PAMELA J. PERUN, Aspen Institute - Initiative on Financial Security
Email: pamela@planetnow.com
C. EUGENE STEUERLE, Urban Institute
Email: esteuerl@ui.urban.org

Despite decades of significant tax subsidies for pensions and retirement accounts, most Americans retire with little or no pension saving. The federal government will give out more than $750 billion in estimated tax subsidies for pension plans between 2007 and 2011, and yet, many low- to middle-income families have too few financial assets to afford retirement.

The United States needs a pension system that addresses 21st century needs, one that complements and is able to accompany any Social Security reform the nation is likely to see in the near future. This paper suggests that it is possible to create using the language of the pension world a Super Simple saving plan that would provide a basic, low-cost, easily administrable plan with the potential to increase significantly the retirement assets available to moderate- and middle-income individuals.

The Super Simple plan would (1) create solid minimum levels of employer contributions for low- and moderate-income workers; (2) include automatic contribution features for employees who do not formally opt out; (3) remove many of the complex discrimination rules surrounding retirement plans; (4) create a significant government match for savers to replace the largely symbolic match now in existence for only a few taxpayers; and (5) streamline today's multiple 401(k)-type plans through a simple plan design attractive to employers and employees alike.

EMMANUEL SAEZ, University of California, Berkeley - Department of Economics, National Bureau of Economic Research (NBER)
Email: saez@econ.berkeley.edu

We examine the effects of presentation and information on the take-up of financial subsidies for retirement saving in a large randomized experiment carried out with H&R Block. The subsidies raise take-up and contributions, with larger effects when the subsidy is characterized as a matching contribution rather than an equivalent-value tax credit (or cash back), and when filers are informed before the tax season about the subsidy. The results imply that both pure incentives and the presentation of those incentives affect consumer choices.

PETER TUFANO, Harvard Business School, National Bureau of Economic Research (NBER)
Email: PTUFANO@HBS.EDU
DANIEL SCHNEIDER, Princeton University
Email: djschnei@princeton.edu

We review a wide variety of programs that support savings by families, in particular by low- and moderate-income families. These programs range from ones that literally compel families to save, to those that make it hard not to save, make it easier to save, provide financial incentives to induce savings, leverage social networks to support savers, and finally, to programs that excite people to saving. These programs involve a number of different stakeholders, including governmental entities, social intermediaries, non-profit organizations, and for-profit firms including financial institutions. They embody a number of different assumptions about incentives, drawing from economics, psychology, and sociology. We describe examples of each program and provide some information on their economics and effectiveness. Our goal is not to identify the "best" program, but rather to lay out the range of innovations to meet the needs of heterogeneous potential savers.

CHRISTIAN E. WELLER, University of Massachusetts Boston - Department of Public Policy and Public Affairs
Email: cweller@americanprogress.org
JEFFREY B. WENGER, University of Georgia - School of Public and International Affairs
Email: jwenger@epinet.org

The relationship between earnings, savings and retirement is well-known; however the linkage between labor market outcomes and financial market performance is generally unacknowledged. This Working Paper examines the implications of the link between labor markets and financial markets for workers who save money in individual retirement accounts. Specifically, differences in labor market outcomes across groups may imply differences in the timing of investments, which may reduce savings over time for these groups compared to their counterparts. Using monthly data from the Current Population Survey (1979-2002) we generate hypothetical investment portfolios using stock and bond indices. We exploit differences across demographic groups in unemployment and wage growth, and use these differences to examine each group's investment outcomes. We then disaggregate the total effects into short-term and long-term components. We find some evidence of short-term market timing effects on investment, but we find much larger long-term effects for some groups. Our findings suggest that, for many people, the retirement savings losses associated with the timing of markets are similar to the costs of annuitizing savings upon retirement. The differences are especially pronounced by education and sex.

JAMES A. WOOTEN, University at Buffalo Law School, SUNY
Email: JWOOTEN@BUFFALO.EDU

If a defined-benefit (DB) pension plan has more assets than liabilities, who should own the" surplus" assets that are not needed to meet the plan's benefit obligations? This report, prepared for the Ontario Expert Commission on Pensions, assesses two leading arguments about ownership of pension surpluses - the asymmetry argument and the deferred-wage argument.

The asymmetry argument holds that the party with the burden of funding pension deficits should get the benefit of pension surpluses. Employers claim that Ontario law is "asymmetric" because employers must fund pension deficits while employees get some or all of the benefit when a plan terminates with a surplus. This asymmetry, employers contend, undermines the incentive to maintain and properly fund DB plans. The report analyzes the burdens and benefits of pension funding under Ontario law and whether "asymmetry" threatens DB plans. While the pension funding rules do appear to create asymmetric benefits and burdens, a more fundamental problem may be that Ontario law creates a zero-sum conflict between employers, who get the benefit of a surplus in an ongoing plan, and employees, who get the benefit of a surplus when a plan terminates. This conflict threatens to undermine the trust that is necessary for DB plans to operate.

The deferred-wage argument holds that employer contributions to a pension plan are deferred wages. Because employees own the funds contributed to their pension plan, unions and other advocates for employees contend that employees should own any pension surplus derived from these funds. The report raises several questions about the premises and reasoning of the deferred-wage argument.

PAUL M. SECUNDA, University of Mississippi - School of Law
Email: psecunda@olemiss.edu

One of the most neglected areas of employee benefits law in the United States today is the extraterritorial application of ERISA to U.S. employees in other countries. Additionally, the courts and legislature have not spent the necessary time to discuss ERISA coverage issues for foreign employees, both legal and illegal and both working for foreign government and non-government employers, in the United States. These are increasingly crucial areas of U.S. employee benefits law as the globalization of the world's workplaces continues apace.

After surveying the tangled web of ERISA law in this context, the article proposes two statutory fixes and one new path for courts to take in applying employment benefits law in the immigration milieu. First, Congress should amend ERISA to add ERISA §4(b)(6) to provide ERISA coverage for American employees working abroad as long as ERISA does not conflict with the laws of a foreign country. Such a law would also make clear that ERISA's extraterritorial application is of a limited nature and does not extend to foreign employees working abroad for American companies or their subsidiaries. Second, Congress should pass comprehensive immigration legislation and include within that legislation a provision which would make clear that documented workers maintain the same rights to employee benefits under ERISA as any other U.S. citizen. Third, courts in the future should consider ERISA policies and the dissenting opinion in Hoffman Plastics to support a conclusion that undocumented workers should remain eligible for appropriate relief under ERISA.

These steps may appear fairly modest for one who wishes to see concrete movement toward a coherent, global employee benefit scheme, but to quote Lao Tzu: "The tallest tree begins as a tiny sprout, the highest monument, as a clod of dirt, the longest journey, with a first step."