Nevin's Data "Points"

  Thanksgiving has been called a “uniquely American” holiday — and as we approach the holiday season, it seems appropriate to take a moment to reflect upon, and acknowledge — to give thanks, if you will. While it’s the celebration following a successful harvest held by the group we now call “Pilgrims” and members of the Wampanoag tribe in 1621 that provides most of the imagery around the holiday, Thanksgiving didn’t become a national observance until much later. On Oct. 3, 1789, George Washington issued his Thanksgiving proclamation, designating for “the People of the United States a day of public thanks-giving” to be held on “Thursday the 26th day of November,” 1789, marking the first national celebration of the holiday. However, subsequent presidents failed to carry forward this tradition.      Incredibly, it wasn’t marked as a national observance until 1863 — right in the middle of the Civil War, (also on Oct. 3) and at a time when, arguably, there was l...

   The primary difference between 403(b) plans and 401(k) plans is the type of employer offering the plan, but a couple of new surveys from the Plan Sponsor Council of America (PSCA) highlight some interesting design differences as well. Believe it or not, 403(b) plans have been around longer—since 1958. 401(k)s didn’t arrive until 1978 and really were not effective until 1981 (see  Talking Points: An ‘Unintended’ Consequence ).  Like its 401(k) cousin, it was initially created under part of the Internal Revenue Code (Section 403(b)!)., and—like the 401(k)—it was designed to allow employees of certain tax-exempt organizations, such as public schools, hospitals, and religious institutions, to contribute to retirement savings on a tax-deferred basis.  Over time, many of the things that differentiated the two (notably contribution limits) have been eliminated or at least narrowed. That said, their different histories and distinct employee populations mean that nota...

  A new study shows how a proposed government-run retirement program said to increase coverage could actually undermine the nation’s retirement readiness. The  report  — by Morningstar’s Spencer Look and Jack VanDerhei (yes, that Jack VanDerhei) — considers the potential effects of the Retirement Savings for Americans Act (RSAA) on retirement-income adequacy for Generation Z and millennial workers. The  proposed legislation  — which aims to expand retirement coverage for American workers by creating a federal retirement plan for those not covered through their employer — has been introduced in both the House and the Senate. [i]   The legislation has been positioned as a means of helping close the coverage gap — of creating not only an opportunity for those without access to a retirement plan at work to save for retirement, but to receive the incentive of a matching contribution from the federal government. How then, would such a proposal undermine the natio...

  "Unintended consequences" are often a euphemism for something bad. But not always. Take the 401(k), for example. While the nation turns its attention to Election Day, Nov. 6 happens to be the “birthday” of the 401(k). Well, kind of. It’s actually the anniversary of the day on which the Revenue Act of 1978 — which included a provision that became Internal Revenue Code (IRC) Section 401(k) — was  signed into law by then-President Jimmy Carter .  That wasn’t the “point” of the legislation of course — it was about tax cuts (some things never change). It reduced individual and corporate tax rates (pulling the top rate down to 46% from 48%), increased personal exemptions and standard deductions, made some adjustments to capital gains and created flexible spending accounts.  But it did, of course, also add Section 401(k) to the Internal Revenue Code. That said, so-called “cash or deferred arrangements” had already been around for a long time — basically predicated on the ...

  Editor’s Note: To his credit, Shlomo Benartzi took the time to respond to my recent  column  on his Wall Street Journal op-ed on LinkedIn (you can read it  here ) — though to my read, the concerns expressed on where such a proposal could lead remain. Consider this a brief follow-up.      Shlomo, Whew! I can’t tell you how relieved I am/was to have you clarify that you are NOT advocating a government-run retirement plan system. I guess you referring to three specific government-run systems as models to be considered persuaded me that you thought those were good examples for us. You’ve  now  pointed more specifically to the Australian model where “workers remain by default with their first plan provider, even if they change jobs.” But as I am sure you know, there are some significant differences between that system and ours — differences that, to my eye, wind up being significant.  First and foremost , that system is funded primarily by ...