Will the ‘myRA’ Help Companies Cut Retirement-Plan Costs?

It's happened before, when the 401(k) replaced pension plans as the chief retirement-funding vehicle.

In the corporate world over the past 30 years, pension plans gave way, in large part, to 401(k) plans. Companies saved big bucks; workers didn’t fare as well.

Opinion_Bug7In his Jan. 28 State of the Union address, President Barack Obama unveiled a new idea that could result in companies shedding still more of the cost burden of funding their employees’ retirement. He said he’d direct the Treasury Department to create a new saving vehicle for working Americans called a “myRA.” The idea is that companies would allow workers to set aside a portion of their pay to purchase federal government-backed savings bonds offering guaranteed returns.

It would be another savings option for employees in an era when most are saving far too little money for retirement. That sounds like a good thing. Small companies that don’t offer retirement plans could at least make available this modest savings opportunity.

But is it hard to imagine that some companies will seize on the myRA as a next-generation strategy for saving on existing retirement-plan costs — by using its availability as a rationale for cutting back on their 401(k) matches, for example?

Sure, retirement plans are billed as competitive necessities for attracting and retaining employees. But that didn’t keep the vast majority of companies from freezing or closing their erstwhile pension plans — and try to find a worker who would rather have a 401(k) than a pension.

The specter of people retiring without the funds needed for a reasonably worry-free retirement is not a problem only for those people. With the average age of the population increasing all the time, a greater portion of consumer spending should be expected to come from retired people. But they won’t be able to spend what they don’t have.

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