A Universal 401(k) Plan

Idea

While America's private pension system provides powerful saving incentives (tax breaks, employer contributions, the discipline of automatic payroll deduction, and professional asset management), this employer-based system covers only half of all workers. Further, two-thirds of the tax breaks for retirement savings go to the most affluent 20 percent. The solution is a universal 401(k) plan that facilitates and encourages lifelong retirement saving. All workers would have the option of contributing automatically to their own plan by payroll deduction, the government would match voluntary deposits with refundable tax credits deposited directly into the worker's account, and default options would encourage saving rather than non-saving. This supplemental system would make retirement saving easier, automatic, fully portable, and fair.

Incubation

New America program director Michael Calabrese initially developed this idea in the early 2000s in writings for the Atlantic and other publications, as well as several research papers and Congressional testimonies. He partnered with other influential thinkers to promote the concept and demonstrated how it would work fiscally and how states could adopt it—even if Congress did not. Calabrese worked to improve the framework at New America for more than a decade.

Impact

New America’s California fellows helped shepherd the idea into law as the California Secure Choice Retirement Plan, which launched in November 2019. Secure Choice mandates workplace saving for the lower-wage half of the population without a retirement savings plan at work. Connecticut, Illinois, Maryland, and Oregon have followed California’s lead, adopting Secure Choice programs. Legislation is pending in other states.