Financial security for most Americans is the ability to save and invest for the future and still meet one's basic needs. Obtaining financial security can lead to upward economic mobility for many Americans.
From some of my other posts, you many know I am also interested in health care. The American employee benefits market is in crisis. One big reason for this problem is rising health care costs. Health care and retirement expenditures are interrelated; so personal retirement savings decrease as health care expenses go up. In the United States, an enormous strain is also being placed on various government entitlement programs, such as Medicare, Medicaid and Social Security.
Population aging, the retirement of the baby boom generation, and immigration amongst other demographic and workforce trends are greatly impacting the financial security of Americans. Since the ability to save is the key to financial security at every stage in one's life, the United States needs to establish sensible savings policies that allow all Americans to save, invest, and own at every stage of life.
To restore confidence in employee benefits, we need to increase individuals financial literacy, increase the number of worker's participating in employer sponsored retirement plans, and increase the personal savings rate in America. Educating people about finances and giving all Americans access to financial advise seems the best way to address this problem.
My area of interest is in financial literacy and the automatic enrollment features of retirement plans. The PPA made it easier for employers to provide financial advice to their employees without worrying about the potential fiduciary liability if employer's investments do not perform well. One way to accomplish this goal of increasing plan participant and contribution rates is with the automatic enrollment feature. The PPA increased plan sponsor's ability to offer automatic enrollment by preempting state garnishment laws.
My original research questions are:
- Did the improvements to the rules made by the PPA relating to the financial literacy of retirement plan participants improve or increase plan participation?
- Since the barriers to setting up the automatic deferral option have been removed, have plan participant rates increased?
The answer to both questions seems to be yes from my review of information today. In addition, it may be too soon to obtain data on the impacts of the PPA since it was just enacted in 2006, some provisions start dates were delayed, and data may not be available yet. So, I evidently need to generalize my research parameters. Any suggestions on what you would be interested in learning more about these two topics would be appreciated. Since my job was focused on the very technical aspects of retirement plans and federal pension laws, thinking about the topic more generally is harder for me.
Some datasets that will work for my topic are:
1) The Survey of Consumer Finance. This is a triennial survey of the balance sheet, pension, income, and other demographic characteristics of U.S. families. The survey also gathers information on the use of financial institutions. As mentioned, the survey is conducted every three years to provide detailed information on the finances of U.S. families. The study is sponsored by the Federal Reserve Board in cooperation with the Department of the Treasury. Since 1992, data have been collected by the National Organization for Research at the University of Chicago. The last survey was done in 2007.
http://www.federalreserve.gov/pubs/oss/oss2/2007/scf2007data.html
2) The National Compensation Survey. This survey is produced by the Bureau of Labor Statistics (BLS) in the United States Department of Labor. The National Compensation Survey (NCS) provides comprehensive measures of occupational earnings; compensation cost trends, benefit incidence, and detailed plan provisions. Detailed occupational earnings are available for metropolitan and non-metropolitan areas, broad geographic regions, on a national basis.
My research will be limited to the Employee Benefits Survey portion of the NCS. The Employee Benefits survey produces comprehensive data on the incidence (the percentage of workers with access to and participation in employer provided benefit plans) and provisions of selected employee benefit plans. The survey separates groups into civilian:, private, and state and local government. I may look at both the private and civilian category. It will be specific to defined contribution plans as these are the plans where automatic enrollment (i.e. 401(k) plans) and financial planning skills are most relevant.
The Employee Benefit Research Institute (EBRI) produces a lot of information and research on topics related to retirement plans. The Retirement Confidence Survey and EBRI Databook on Employee Benefits are great sources of information. The data is not easily downloaded and is mostly reported annually in pdf files. The website does have data about automatic enrollment programs and participant/contributions.
http://www.ebri.org/surveys/rcs/
Questions:
- Does your employer use automatic enrollment for your 401(k) plan for new employees?
- Does your employer offer financial education or financial planning services?
- Are you currently participating in your 401(k) plan?
- Are you putting in enough money to receive the full employer matching contribution if offered?
- Does your employer offer a traditional pension plan (i.e. defined benefit plan)?
- Do you think you are saving enough for retirement?
- Do you feel comfortable making investment decisions?
(Note: You can find information to answer the plan related questions in your Summary Plan Description. If you are not familiar with this document, its a good idea to review these documents for all of your employee benefit plans.)
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