A dramatic overhaul of the 401(k) regime by lawmakers is unlikely in the near future, but there’s plenty of room for improvement to the employer-sponsored retirement system.
Those were key themes struck by speakers Monday, November 2, at the West Coast Defined Contribution Conference in San Francisco hosted by Pensions & Investments magazine.
Employers who sponsor 401(k) plans ought to do more to help participants realistically prepare for retirement, and special attention is needed to close gaps between minority employees and white employees, speakers said. But calls to take steps such as replacing 401(k) s with a guaranteed public retirement system have not caught fire in Washington, said keynote speaker James Delaplane, partner at law firm Davis & Harman.
The tax-advantaged accounts are a way for employers to offer a retirement fringe benefit without the liabilities of defined-benefit pensions. A key selling point to employees has been the portability of 401(k)s, and they have emerged as a crucial retirement vehicle for Americans in recent decades.
But the drastic stock market drop of 2008 has raised pointed questions about 401(k)s. These include whether they enable a secure retirement for Americans, whether they aid higher-income employees unfairly and whether fees associated with the accounts are reasonable.
Last month, Time magazine ran a cover story titled “Why It’s Time to Retire the 401(k).”But such calls have not won over the bulk of Democratic lawmakers or President Barack Obama, Delaplane said at the conference. The answers on issues such as 401(k) fees are coming from regulators like the U.S. Department of Labor, not from Congress, he