The workforce, like the economy, is changing rapidly. That has implications in many areas, including retirement savings and retirement plan coverage. A June 4 session at the SPARK National Conference held in Falls Church, VA discussed some of those circumstances and how they may be addressed.
John Scott, Director, Retirement Savings at the Pew Charitable Trust, moderated the session. “There isn’t a problem with our economy,” he said. Instead, Scott said, there is a problem in the way we think about the economy; he added that there is a need to create policies that reflect the new types of work that are emerging and are part of the economy now.
Louis Hyman, Director of the Institute for Workplace Studies at the ILR School of Cornell University’s School of Industrial Relations, focused on retirement savings solutions for a changing workforce that now includes unconventional workers in the contingent workforce.
Retirement plans reach half the population, said Hyman, adding that “savings rates are too low” and observing that the Social Security system faces challenges. And while the retirement coverage issue is fairly widespread, health care, not retirement saving, “is the most pressing issue for most folks,” he said.
There is more volatility in the workforce now, said Hyman, and behavioral issues affect contingent workers. He suggested some possible solutions to improve the retirement readiness of those workers:
- Financial technology applications, which Hyman cited as a way to connect a retirement account with an employer’s bank account. He cited Lyft and Uber as examples of companies that employ such applications.
- Multiple employer plans (MEPs), which he noted enjoy bipartisan support in Congress. Hyman noted that there are issues to consider regarding MEPs, however, including whether they are open or closed, employer liability, who is responsible for standard consumer protections, and how they would apply to contingent workers.
- State auto IRA programs, which cover employees whose employers do not offer a retirement plan. But there are issues with such plans, Hyman noted, including ERISA preemption, their cost, and striking a balance between coverage and savings. It also remains to be seen, he said, how such programs would apply to the members of the non-traditional workforce, although he did note that Oregon — the first state in which such a plan is in operation — has expanded its program to include gig and contingent workers.
- The Black Car Fund, which is a workers’ compensation fund established for for-hire drivers in New York, and covers 130,000 drivers employed by 400 companies. Hyman noted that it is funded by a 2.5% surcharge on every ride.
There may be other solutions as well, Hyman said, including:
- new types of plan sponsors;
- creating new incentives to encourage individuals to save;
- individually-sponsored 401(k)s;
- requiring employer contributions; and
- increasing Social Security benefits for contingent workers and low earners.
A central question in covering such workers, Hyman said, is what the role of employer is. He said that he suspects that many employers would be willing to include in their coverage non-traditional workers under certain circumstances.
Scott and Hyman noted that the federal government is not the only entity considering what to do. “It’s interesting that there are so many experiments” at the city and state levels, said Scott, adding that there have been other times in our history when that has happened. Hyman added that cities and states also have recognized that their populations are aging and are acting to address the current and future implications of that trend.