Nevin's Data "Points"

Last week we explored the reasons why small businesses DON’T offer a retirement plan to their workers. But there are quite different—and positive—reasons for choosing to do so. The obstacles that keep most small businesses from offering a retirement plan to their workers are an assortment of factors, real and (somewhat) imagined . There ARE remedies for those concerns, [i] but mediation of those concerns doesn’t seem to be a factor in the motivations of small businesses that DO choose to offer a plan. Reasons ‘Able’ According to that recent survey by the Employee Benefit Research Institute (EBRI) and Greenwald Research, when the small business owners who offer retirement plans were asked the reasons that they do so, factors associated with attracting and retaining workers were the most prominent. Indeed, the vast majority—more than 9 in 10 of the small business owners [ii] —said that a reason they offer a plan is the positive effect on employee attitude and performanc...

Last week, a trio of academics rolled out a plan to “save” Social Security—by undermining the 401(k). Their “ plan ” is diabolically simple, though not unique. They’d just take away the tax preferences that support and encourage employment-based retirement plans—and “give” that money to Social Security.  It was admittedly an odd combination—Alicia Munnell, director and founder of the Center for Retirement Research at Boston College (which often has pretty negative things to say about the private retirement system [i] ), and Andrew Biggs, a senior fellow at the American Enterprise Institute, who has traditionally been a voice of reason on such matters—pointing to actual tax filing data to refute claims of a retirement crisis. Then again, Biggs, a former principal deputy commissioner of the Social Security Administration, and now a Senior Fellow at the American Enterprise Institute, has recently been nominated by President Biden to serve on the Social Security Adviso...

A new academic study offers some insights on taxpayer preferences for pre-tax versus Roth savings – at least in certain conditions. The study – which carries the somewhat unwieldy title “The Relative Effects of Economic and Non-Economic Factors on Taxpayers’ Preferences Between Front-Loaded and Back-Loaded Retirement Savings Plans” – takes a look at the various factors influencing preferences for paying taxes “up front” on retirement savings (this is termed “back-loaded by the researchers, in that the tax advantages come in retirement) versus pre-tax treatment as with a 401(k). Writ large, and pretty much across the board, the researchers – Andrew D. Cuccia, associate professor and a Grant Thornton faculty fellow at the University of Oklahoma, and Marcus M. Doxey and Shane R. Stinson, both assistant professors at the University of Alabama – found that individuals preferred Roth (back-loaded) – even in circumstances in which they thought a rational determination would favor a pre-t...

A research paper finds that introducing a Roth 401(k) option doesn’t have much impact on current plan savings rates — but what does that have to do with their preference for tax preferences? Well, according to “Does Front-Loading Taxation Increase Savings? Evidence from Roth 401(k) Introductions,” governments could actually increase private savings by taxing savings up front, rather than in retirement. This conclusion basically suggests that taking away the current 401(k) pre-tax contribution and replacing it with a Roth assumption would not only not decrease, but it might actually increase , retirement savings, and with no additional cost to the government. For years a key education element touted about 401(k) plan participation has been the ability of the individual to put off paying taxes on their contributions and on the earnings attributable to those contributions (and those of their employer, if any) until retirement, at which point they would ostensibly find themselves in a...