Nevin's Data "Points"

  It’s long been noted that inertia is a powerful force regarding behavioral finance and automatic enrollment — but it may have limits, according to a new study. Coverage of the report — titled “ Smaller than We Thought?  The Effect of Automatic Savings Policies ” — focused on how job change undermines retirement savings — both because of vesting, as well as the effectiveness of automatic enrollment, and more specifically auto-escalation, since those mechanisms tend to reset with the change in employers (and payroll).    Don’t get me wrong. The report states quite clearly that these automatic mechanisms provide a positive result — the authors comment only that it’s perhaps not quite as positive as most think.  Their solution — give people less access to these monies before retirement, and require savings, rather than permitting an opt-out.  From a pure mathematical stance, there’s little argument there — making people save and prohibiting pre-retiremen...

 A new paper rehashes (and embraces) some old beliefs, blatantly ignores the full impact of workplace savings, disregards the reality that deferrals are temporary—and kills a lot of trees in the process.   The diatribe’s author, perhaps because he’s affiliated with a law school, perhaps because the paper (provocatively titled “ The Great American Retirement Fraud ”) is so long (82 pages), managed to get what amounts to a long-winded pontification published by the Social Science Research Network [i] —a network that normally publishes research.  There’s little new here, and painfully little substance—though he does affix a label—“the Retirement Reform Project”—to the “conspiracy” he crafts between employers, investment management firms, advisors and those that support their interests. At the crux of this imagined conspiracy is none other than Rob Portman and Ben Cardin. Yes, that Portman and Cardin!   Reform ‘School’? Indeed, he claims this “...

It should come as no surprise that the vast majority of plan sponsors who have adopted automatic enrollment have chosen to default that initial deferral at 3% of pay. No, that’s not the level at which most plans match deferrals, and it’s certainly not a level of deferral likely to produce sufficient retirement savings. It is, however, the starting deferral rate attributed to such programs under the auto-enroll safe harbor provisions in the Pension Protection Act (PPA). Coincidence? I think not. Ironically, that same safe harbor provision requires that employers either go back and automatically enroll all eligible participants (giving them the ability to opt-out), or be able to establish that they did at some point (see “ The Pension Protection Act: This Changes Everything ”). Most providers, certainly pre-PPA, were unable to provide the requisite proof of those prior enrollments—and thus it would seem that most employers seeking the protections of that auto-enroll safe harbor woul...