WASHINGTON-Regulators, employers and the financial services industry must work together to expand the use of 401(k) plans and increase worker participation, the Investment Company Institute's President and CEO Paul Schott Stevens told attendees at the ICI's 50th Annual General Membership Meeting on May 7.
"Participation [in 401(k) plans] turns savers into investors," Stevens said, adding that it is crucial for the government and the private sector to refine and improve the employment-based system as more and more companies drop their defined benefit pension plans.
The U.S. 401(k) system has become the dominant private-sector device for retirement savings, and mutual funds hold about half of all those assets, he said.
"More and more American workers will embrace the opportunity to save for their retirement," Stevens said, reminding executives that the Pension Protection Act of 2006 makes it easy for employers to automatically enroll employees into 401(k) plans.
"We need to give employers clear, concise information on how to provide 401(k)s to their employees," the ICI president said. "Approximately 56% of small, private-sector employers don't offer pension plans because they are too complicated, and about 30% of workers who have access to a 401(k) plan don't use them."
Regulators and the private sector should work together to provide what's best for employers and for employees by removing the obstacles preventing companies and investors from adopting 401(k) plans, Stevens said.
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