Expanding workplace retirement plan access: Evidence on incentives and some potential paths forward
Since 2019, the SECURE Act and SECURE 2.0 have taken meaningful, bipartisan steps to expand retirement plan coverage, encourage automatic saving, improve portability, and open the door to lifetime income options. These reforms represent real progress—but significant gaps remain. Tens of billions of dollars in annual tax subsidies for retirement saving are not always well targeted toward those who need them most. Access to workplace retirement plans is still far from universal, leaving millions of workers without an easy way to save. Employers remain reluctant to offer lifetime income options, even as the shift from pensions to defined contribution plans has left retirees to manage longevity risk largely on their own. And savers continue to lose momentum when they cash out small balances between jobs, eroding years of accumulated savings before retirement.
This collection brings together a set of practical, evidence-based, and fiscally sound policy proposals from the Retirement Security Project at Brookings, designed to address these persistent shortcomings. Each paper offers policymakers actionable, ready-to-use solutions as the next wave of retirement legislation and rulemaking takes shape. Together, the four proposals cover expanding access to workplace retirement plans, strengthening the Saver’s Match, establishing safe harbor rules for employer matching contributions, and promoting default lifetime income options—concrete steps toward a more secure retirement system for American workers.
We are grateful to Arnold Ventures for their generous support of this work.
The authors evaluate the impact of alternative policies designed to increase workers’ access to Employer Sponsored Retirement Plans (ESRPs). Economic theory suggests that firms substitute ESRPs and other benefits for cash wages when their value to workers exceeds their cost to the firm. Policies that increase ESRP access may therefore reduce cash compensation, resulting in both benefits and costs to workers. ESRP access is best understood as an equilibrium compensation outcome shaped by firms’ net costs and benefits, worker valuations, and firm- and worker-side frictions. Within this framework, the authors review evidence on how alternative policies may alter this equilibrium by affecting firms’ net costs, worker valuations, or the frictions that distort whether firms offer plans. The authors conclude by offering a list of options policymakers can use to reduce firms’ actual or perceived costs of ESRP provision.
Improving retirement security by expanding the Saver’s Match
The SECURE 2.0 legislation established the Saver’s Match, a refundable tax credit intended to reward and incentivize retirement saving by low-income Americans. The authors propose three options to make the Saver’s Match even more progressive by pairing an expanded match with modest saving-related offsets. Using the Urban-Brookings Tax Policy Center’s microsimulation model, the authors estimate that their modeled reforms would benefit between 2.6 million and 3.0 million taxpayers annually, with benefits concentrated among households in the bottom three income quintiles. Further, the tax changes needed to fund these reforms would primarily affect the top 1 to 10 percent of the income distribution. The plan would maintain the existing defined contribution system, but would simply offer more generous matches on retirement contributions for working families.
Rethinking safe harbor for employer matching rules
Around half of U.S. retirement savings plans that offer a match use formulas that meet or exceed the safe harbor matching requirements, which allow qualifying plans to avoid annual nondiscrimination testing. The current safe harbor matching formulas apply high match rates over narrow employee contribution ranges (e.g., 100% match on the first 4% of pay), subsidizing saving that would likely have occurred anyway while providing nothing to non-participants. The authors propose a reformed safe harbor that pairs a non-elective employer contribution (i.e., an employer contribution made to all eligible employees regardless of whether they contribute) with a lower match rate over a wider range of employee contributions. They argue that this design can increase total saving, guarantee every eligible employee an employer contribution, and be calibrated to any chosen level of employer cost.
Restoring lifetime income to retirement plans as the default
Millions of Americans fear, and risk, running out of money later in life. This insecurity arises in part because, with the disappearance of traditional defined benefit (DB) pensions, few retirees receive guaranteed lifetime income beyond their Social Security payments, few purchase their own annuities, and few are confident in their ability to manage their investments and preserve them for life. The authors propose to restore lifetime income to retirement plans by establishing partial annuitization as an automatic payout default in defined contribution (DC) plans, permitting employers to add a lifetime income option without additional fiduciary risk while protecting retirees and preserving their ability to adjust or decline the annuity. By embedding lifetime income into the plan default structure, retirees would gain low-cost protection against longevity risk without having to navigate complex financial decisions on their own, effectively “putting the pension back” into DC plans in a form that employers can support and administer responsibly.