Nevin's Data "Points"

Which is more powerful—a generous match, or a high savings rate default?  As it turns out, Christmas Eve brought us a new white paper with the fairly innocuous title, “ The Impact of Employer Defaults and Match Rates on Retirement Saving .” Indeed, there have been plenty of surveys (and tons of data) that speak to this issue (many of which are cited as references in the paper)—but underneath that bland title the authors take on an intriguing question, specifically how, and how differently, the deployment of specific plan design features—the employer match, or default enrollment—impact retirement savings.  With regard to the former, there’s been plenty of real data to buttress the notion that the employer match acts as a virtual target for retirement savings—with employee contributions clustering around those like moths to a flame, regardless of the savings needs or income wherewithal of the participant. Similarly, we’ve long—but even more so since the advent of t...

Last week, Senate Democrats unveiled a bill that would, among other things, enhance the Saver’s Credit – a provision which retains bipartisan support, even as the take-up rate disappoints. Here are six things that people who don’t get the Saver’s Credit often don’t “get.” The Saver’s Credit is, of course, a tax credit from the federal government for low- to moderate-income workers who are saving for retirement. For those who qualify, 1 in addition to the customary benefits of workplace retirement savings, the amount of the credit is 50%, 20% or 10% of retirement plan (or IRA or ABLE account) contributions depending on adjusted gross income. Credit ‘Limits’? And yet, some of the things that seem to be holding back the take-up rates could surely be addressed with a legislative “fix” – and here we’re talking about the relatively low income thresholds to which it applies, the fact that while it’s a credit, it’s not a refundable credit (and thus you have to have a fe...

It has been heartening in recent weeks  to see a number of employers announce plans to expand and increase benefit programs, offer bonuses, and increase the employer match. Better still, a recent survey  indicates that more positive changes could lie ahead. A decade ago , the headlines were filled with stories about a number of large firms announcing that they were cutting, and in some cases eliminating altogether, the employer match. While the vast majority of employers didn’t reduce those matches, it was nonetheless a stark reminder that those defined contributions are “defined” annually, not in perpetuity. The Match Matters There are a number of things that we know about the importance of the employer match; there’s the obvious (though sometimes glossed over) impact that an employer contribution means in terms of retirement security in simple dollars, for one thing. Indeed, the nonpartisan Employee Benefit Research Institute (EBRI) has estimated th...

People often talk about the significance of the “free” money associated with the company match in retirement savings – but there’s another source of “free” money that is often overlooked. I’m talking about the so-called Saver’s Credit, more precisely the Retirement Savings Contributions Credit. It’s a credit, not a deduction – a dollar-for-dollar reduction of tax liability. Income Limits For those who qualify, in addition to the customary benefits of workplace retirement savings, it could mean a $1,000 break on their taxes — twice that if married and file a joint return. In fact, for a moderate income saver, it can offset 50%, 20% or 10% of retirement plan or IRA contributions up to $2,000 ($4,000 if married filing jointly), depending on adjusted gross income. Speaking of which, the Saver’s Credit can be claimed by: married couples filing jointly with incomes up to $61,500 in 2016; heads of households with incomes up to $46,125 in 2016; married individuals filing separatel...

One of the things I have always enjoyed most about this job is the access to information—not only from our own research, but from any number of academic and professional organizations. It’s a lot to keep up with, of course, but it’s a great tapestry from which to construct a sense of where things are going, and what things need to get going. There are, of course, things to be wary of. For example, surveys conducted on behalf of organizations supportive of a particular view—that suggest that most people agree with that view—are an obvious eyebrow raiser. Studies based on samplings that are limited in size or scope aren’t inherently flawed, but should always be taken with a grain of salt (for example, a survey of large plans isn’t always illustrative or predictive of the behaviors of smaller programs). My personal favorite: “studies” by the purveyor of a particular good or service that indicate that what people really want is—more of that particular good or service. But there’s anot...

A couple of months ago, I started getting e-mails from readers curious about the announcements of plans reducing and/or suspending their matching contributions. As the weeks passed—and the number of reports grew—so did the inquiries. Those first inquiries were clearly seeking assurances that the announcements did not constitute a trend, that this was still just something a (very) few employers were embracing. Indeed, that was my sense of things (see " IMHO: Trend Spotting ", borne out not only by one of our weekly surveys (see " SURVEY SAYS: What Are Your Plans for Your Match? ", but also in a couple of industry reports as well (see " 83% of Employers Surveyed do not Expect Employer Contribution Changes "—and I was happy to provide those assurances (and links to those surveys) to any and all who asked. However, in recent weeks, those inquiries have taken on a different tone; this new wave of inquiries seems to be seeking validation, if not vindication. ...

Here’s a headline you won’t see this week: “Nobody Cut Their 401(k) Match Today.” That’s right, even though there is a very good chance that it will be an accurate statement on just about every day, I’m betting it won’t even make its way into the business briefs section, much less a newspaper headline. Not that employers aren’t making decisions to cut back on, or even suspend, their 401(k) match. On the other hand, you don’t have much trouble keeping up with that activity. Regardless of plan size or industry, these days, pretty much any plan that takes that step can count on making headlines—and every article beneath those headlines spends at least a sentence or two recounting the latest list of 401(k) match casualties. Even in our publications, sadly. Let’s face it, it’s “news.” With such incessant coverage, it’s hard to shake a sense that we have the makings of a trend—particularly for plan sponsors. Indeed, for employers looking for some respite in one of the more challenging e...