Since 2007, SHRM has recognized America Saves Week every February. This industry-wide event provides an opportunity to reflect on the importance of saving. Yet, it’s scary to think that only one-third of Americans feel prepared for their long term financial future, according to the 2014 Annual National Survey Assessing Household Savings.
Agreed – it can be challenging to sock away cash for unexpected expenses and emergencies. It can be even harder to save for retirement when you can barely imagine what the future will be like in 5 years, much less 50! But this is something that folks really need to contemplate, or face a grim reality of trying to be financially sustainable during their golden years.
Luckily, one of the greatest conduits to encourage and provide an opportunity to save is through employers. Having access to an employer-sponsored retirement plan provides employees with the opportunity to not only save, but to maximize their investment, especially when their employer provides resources such as an employer-match, automatic enrollment and an auto-escalation on contributions.
According to the 2014 SHRM Employee Benefits Survey, 89% of employers offered a defined contribution plan (think 401(k) 403(b) etc.), and 74% offered an employer match. Additionally, private retirement plans in the United States paid out over $3.96 trillion in benefits from 2001 through 2010, while public sector retirement plans distributed $2.82 trillion during the same period, with both playing an essential role in providing retirement income for millions of our nation’s senior citizens.
Therefore, it’s perplexing that the primary (and very successful) mechanism in America for saving for retirement may come under fire during the pending tax-reform debate in the 114th Congress and the Obama Administration. With employer-sponsored retirement benefits posting the second largest loss to the U.S treasury, it’s no surprise that this pool of money will be scrutinized.
As HR professionals know, one of the best tools to recruit and retain a talented and skilled workforce is offering a comprehensive and competitive benefits package; one that undoubtedly includes a defined contribution retirement account. So, as Congress tinkers with proposals that could significantly impact the tax status of employer-provided retirement plans, it’s important to remember how critical it is to preserve the tax treatment of these retirement plans.
America Saves Week is a perfect opportunity to take some time and evaluate the savings options available to your workforce, but also for yourself. It’s also a great time to tell your lawmakers about how important it is to save for retirement and how the government can help facilitate savings for American workers.
As tax reform begins to dominate the national agenda, be sure you understand what’s at stake as well as how you may be impacted as you administer your retirement plan (as well as how your own retirement account may be affected!). Be sure to visit both SHRM’s Tax and Benefits website, as well as the SHRM-led Coalition to Protect Retirement for resources and information about this important policy issue.