Alicia Munnell: With a shift from defined benefit to defined contribution plans more and more responsibility is being placed on the employee, on the worker. Here are some things you, the employer, could do to make life easier. One, you could automatically enroll all employees in your plan and do it annually. That means everybody is in unless they go to the HR department and say they're out. Second, you can automatically enroll them at a meaningful contribution rate and increase that contribution rate over time. And third, you have to think about setting it up so that people can take their money out of these plans in an orderly way. My sense would be that you should have—and employers can't do this without some legislation—but have the default be that some portion of the money is automatically annuitized, again, unless people go to the HR department and say, “I want my whole pile. I don't want any of the money paid out as an annuity.”
This is a little more controversial than automatic enrollment, but I think my choice would be to have some annuitization as an automatic part of the de-cumulation process in 401K plans.
Directed / Produced by Jonathan Fowler & Elizabeth Rodd