SSGA Chief Calls Out American Retirement Crisis

Auto-enrolment and auto-escalation in DC plans could reduce Americans’ retirement shortfall by as much as $740 billion, CEO Ron O’Hanley has argued.

Ron OHanley Ron O’Hanley, President & CEO, SSGAAmericans’ retirement security is in danger and Congress needs to step up, State Street Global Advisors CEO Ron O’Hanley penned in a letter.

“It’s time for a national, bipartisan solution that guarantees workplace coverage in a retirement savings plan,” he said.

Nearly 40% of working households lack access to a defined contribution (DC) plan, O’Hanley continued, citing the Government Accountability Office’s report. Americans are currently more than $4 trillion behind retirement security, he added.

“Time is not on our side, and the cost of inaction is great: generations will be unable to retire with dignity and our country’s economic and social fabric will be at risk,” the CEO wrote.

Instead of current “discrete initiatives” with “a complex and inefficient set of retirement savings programs,” O’Hanley proposed a federal legislation that would open DC plans to all working Americans.

The new framework would build on the “behavioral success drivers” of current DC plans, and could cut savings shortfall by up to $740 billion, or 18%, he claimed.

“The cost of inaction is great: generations will be unable to retire with dignity and our country’s economic and social fabric will be at risk.”First, the SSGA chief emphasized requiring private employers to automatically enrol all workers into a DC plan. Employers should also help workers maximize savings through auto-escalation and default investments such as target-date funds.

Congress should also implement tax credits for small employers that would help pay for DC plans’ administrative costs, as well as open up access to multiple-employer plans to make DC offerings more affordable.

“By using existing programs that have already received bipartisan support, we believe this is a workable plan both parties can act on now,” O’Hanley concluded. “It is a solution that allows us to put side our differences… and work toward a common goal of greater retirement security of millions of working Americans.”