Report

Promoting 401(k) Security

J. Mark Iwry

Please visit the Urban-Brookings Tax Policy Center website
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Enron, WorldCom, and other corporate scandals have generated a public appetite for bringing corporate wrongdoers to justice and a legislative push to protect investors through accounting and corporate governance reforms. Yet Congress, while enacting legislation to address some accounting issues in the interest of investors generally, has failed to protect the millions of employees who invest in their employers through retirement plans. Too many have lost much or all of their retirement savings because of imprudent overinvestment in employer stock, and many more are at risk of doing so in the future.

Members of Congress have been rightly concerned about enacting new restrictions that would cause employers to stop offering retirement benefits. And they have been highly sensitive to polling in which, predictably, employees respond in the negative when asked whether they want government to take away their ability to choose investments. But there are legislative approaches that would limit workers’ risk in 401(k) plans without precluding choice by employees or employers. This policy brief describes several such measures.

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