little. The Senator supports raising wages so workers can save and protecting Social Security.
Doug Calidas, from the staff of Senator and Presidential candidate Amy Klobuchar, noted that 3 out of 10 workers do not have access to pension savings and many who do do not participate. The Senator supports the Saving for the Future Act, similar to the Thrift Savings Plan for federal employees (which itself is similar to a 401(k)).
Tony James of Blackstone, co-author of Rescuing Retirement: A Plan to Guarantee Retirement Security for All Americans with Professor Teresa Ghilarducci, pointed out that the lowest paid workers have the least access to pension savings/investments. Their plan is a 401(k) with a tax credit rather than a tax deduction. “It works and it is painless but you have to start early and stick with it.” This plan would not increase the deficit because it would be self-funded. A key point: it would be portable, recognizing that today’s workers will have many employers and often work as contractors, without a traditional employer in the gig economy. “Retirement should be attached to the employee, not the employer.” Benefits would be paid out through the Social Security system, and the savings/investments would be managed by “credible, established managers.”
Minow asked about the corporate governance implications of the proposal, and got a very superficial “it would be better!” answer. Other than this very considerable concern about conflicts of interest and the ability to withstand current efforts to disenfranchise shareholders (corporate governance is not even raised in the book) we believe these proposals are very promising and should get non-partisan support.