they've used the credit. the median -- the average credit is -- [inaudible] and that's $5 more than it was in 2006. part of this is limited, people that don't have the resources to save that much, but they are willing to say it. the one other data point that really concerns us, and this gets to the structure of the credit, is the credit is structured as something you have to file a tax form to get, you have to actually file a long tax form, so you can't file a 1040-ez tax form. individuals who take the earned income tax credit, another tax credit geared towards the same income population, that credit can be filed on a 1040-ez, making it much, much easier to get. and then there's also another form, i are, s -- irs form that you have to fill out that's sort

of to make sure you haven't taken money out of your account over last two years, because that will disqualify you from getting the match. now, the interesting thing is for many of these individuals because they are close to having almost no tax liability, they really have no other benefit in the tax code. this is the only benefit. so the corporate executives who choose to put, you know, 16 or $24,000 into their 401(k) plan, they get their full tack benefit right -- tax benefit right up front in terms of what is provided for hem in the tax code. we make these vims file -- individuals file a tax form, and we lose 35 percent in 2006, the most recent year that we could find data for that. so 35% of people in those income levels who have actually saved don't file for the credit.

and don't get the credit. and so some of -- [inaudible] what can we do to make that more fair? obviously, finding a way to change that, make it their -- jamie and i agree entirely, putting it into the individuals' accounts would make a big, big difference. and, in fact, there was a report a few years ago from the government accountability office that looked into how could you work to build low earning households better retirement savings? and they specifically looked at if you had auto enrollment and you had saver's credit going into individuals' accounts, what would that mean? and the numbers here are annual, they may not sound a lot to some individuals, but it's $479 per household in the lowest income quartile, households under $35,000. the next bracket is households under, between there and 50,

they would get about another $1,043, and the benefit is more as you go up, because they're putting more money in. but the importance here is that this is real income to these individuals. because individuals in those two bottom categories when you look at them, when they term to be in retirement, these are the individuals who have nothing but social security for 90% of their income. >> what we are done is we are made it difficult. we are taken all of these

wonderful things in pta and made automatic but they are not automatic for the people that need automatic stuff the most. we haven't made the tax incentives that are there available to individuals. so one of the things we think we need to do is we have to find a way to make the text simpler to get, make sure it goes directly into accounts, and if we can combine that with the automatic ira so we developed recently a short flier we can share with state legislatures who are thinking about can they do because they are hearing from their constituents about the importance of retirement savings. this sums it up. we need to educate lower in come people. when you think about jack's data

on the increase vanguard reported in households under 30,000 because of automatic enrollment think of how many of those individuals don't know the savers credit exists. how do we get them to understand that and that it can go into their accounts. that was the other thing pta did. it made it clear and told the irs you need to be able to deposit these into accounts. refundability was recently one of the recommendations from a bipartisan policy center study on requirement security and making the savers credit a refundable credit has been garning bipartisan support and that is a significant positive development moving in the right direction. we can come together and come to

agreements on these issues. >> thanks, diane. >> you are welcome. >> i will hold my questions and get to derrick and come back around. we had an overview from mark and a history and debate automatic enrollment constitution that is part of unfinished businesses. we had two takes at adequecy. we have had this by having higher krdt credit or uptake o saver credit. and jaime alluded to, and we heard a few times as well, that this other piece is lifetime in come which often gets punted because it is down the road. we know with any big issue if you could put off the

conversation you tend to. we also know people like lump sums. but especially now with 10,000 baby boomers retiring a day these questions are coming to the forefront of how much does what looks like a large sum actually take you into the future. i think any of the speakers on this panel and other panels will talk to any of these issues and would love to do so but we put them into specific requests they talk about one specific part of the solution set going forward. i am going to introduce derrick lori andrews a regulatory engagement in policy at tiaa and we asked him to come talk to this issue in the broader conte context. just a little background about derrick besides him being one of my favorite people to go to learn about the in and out of the details and part of that is

because of his long stent on the hill being the staff director at the senate finance subcommittee and being senate finance counselor to senator jeff binging ham. we hawse at davidson harmon a number of years and at tiaa a couple years now leading the crafting and implementation of the new engagement strategy at the global, federal and state level and there are policies you are developing at this point. thank you for all you will share. >> thank you, ida, for the introduction. it is a great pleasure to be on the panel and to be back at aspen with long-time colleagues and friends. it is a great honor to be part of this conversation. i think tiaa is about to celebrate it's hundredth anniversary and the mission is also about securing retirement

security for those we serve and those when we serve serve others. i wanted to start by framing this conversation with a question. that is among tia's married par advertise pants who are now age 65 what are the odds that at least one spouse will reach the age of 90? so you can answer this in your head. and the answer is 45%. nearly half of our married participants either they or their spouse will live until age 90. you will see on the right we asked this question recently of a conference we hosted for senior university executives. so if you didn't realize that the number is 45% you are not alone. many senior executives thought the percentage reaching age 90

is quite a bit lower. so what actually are the probabilities? even those who don't live until age 95 among our participants have quite a life long expectancy. here is the great majority of our five million participants. for our single inewties 75 paying out at 82 and 25% at age 95. and of course, for joint annuity the numbers were higher. 94% of our joint annuity is paying out at 82, 44% at age 95. i think there is always a bit of hand waving when talking about tiaa participants.

they tend to live longer than average because they white col ler and higher educated. we are dealing with a fairly set of equal individuals. even if we are not focused on the data we have, like expectancy is increasing dramatically and people are often quite unaware of the extent to which life expectancy is increasing. what do these longer lifespans mean? here is a chart from the stanford tr on longevity. it means longer retirement. this chart shows retirement age, the red bar, and life expectancy the blue bar, have been widening in gap. and in fact over the count of

the century, 2015, the rate of the retirement will have tripled from eight years to a little over 22 years. what does that mean for participants? the good news is for them is over two thirds of our participants have some form of primary assets devoted to our traditional product which is fixed annuity. and they chose a rate that is high relative to the general population. we think there are a few reasons for that. read among them, our participants have access to annuity as saving vehicles throughout their working years. they have it as a pay out option as well. we offer a guaranteed fixed annuity and these are things people are thinking about and

getting guidance during their working lives. you will see among our participants, among the 70% that chose annuity, 92% were satisfied with that choice. what i think is more striking is at the bottom of the screen which is if you take our average participant they are replacing 90% of their income in retirement. that is a combination of saving, annuity payments and social security. that, we think, is you know, case in point perhaps for the importance of having lifetime income. participants seem to recognize that replacing employment is a goal. there is not something pecular about the participants.

48% of americans say having guaranteed income to cover their living costs is the primary goal of retirement. if the guaranteed income yields dramatic success that begs the question which is my next question for you which is what share of all defined contributions have access to an in plan lifetime income solution and the answer is a mere 13%. actually, the numbers are a bit disputed and i don't know if jack is around but he might have a lower number. 13% is the highest number we have seen in terms of estimates. there are some that say as few as 6% have access to in-plan annuity option. so if we were to remove the 40 3 b universe we know the number would be lower.

for many americans, that leaves a lot of guess work in planning for retirement. they are looking through the proverbial crystal ball. remember the uncertainty that people guess their life expectancy. two and three pre-retirees under estimate the life expectancy of the average 65 year old and nearly half of them do by five years or more. as a matter of prudence, i think this is a question we want to be focusing on which is how do we help individuals prepare for not only a secure retirement, but a secure retirement where income is part of the solution? we know that very few american participants are thinking about their plan balances in terms of lifetime income. here is another question from all planned participants, not only our own, and asked have you

done an analysis of how your savings will translate into monthly income in retirement and you can see the overwhelming majori majority, 62%, haven't thought or done an analysis of how savings will translate into monthly income in retirement. all of this brings us to the ultimate question ida asked me to discuss which is if we are moving forward with a policy agenda what role is there to promote lifetime income. we would say there are three policy blocks we encourage policy makers to considered. the first is to enhance the understanding of lifetime options. for 50 years, tiaa has been offering lifetime income illustrations to investors they have a projection on their statement that helps them understand what their plan balance would be in terms of life income.

we are pleased the labor put out a notice of proposed rulemaking to look at getting this illustration on all partticipants benefit's statements. we hope this becomes a reality. we think that whether individuals decide an annuity option is right for them or not all would be well served by understanding how their balance translates into lifetime income. the second is we hope the labor department could talk a like at the fiduciary concerns that child many employers from aufshiaufs offering annuity. the government prompted clarification of fiduciary but the rule didn't thread that proverbial needle and we would like to consider whether further reforms are appropriate. in particularly, we would suggest that dol come up with

specific measurable guidance for evaluating insurance company's financial strength. and finally as the role of depalt and in particular diane had compelling evidence over the importance of automatic solutions. not required by congress, dol did structure the qdia roles to require liquidity of the investments. we think that ought to be reconsidered. we have developed the target date funds and think those are important products but we need to keep in mind they cannot offer a guarantee even though many participants think a target gate fund does include one.

we are encouraging policymakers to think about making another look at that regulation. in particular we think the time is right to consider whether an annuity sleeve can form part of a target fund to give that individual that certainty. >> thank you, derek. >> i think we are presseded against time and thank you for the opportunity to add the lifetime income spin to this conversation and really again thank you, ida, for convening this important gathering. >> i know it is 1:30. i encourage us to have conversations. we can take them off line. a quick rapid fire down the load because i said there were three parts. we will talk about assessing what happened, what is left, and what the solutions are and this third question is what is it going to take. what is it going it take in terms of political will, collaboration, in terms of different changes to make some of these solutions a reality.

if you all would take a few sentences to offer your own insight into what it is going to take to get us to take the next steps forward. anybody can start. >> taking advantage of what is already in front of us. there is a ton we know we can do. but i think we have to help plan sponsors in particular with what is exist and get comfortable they will not have a revolt from their employees or a potential legal issue they may in reality not face but are certainly worried about. i think that has to be part of it. i think from a legislative perspective, i am encouraged at these conversations which seem too me this year to be more concrete and tangible than prior years. i think we are moving in the right direction. >> i think on covered solutions i am highly encouraged by the bipartisan nature and the

endorsement of these sort of issues for everyone from chairman hatch to the president to the speaker to there was a roundtable hosted by senator in and warren to the bipartisan center. there is agreement. we just need to get through the workings of congress in this sort of environment. >> the other thing i would say is this is something in our cereva data the american people are crying out for -- survey. they want help. 80% of those would like to see washington pay more attention to retirement security because they have a feeling they don't understand how hard it is to save for retirement. >> i would add not to plug the aspen instustute, although i enjoy doing this. i think more conversations like this are important. given the challenges we are facing it is easy to lose sight

of areas like this one i i think there are many commonsense solutions that industry and advocates and legislatures and regulators kind of talk and reach points of agreement. i think the more we are able to bring these issues forward and illustrate as we think about the challenges facing middle class americans and working class americans that this is an area we have solutions ready and i think we would be able to advance the ball better. >> thank you, all. i started by saying the take away i hoped from a was one of optimism and that really we had the evidence at this point and the ideas and the technology and leadership that it is going to take. i think that is true. i am staying on the charge of conveneing dialogue and working with those in the room including those who stood with us during the discussion. thank you so much and thank you

to the panelist and we are adjourned. [applause] [inaudible conversation]

[inaudible conversation] [inaudible conversation] [inaudible conversation] [inaudible conversation] hour .

>> good morning, everybody. so we will shift gears now building on the remarks from representative pose and representative crowly. we want to do three things. first we vpt to a conversation about what the pba accomplished and what was left undone. that is the purpose of this conversation. we will get in-depth into it with really great speakers into

what happened in the ten years since the tpa was passed, what it means for retirement in america, and what more needs to be done and hopefully that will tee up the next of the day. followed by keynote remarks at 11:30 from edmond murphy, ceo of power retirements. and then is short break and we will have a second panel all about the path forward and what is the agenda for the next administration. so, what i am going to do, just a note on logistics. the way we would like to do is people make brief remarks and i will follow up with one question per person. woel we will go down the row and have time for dialogue between the panel and questions and answers from the crowd. as you may have noted in your packet we have longer bios so i am not going to go deep into the the bios here.

but i will say that to have this conversation we have this incredible depth and seeing the panelist many years of deep expertise. we are excited to bring a number of perspectives to this important conversation. we will start on my left with lou, who is the president and co of the defined contribution investment association. it is the second time this week i have had to say that and pleased to say i didn't mess it up either time. lou helped found that organization in 2010 and brings many many years of deep expertise in retirement security. so without further ado, luke. >> are we on? great. let me first thank aspen for including me.

this is my second opportunity this week to join you all and really appreciate being part of this broader conversation on retirement security. earlier this week in oregon i got to talk a little bit about the coverage gap. i will going to primarily focus on retirement adequacy which was addressed by ppa but we will talk about coverage as well. probably useful for me to give a brief description of dciia. we will go with the acronym. as mentioned, it is about seven years old and really comes from the aftermath of the tpa. so what i found following on tpa was a real emerging interest

from those in the retirement savings world to we are yearning for a place to come together and talk about what we all agree on which is that it is critical that we figure out ways to improve the retirement security of american workers. really the existence of dciia is a testament to the fact there is a desire out there from the key players in the industry and, union, i think through forums like this week really figure out how to take the next steps forward. let's first take a quick step back. i am going to try to talk through at a very high level where we were ten years ago in the evolution of the retirement savings industry, the primary themes we saw in the tpa on the defined contribution side and

how the dialogue has changed post tpa.

>> we've got the right people here, so after some framing remarks, i'm going to quickly get out of the way. so, you know, where were we ten years ago? well, you know, as i said, there was a lot of interest and passion but maybe a lack of direction around what we could do as an industry to drive better outcomes. and ppa really did a solid job in getting people focused really in two key areas. so, you know, one, ppa did a great job in clearing a path for the use of behavioral techniques primarily around automation and driving better outcomes. and then really also set a path for how we can get participants

in the system's to advice -- access to advice on a mass commoditized basis and also on an individual basis. and then finally, as most of you know, importantly, solve the looming concern about extra-permanence. but i'm going to focus on the first two and where we are now post-ppa. so really there are some key themes to driving retirement security that we've learned now. one, insure that people have is the's to the system -- have access to the system. i'm sure people are going to talk about that as being an important gap left, and i share those thoughts and would be happy to share my potential solutions if we get into it. but that's, clearly, an open issue left. but then once people have access, we need to make sure that they utilize the system.

and we've made a lot of steps forward, and i think we have a lot of opportunities to further move forward. then once they're accessing the system, we need to make sure that savings rates are sufficient. and we clearly have tools from ppa in order to do that, and we'll talk a little bit about that. and then finally, you know, when people are saving at sufficient initial rates, we have to the make sure that they're continually saving appropriate rates as they progress in order to meet their retirement security needs and that those savings are ultimately targeted toward appropriate institutionally-priced investment structures that will get them both to and through retirement. and once we've met all those needs, then we're in pretty good shape. so, you know, where are we

today? well, there are definitely a leading group of employers who have instituted best practices and are saving, are defaulting their employees at robust initial rates, auto-escalating up to levels that are designed to get them to retirement security. some are re-enrolling people annually in default investment structures and then sweeping employees who are not participating on an annual basis -- not just new hires. and or more those employers -- and for those employers, what we've learned is that they're doing an amazing job at getting their workers to a level of retirement security that will get them both to and through retirement. unfortunately, we're not at a point where those practices are universal. so i think a constructive

conversation is how do we get to universality or at least close to it with the tools that we have from the ppa and the knowledge that we've developed since? i suspect we can get pretty close. and then once we do, then it's, you know, critical that we start addressing the coverage gap. and we figure out how to bring that, those solutions to the rest of the population that currently is uncovered. but i, for one, am very optimistic that we have a path forward, that we have the tools we need, and i'm going to defer now to jack who i know has a lot of detail behind that. thank you. >> thank you, lou. -- lew. as you said, there are a lot of tools, but practices aren't universal. so say a little bit more about why you think they're not. what are the primary challenges that plan sponsors are facing

that are preventing greater adoption? >> yeah. so, you know, clearly we still have a challenge to get employers comfortable and focused on adoption of plan designs that incorporate the robust implementation of automation and focus on outcomes. we're definitely seeing significant movements in that direction particularly in the larger employer space. but there are some very critical headwinds. you know, one important one is the fear of litigation. you know, we really have to do something about the, what i view as often frivolous litigation that's out will that causes -- that's out there that causes employers to really resist the,

their otherwise natural inclination to innovate and to focus on outcomes. i think there's also, you know, a number of misperceptions or that are common out there about what is allowed or even encouraged in the current law, and there's a lot we can do to educate plan sponsors and those that advise plan sponsors. and then, finally, there's really a lack of discussion right now about the mutual benefits of retirement security both for the employer and the employee. and a real opportunity to get people to understand that those interests really are well aligned. i know dciia is getting really close to releasing a paper, i'll put a little plug in here. what's in it, it tries to focus the plan sponsor community on the fact that not only is in the right thing to do for your employees, but this is actually the right thing to do for your work force plan and for your

company, and that'll be coming out soon. >> great. we look forward to seeing it. jack. so now we're going to hear from jack vanderhei who's the research director for the employee benefit research institute. and as many of you know, he's also the director of the center for retirement -- excuse me, for research for retirement income. jack has more than 200 publications, if you can imagine that, devoted to employee benefits and insurance with a major focus on the financial aspects of private defined benefit and defined contribution retirement plans. for those of you like many of the people in the audience in the retirement space, jack has been a leading voice for many, many years, and we're delighted to have him here this morning. >> thank you, jeremy. on behalf of myself and the employee benefit research institute, i'd like to extend my appreciation as far as the opportunity to talk about such

an important topic. we've been doing research on employee benefits since 1978. we got into the defined contributioning database-building process back in 1996, and i think it's easy to conclude that, certainly, ppa and the aftermath of ppa was one of the most important developments that we've seep in our -- we've seen in our entire research. what i'd like to do today is just very quickly go over a existing research. we want to set the stage as far as what we've already seen happen with respect to automatic employment in terms of what has happened with respect to the participant behavior. going to look very quickly at participation and contributions as well as asset allocation. but before we get into that in any detail, i really want to have a huge caveat that you really should not look at any of

these aspects in isolation. for example, there was a front page story in "the wall street journal" back in 2011 that ended up making the big conclusion that ppa was bad for 401(k) plans, that basically if you look at 401(k) participants, deferral rates had gone down. well, the problem is if you're not going to look at what's gown on with respect to participation at the same time you look at deferral rates, you're ignoring the fact that a lot of those people in automatic end enrollment plans -- enrollment plans that admittedly have low contribution rates because of the default deferrals of maybe 3% would have had 0% had there not been an automatic enrollment provision for them. so you have to keep that in mind as you look at some of this. what i'm going to try to spend much of my time on is a study that dciia is going to be releasing in a few months that will look at how each of these components that we're going to

to be talking about today impact outcomes, retirement outcomes instead of just looking at individual snapshots year by year. and basically, if you want to be able to do something like that, you need a model that's going to be able to look at the behavior of eligible employees under different types of automatic enrollment plan designs. because, as lew mentioned, there's many different types of designs out there. and if you're wanting to get a comparison to how much of an improvement there has been, you're still going to have to be able to figure out what these people would have done had there not been automatic enrollments. we're also going to look at what happened under voluntary enrollment designs. for that you have to the look at job change activity. we all know that so much of the leakage is still occurring when people change jobs and, basically, cash out those accounts. so we have to take that into account. we also have to take into account the impact of hardship withdrawals and the impact of loan defaults.

in addition to to everything else, basically, you need a micro-simulation model that can take into account uncertainties like uncertainties in the financial markets, and that's all going to be part of what we're going to be looking at today. very quickly, and this is from vanguard's latest report that was released earlier month, how america saves. the two things i think people focus on the most are participation rates and deferral rate when it comes to automatic enrollment with a comparison against voluntary enrollment. and, again, much of the action has obviously taken place for the lower income individuals. if you take a look at the individuals under $30,000 in the most recent vanguard report, you see a jump in participation rates from 29% all the way up to 82%. even for those 30-50,000 you still have almost a doubling from 53% to 90%. the other side of the own coin,

of course, is if you go to the right-hand side and you look at those deferral rates. deferral rate for an automatically enrolled perp under $30,000 comes in at about 3.6%, just a little bit over the 3 percent deferrals many of them have whereas the voluntary enrollment people who basically got in on their own initiative and are probably being much more influenced by match rates are up to 5.1%. so, again, if you look at only the right-hand side, you can come away with the kind of conclusion "the wall street journal" did back in 2011 that maybe these things aren't necessarily a great improvement, but if you look at the left side at the same time and keep in mind that you would have had a number of people otherwise having no deferrals who are now showing up at least with a 3% deferrell, that goes a long -- deferral, that goes a long way to what we're going to be seeing in some of the next charts. certainly, there's been a lot of

conversation about what happens with asset allocation. and for this i just want to quickly highlight some results that sarah holden from ici and i co-authored using the ebri/ici database where we looked back at what the asset allocation rate was in 2007 and compared that to what we had for the most recent database, year-end 2014. we break this down into three different age cohorts. on the left side you see the 20s, middle is the 40s and the right side is the 60s. and in each case i'm comparing what's going on in 2007 with what's going on in 2014. if you look at that red rectangle on the bottom, what you're seeing is the percentage of equity that these participants have. in fact, back in 2007 almost one

in five 401(k) participants in their 20s had zero, and this is all equity components put together. direct equities, it is the balance funds, it is the target date funds, and it is company stock. one in five had nothing in the equities market. in 2014 largely because of automatic enrollment, harmingly because of the qdias, largely because of the shift to target date funds, you see that number's been reduced all the way to 7.7%. if you want to go to the other end to the people in the 60s and look at the green rectangle, what we find here is in the end of 2007 on the verge of the financial market collapse you had 30% of the people in their 60s that had more than 80% of their 401(k) balance in equities. because of the glide paths that many of the people have adopted

in the target date funds, that number has come down appreciably and, in fact, is only 22.1% now in 2014. so not only did automatic enrollment have a huge impact on contributions and participation, but because of the fact that many of these people are being put in target date funds and leaving that money alone for age-appropriate asset allocation, you've also seen a shift away from the extremes for both the young and the older participants. so what i want to do is very quickly give you a little bit of background on the model i'm about to take you through. we're very fortunate, ebri, we've had a collaborative effort with ici that's given us extremely detailed information. as of year-end 2014, we have participant information on 27 million individuals, so we know to the penny what they're invested in, what their account

balances are, their contribution and their loan activity. that's coming from more than 75,000 different plans and represents about $2 trillion in assets. and the database is longitudinal so we can track individuals from year to year to see how their activity changes with respect to age, wages, etc. what we've been able to do is a number of different can simulations studies like i'm about to go through with ebri retirement security projection model, we've got some results of that in the appendix if you'd like to see it. but the important point, and this is why this collaborative effort we're doing with dciia is so to important, even though we've had this extraordinarily rich database, we've never really had the plan-level data to go with it to bifurcate between automatic enrollment, for example. we've been able to get that recently from a number of different record keepers, and

what i'm about to run you through just very quickly, i just want to make sure everyone is understanding what's going on. the model you're about to see will look at employee contribution activity as a function of many different things, demographic certainly, but also what's going on as far as the plan's concerned. different plan matching formulas will have different incentives. some will stop the incentives after 3%, some will go to 6%, some will stretch it out even further. all of that is factored into this model. just as a quick note, what i'm about to show you does not include any amounts from iras or balances with previous employers, but it does allow for job change and leakages, and basically what i'm going to assume is if you're a 401(k) participant when i see you today, that every time you change jobs you will continue working for an employer that sponsors a plan. it doesn't mean you're going to participate, but at least you will continue to be eligible. we have other versions of the

model that give it more of a random version. and we also have participation and opt-out simulated on an annual basis. so what i'm about to show you deals with eligible employees. okay, these are employees under voluntary enrollment that very well may choose not to participant. and what i'm going to focus on is age 65 balances in 401(k) plans plus any rollover money that originated in the k plan. so you change jobbed, if you rolled it over to an ira, we're going to count this as part of this 401(k) bumming. it's going to -- bundle. basically, the numbers i'm going to show you are just simple multiples of final earnings. i'm going to take your account balance, i'm going to take divided by what you were earning right before you retired at 65 and show you the differences you're going to get between automatic enrollment and voluntary enrollment.

so basically, what's the best way to try and illustrate this difference? i mean, certainly, there's a lot of debate going on. just very quickly, what i tried to do today to get something relatively simple and quick to the show to is we're going to look at improvement in simulator retirement outcomes. as i said, measured as increases in the medians of these multiples of final pay. and i'm going to break it out for you by age and by salary quartile to see whether there are differences. many people have alleged you're going to see different types of reactions among the low income versus the middle income versus the high income. and basically, this is probably the single most important thing i want to focus on, is if you take a look broken out by age and by income quartile, so i have the middle 50% together under the red line, the blue line is the lowest income quartile and the green is the

highest and also broken out by age, regardless of age, regardless of income the movement from voluntary or enrollment to automatic enrollment with auto escalation is giving you at least a 15% increase at the median. as you move from the voluntary enrollment to the automatic enrollment with auto escalation. now, the next steps and, certainly, we're going to have to be talking about ways to improve the system sometime during the course of today's conversation, is certainly leakage is going to be one of the most important things to take a look at. whether it's cashout due to job change, hardship withdrawal -- remember, that will include a six month suspension for employee contributions and, hence, the inability to get the employer match at that time -- and loan defaults. so what i want to leave you with is as the last graph is how much of a difference -- again, at the

median -- do these leakages make. it should come as no surprise to individuals that the younger you are, the bigger the impact leakages will have. and because the low income are so much more likely to cash out their 401(k) balances at job change, also you have a bigger impact for the lowest incomes. if you want to just focus very quickly, for people 25-29, the lowest income quartile, their median reduction relative to this optimized portfolio is about 15% reduction whereas it's about 9% for the middle 50% and about 6% for the highest income quartile. so overall, we've come a hong way. -- a long way. it certainly appears in terms of retirement outcomes this is going to be a big improvement over where we were pre-ppa with

the voluntary enrollment, but there's still a lot that needs to be done and, certainly, leakages should be one of the aspects we take a look at as soon as possible. thank you. >> thanks, jack. that was fantastic. [applause] so clearly, i mean, quick summary of a really comprehensive presentation, a lot of great evidence that shows that auto enrollment works more those who benefit from it, of course. you pointed out leakages as a major problem. what else would you say? if you were redesigning ppa or you were there at the table, what do you see as others' perhaps significant shortcomings? >> one of problems with ppa involves safe harbor. now, not everybody who goes automatic enrollment takes the safe harbor approach. but if you look at the safe

harbor with auto escalation, there's basically a maximum cap of 10%. and if you take a look at what the individual plans are doing, this is a huge percentage -- i believe it's over one-third -- that are capping the maximum auto escalations at 10%. i don't know the political rationale behind this, but i would say especially if you're a mid-career hire and you didn't have coverage before or perhaps you inadvisedly cashed out your 401(k) on the previous job and you're now, in essence, starting over at age 40, 10% plus whatever you're getting from the employer match is just not going to get you where you need to be. and i think if you could somehow increase those maximum limits under auto escalation, that would be a huge improvement. plus, i agree with everything

that lew said, that coverage has to be the primary concern in the cases where the employer's not offering something. but for those that do, they should be allowed to escalate the employees much beyond 10%. >> okay. thank you, jack. all right. now we're going to shift to kilolo. institute fellow at the urban institute, we're delighted to have her with us today, kilolo works with staff across the entire institute to develop collaborative partnerships with organizations and individuals who represent those most affected by economic and social issues. as of you know -- many of you know, before she joined urban, she spent many years as program officer at the ford foundation where she focused on building economic security for working families and on incorporating the expertise of people of color into all aspects of ford's work. she's been a leading thinker on retirement issues for many

years, and we are delighted that she's here with us this morning. >> well, good morning. it's a pleasure to be here, and i also want to thanks a pen for inviting -- aspen for inviting me. we've heard, from our previous speakers, about the progress that's been made with pension savings since the enactment of the pension protection act. i'm going to talk about who still has not been reached and also tee up remarks for the panel, the second panel which will discuss additional solutions that are needed. my remarks are reflective of my own views and are not necessarily the position of the urban institute where i work. i'm not going to use slides, but i did provide a handout that looks like this on the table outside because i'm going to be talking about quite a few numbers, and it allows you to follow along if you would like

to. the information, the table that's in the handout is taken from the employee benefit research constitute's data comparing 2006 and 2013 percentages of all workers who worked for an employer that sponsored a retirement plan, and similarly, there's a comparison for 2006 and 2013 of the percentage of all workers who participated in a plan. so before or and after the enactment of the pension protection act. this includes workers who have access to plans through their employers and those who do not. the data are disaggregated in several ways to get a better sense of who has access to a plan and the extent to which different workers participate. one of the first things that you'll notice is that there is generally some improvement after

ebb enactment of -- after the enactment of the law, but that change is modest. and this is consistent with the research by my colleagues at the urban institute. automatic enrollment affects workers with employers who offer a retirement plan to which they have access. it does not affect workers who do not have access to a plan through their employers. almost 49% of all workers do not work for an employer that offers a sponsor -- who sponsors a plan. so let's take a look at the groups, disaggregated groups in the table to see what that shows. there's a difference by race and ethnicity in the percentage of workers who are employed in jobs that offer retirement plans and a difference in the rate of participation. about 55% of workers have jobs with plans compared to 52% of

african-americans, 36% of latinos and 48% of other groups. in terms of participation, almost 45% of white workers participate compared to 39% of african-americans, 27% of latinos and 38% of others. african-americans and latinos are less likely to have jobs where employers offer retirement plans. discrimination in the labor market results in occupational segregation that leaves them disproportionately represented in service occupations, farming and construction. only 34% of workers in service occupations had employers with retirement plans compared with 66% of workers in professional occupations. in addition, workers of color

are less likely than white workers to have earnings levels and job tenure that facilitate participation in retirement plans. factors including employment discrimination mean that workers of color are more likely to face unemployment, have longer estimates of unemployment, work in voluntary, part-time jobs when they would prefer full-time jobs and have lower wages than white workers. the table shows that part-time workers and workers with lower earnings are much less likely to have employers that sponsor retirement plans and have much lower participation rates. only 34% of workers who are employed part time for the full year have jobs with retirement plans compared to 59% of workers with full-time jobs all year.

workers participate -- i'm sorry. only 18% of participant-time workers -- part-time workers participate compared to 52% of full-time workers. with respect to earnings, only about 34% of workers earning $10,000-$20,000 have jobs with plans, and they have a participation rate of about 17%. by contrast, 71% of workers with earnings of $75,000 or more have jobs with plans, and 67% participate. it is important to note that when workers of color and white workers are, have similar circumstances, they make similar choices. a study by the center on retirement research found that, and i quote, for comparable my situated individuals, blacks, whites and hispanics respond in

a similar fashion in terms of joining a 401(k) plan and deciding how much to contribute. an ebri study showed that african-americans and white waged salary workers with the same earnings have participation rates that are nearly same. in fact, for workers earning $75,000 or more, the african-american rate of participation in retirement plans exceeds the rate of white workers at the same level of earnings. 73% of african-americans compared to 71% of white workers participate. and for latinos, country of birth appears to be a factor. latinos born in the united states had retirement plan participation rates similar to african-american and other workers of color. but still lower than white workers.

while latino workers born in other countries had rates that were much lower. so we've talked about race and ethnicity, occupations, full time versus part time, and earning levels. i'll talk about two other groups, and then i'll stop. women and men overall had similar rates of employment in jobs with plans and participation rates that were about the same as well. but if we look at marital status, it may give us a bit more insight about what might be happening in terms of gender differences. single workers, particularly widowed, separated and never married workers, have substantially lower rates of employment in jobs with plans and participation rates compared to married workers. divorced workers overall -- or divorced workers are a bit better off than single workers.

but overall these workers could be vulnerable to economic insecurity in retirement. and finally, young workers. they have much lower rates of employment in jobs with plans and lower participation rates than older workers. 49% of workers who are age 25-34 are employed in jobs with plans, and 37% contribute. and by contrast, 58% of workers ages 45-54 are in jobs with plans, and 51% participate. given the increased importance of beginning to save at very early stages in one's career, this disparity needs to be addressed. the pension protection act is important but not sufficient. there's a need to expand coverage for workers employed in -- workers employed in

establishments that are offering a plan or establishments that limit their eligibility to a plan. thank you. >> thanks, kilolo. [applause] so you've laid out some pretty important shortcomings a across a number of different factors. i'm curious if you have a thought, and i think we'll get boo this probably later in the -- into this probably later in the conversation, and also i'm sure it's going to be one of the things i'm sure we talk about in the second panel, but just to focus on one part of what you talked about, the sort of breakdown between full time and part time. you know, the economy appears to be move, you know, towards a place where many, many more workers are either not getting -- are underemployed and don't get enough hours or are, you know, the growing number of contingent workers. how do you see that playing out as we look into the future, and

what kind of reforms do you think are necessary to bring all of the workers who have new contingent relationship ares into coverage? >> so i'm sure that the panel later on will address some of this, but clearly there is a need to reach employer -- smaller employers. i think that a lot of the part-time and contingent workers are obtaining jobs with relatively small employers who are less likely to currently offer plans, so there needs to be an encouragement or a requirement for there to be more universal coverage of all workers. and even among workers or even among employers who are offering plans, they may not be providing access to some of their employees who have not had the same tenure or the, who have

part-time positions within those organizations. and so that needs to be addressed as well. >> great. thank you, kilolo. okay, now we're going to shift gears -- we seem to be shifting gears a lot on this panel -- to bring in an international perspective. 're delighted to have keith ambachtsheer from the university of toronto. keith has been a leader globally in the pensions and investment industry for more than four decades. he's an award-winning analyst of pension and investment issues who advises governments, industry, associations, plan sponsors and money managers on governance, finance and other investment issues. he's also, as many of you know, the founder of kpa advisory services and cem benchmarking which are two highly respected organizations in the global pensions and investment industry. he has a lot of experience working with countries, with funds around the globe, and he's

going to bring some of that experience -- more particularly that in the launch, related to the launch of the u.k.'s recent program and this experiment that's going on in ontario, in the province of ontario. so, or keith, we look forward to hearing your perspective. thank you. >> [inaudible] try this. yes. okay. the other comment i was going to make was to, at the border we're not non-americans, we're aliens. [laughter] i qualify twice, actually. i have a dutch passport and a

canadian passport, so i'm twice over an alien. so my perspective, obviously, is to look from the outside in. and then the question is, well, how to best do that. and i think the place to start with the melbourne mercer global pension index, gpi. how many people here know about the global pension index? about half, half of you. i think it's a terrific effort because it allows us of to have comparable conversation -- comparative conversations about retirement income systems, what's good about them, what's not so good about them and to see how we can all get better at it. the premise more this index -- for this index which was started in the 2009, i actually happened to be in melbourne when it was originally launched it was, i think, a very interesting and important occasion.

it was put together by mercer actuary david knox in australia and his colleagues, actually, around the world to give it international perspective. so what drives retirement income system quality. they posit three things. one is adequate is city -- adequacy, income replacement. second criteria is sustainability, the ability of the system to not only do it now, but to do it 10, 20, 30 years from now. and the third dimension is integrity. is the system actually well put together, is it being well managed, is it being well supervised, if you like. this initiative started with 14 countries in 2009. the last report was with 25 countries, and this year later on there'll be 27, so it keeps growing every year. the top three are denmark, netherlands and australia. the dutch used to be on top until denmark came on. it was devastation to the dutch

to actually lose their first place. along with not being in the euro cup this year which is another tremendously sad event. so what's with the top three here? what does it take to get into the top three? you need a sustainable pillar, one, the government piece that actually looks at poverty issues and covers the poverty, elderly poverty aspect of retirement. second, all three countries have compulsory participation in workplace pension plans. number two, all three countries have strong regulatory processes that cover all workplace pension plans, public sector, private sector, union, it doesn't matter. everybody gets the same treatment. and what that means is because pillars one and two are well thought out and well run, there's little need for pillar

three. and pillar three is where informational asymmetry sets in which basically means if you leave people to figure it out for themselves or advised by advisers who aren't necessarily totally unbiased, then you get a lot of inefficiency into the retirement savings system m and they don't have those issues because of the way these three countries have organized their retirement income system. so what's the usa -- where's the usa out of 25? where do you think? 14. and, basically, you get cs in all three categories. you get c for adequacy, c for sustainability and c for integrity. so you've got a ways to go. and we'll see how things turn out this year. so what comes out of this global pension index in terms of how you raise your, the bar from cs to bs and as.

one, raise the minimum pension. in other words, deal with the poverty issue which is really a pillar one issue. number two, mandatory pillar two with a sensible net income replacement target for middle income workers. three, minimize leakages. came up in the conversation already. and, four, income for life back ends to d.c. plans. in other words, don't stop at retirement. figure out how to do income for life at the back end. so that's it. that's all you have to do, and you'll become an a country in pensions. [laughter] a little bit on your closest cousins, arguably, the u.k. who had an interesting event overnight and canada. by the way, u.k. ranks number 9, canada ranks number 7, so we're somewhere in between the top and where you are. and what's interesting is that in both countries, they've both

taken on this question of the middle income workers without pension plans. i mean, that's been the big thing. the u.k. went through a major research process in the 199 1990s -- in the 2000s which led to legislation which effectively required all employers in the u.k. to offer a workplace pension plan. interestingly, offered by a private sector provider or by default n.e.s.t., the national employment savings trust which ends up with everybody if the employer doesn't make an active decision otherwise to. it's now been operating for about three years, and things are going well. it's actually unfolding, as it should. what they decided to put in their system was an opt-out option for employees, and they thought opt-out rate would be 20%. and what do you think it actually was?

the ones that know can't answer, that already know can't answer. you've blown it. 6%, right? very low dropout rate. which surprised everybody by how low it was. so i think that's, you know, that's very encouraging for an approach where you have auto enrollment, and you don't want to go totally mandatory, you want to create the safety valve. it really seems very powerful to get people in and get people savings. the 7 percent that are dropping out are rational decision, people close to retirement, entire income brackets. makes sense. so that's interesting. the great white north, your friends, your neighbors to the north. we've been dealing with the same issue, middle income workers, no retirement pension plan, what are we going to do. and this has been going on for ten years. and effectively, there's a group that says, well, we already have the canada pension plan. it works very well.

it's a relatively modest system. let's expand it, you know? let's do this two things, increase the benefits, cover more income. and, but we have this rule in terms of changing the cpp/qpp, quebec does its own thing on this, is that it requires two-thirds of the provinces with two-thirds of the population as well as the federal government to make any change. and so that's a pretty high hurdle. and so we've had a federal government for quite some time who said, no, people should figure this out themselves. so it's been a nonstarter. so ontario, a few years ago, said enough already, largest province. we're going to start the orpp, the ontario retirement pension plan, because it looks like we're never going to agree federally on anything. and so that started a couple of years ago, legislation was enacted last year. there's a process now in terms of actually creating the delivery organization. and then we had last monday. now, i don't know with all the

news going on down here whether you get any canadian news whatsoever -- [laughter] but in our world something really big happened on monday. and that was there was agreement to actually increase the cpp. so we had a change in government last october. that was positive on enhancing the cpp. and, frankly, ontario would rather do something nationally with the other provinces than do things on their own. so between ontario and the federal government and doing some further work, there was actually agreement on monday to do two things with respect to the canada pension plan. one was to increase the benefit and, number two, increase the amount of income that is going to be covered by the benefit. so it's a big deal in canada, right up there with stabilizing the cpp in the 1990s. so there's a lot of detail to be

worked out as to, okay, exactly -- you get down to the bottom line, what does it all mean in terms of implementation? long window on implementation starts 2019, seven-year window to implement the whole thing. that got agreement -- that's what got agreement from the hesitant provinces, to have a very long runway. so that now changes the conversation in canada in terms of, okay, given that we're going to do that, what else do we need to do? and it's quite a change in conversation. so good things can happen. there can be agreement between governments, apparently, if you get the right vibes. and somebody called trudeau in the room. and it happened. so where does that leave you all here? three things. one is that i think it's important to have the ideal system in mind. you know, ideally if you could wave a magic wand, what would it look like? and then, number two is

realistically how close can you get there, because there are a lot of barriers, a lot of path dependency in how you got to where you are today. some of them nonchangeable. but i think still this notion of the ideal, what can we do, you know, at the margin where should we be spending our time, and it seems to me personally that, you know, the abovety alleviation -- the poverty alleviation for seniors is one major issue that i would look at in terms of what do we do about that. and then i think with respect to middle income workers without pension plans, the question really does become is, you know, how forceful can you become about getting that participation up? and it's interesting that in the u.k., you know, they went through this, and they said, you know, you've got to mandate it. and now in canada through expanding the canada pension plan, it is mandatory. so all employers will have to be involved in this. so i think, you know, the question for you is to what

degree can you require, number one, participation but also, number two, getting the contribution rate up to a level where it actually matters? where you can get the income replacement. so those are my opening thoughts. thanks. [applause] >> thanks so much, keith. so we've got about 15 minutes left, and i want to make sure we have lots of time for -- well, lots of time, some time for audience questions. so i would say, i would like to pose one question to all of you that you can answer or not as the case may be based on things that everyone has said, right? everyone's pointed out that coverage, coverage is a huge issue. keith has just put on the table idea that the key to it internationally is compulsory participation. is that the key to it? and, you know, related to what, the way he framed it at the end

which i thought was really useful, right, was like there's an ideal system in mind, and then there's realistically how close can you get there. we all know the prospects for compulsory systems in the united states are particularly challenging in the aftermath of the affordable care act. so comment, if you would, on whether you think compulsory is a solution or what a better, what a different alternative might be that would get us there. >> you want me to start? >> sure. >> so i say to start the first thing i would suggest is we don't use the term "compulsory." [laughter] >> how about mandate? >> probably not that one either. i've been at a number of events with the folks from n.e.s.t. and others from the u.k. that were part of their reforms, and they always start using the term "compulsion." and i think, boy, that'll never

sell here. [laughter] so, you know, i see david john in the room, and i know mark is going to be here later, and i think the critical thing is to think about how we build on, you know, the start that they got on the auto ira and think about the framing in a way that makes people in policy circles comfortable with the fact that we're not talking about compulsion or a mandate, we're talking about putting in place a series of defaults that puts people on a path towards retirement security, towards success and that if we don't, we're doing the same thing, we're just choosing a negative default. we're putting them on a path toward failure. so why as a society would we do that? i mean, it just doesn't make any sense. and i think if you frame it that way, it's a lot easier to get

the 90% of the way there that we can get to and not make the, you know, the search for the ideal be the enemy of good enough here. so that's my thought. >> thank you, lew. >> sure. >> i like the term universal as opposed to compulsory. i like the sense that everyone, all workers would be covered, would have some way of providing for retirement and targeted universalism, perhaps. and by that i mean doing something for those who are the lowest earners through tax credits, expanding the saver's credit and making it refundable, something to that effect, so that there is an additional boost in terms of insuring that there is enough for them at their retirement age. >> [inaudible]

>> you know, maybe this is a time where i'm supposed to remember to say my views are my own and don't reflect ebri or the trustees, etc., etc. [laughter] i think you really need to focus on how to best draw employers in as part of the solution. we modeled what would happen if auto iras were basically available on a national basis, and of the $4.13 trillion in retirement savings shortfalls, we were only able to decrease it by 6.5%. the reason is, of course, is you don't have any employer money coming in, and you don't have any incentives for the employees to go beyond the 3%. so whether we're calling it mandatory or universal or compulsory, i think we should do everything we possibly can to incentivize the employers to

become part of this process and the come in as contributions. the other thing i think you have to be really careful on is what is your objective? i mean, do you really want to have every single employee, quote, covered every single year? we look at these snapshots, and we look at a huge percentage of individuals that don't necessarily have coverage or aren't participating in a particular year, but that doesn't mean they're going to go through their entire career without participating or without coverage. so you have to look basically over a full lifetime. and then you get9 to the end, and -- get to the end, and what is it you want to have available for these people in we find in our modeling that a lot of individuals look like they'd be in good shape financially and then because of nursing home costs for one or both spouses, basically, the account balances are ravaged. so is it really a problem with not enough savings, or is it a problem that we have retirement

expenditures that are not being dealt with sufficiently? whether it's through long-term care insurance or some government program, what have you. >> thank you, jack. >> keith, i'm going to give you the last -- [inaudible] give you the last word on this, and then we'll open it up to the audience, if that arrest okay. >> [inaudible] >> yep. >> i think economics is really important in this, in understanding it. and the framing is really critical. i'm just going to give you an example of that. and this relates to my friend david knox who's actually been -- this goes back to the inventer of gpi. he's now on a mission to invent the back ends on d.c. plans, income for life back ends. and we just had a workshop in toronto on that. and i wrote it up, and i used, in my language i used income for life guarantees in my draft. and he came back and he said

don't use the word "guarantees." use protection. income for life protection. and, again, i think it's a classic example of something that goes down a lot easier because, again, with protection it's not necessarily a guarantee. i mean, you can actually do a lot of shifting, longevity shifting between the people that die too soon and the ones that live longer than they're supposed to without guarantees. and that's the focus. so i think that there's a whole open question of language that we use and how we rethink getting to where we want to go using language that facilitates rather than creates barriers. >> thanks, keith. that's a great point. so let's go to audience questions. i would ask -- a, i would remind you that we're on c-span. not because anybody should be should be afraid that they're on tv, but if you would, please, wait til we get a microphone, stand up and also if you would, please, identify yourself before

you start. i think, melissa, did you have a hand up? do you? [inaudible conversations] [laughter] >> thanks. melissa khan from state street global advisers. and i agree with all comments me about language. language is very important, and framing is very important, and i really liked kilolo's term about universal. lew, i'm sorry to put you on the spot. since we are a member and we support you greatly, but i'm just curious, you know, i think auto enrollment, auto escalation, changing the safe harbors is very important here, but i still think you have that gap of workers who don't work for companies, especially in the small plants in the small employer sector who don't and won't have access. so how would you get them covered? >> yeah. great question.

so i think the first thing you want to do is understand, as jack was alluding to, who's left out of the system, and i think we often reflexively fall into the trap of looking at a snapshot that at any given time, you know, there's a significant percentage, maybe an overreported percentage, but a significant percentage of the population that at that moment in time is not covered. but a significant number of those people that are not covered are going to cycle back into coverage and may be out of it and back in. so i do think it's important for us to understand through a working lifetime, you know, whether people have access to enough coverage to get them where they need to be. but that aside, who's left out? so part-time employees, as kilolo said, are clearly in a position where they're more often than not left out.

we need to figure out what the incentives are in the system right now that are causing employers to leave their part-time employees off the table. i think there are, you know, rules in place, qualification rules that are probably anachronistic that we need to rethink. we need to make sure that the incentives are always to cover people and not the leave them out. not to leave them out. but it goes well beyond that. you know, the self-employed are often out of the system, and you would think that there's a way for us to incentivize them to take care of themselves.

>> you know, ultimately i think the other thing is it may be a bit beyond the scope but we have to think about the critical role social security plays in providing for the retirement security of the least among us. social security was conceived as a social insurance program. we have gotten it thinking about it as a retirement savings program and you know, i think as part of this conversation we have to think there is going to

be a portion of our population that whatever we do we will not have enough periods of coverage through working to provide for their retirement security needs. we have to make sure their security is provided through social security. i think it is a critical part of the total calculus. i don't know if others have comments. >> other questions? >> thanks so much, everyone. i am justin king from new america. congress man crowly did a great job offering up the idea of the need for savings for a variety of needs over the course of one's life. and i would love to elisant reactions from the panel about the tension between people's emergency needs and retirement savings and whether or not there

is potential to adapt the retirement savings system to more wholistically meet the needs of americans whether we can address with drawls and leakage in a way that supports family's emergency needs and the fact that life happens going forward. >> anyone want to take that? >> that is a very good question and definitely there is the need to acknowledge people are going to have requirements for the use of savings before they get to retirement and to have multiple ways of saving and we have research that shows that people of all income levels can and do save when they have the structures in place to

facilitate things like upper income households had for a long time. so there are options to have bifurcated saving strategies so some savings are going into retirement accounts at the same time some savings are going into accounts for other uses which would be emergency savings and i think we need to keep those on the table and explore that as we go forward. >> yeah, i just want to quickly comment. i think it goes beyond programs. i think we have a real need for cultural change. we need to change the mindset and beliefs in the country around taking control of your financial future. there are programs i suggest better outside of the retirement system instead of detracting from it but i think it is really

important that we get peop people-focused on a gut level for taking control of their future >> i think we have time for one more question. i saw your hand up lynn. >> first of all, thanks for a wonderful and comprehensive panel. i wanted to just to note that what was said pointed out to me closing the coverage gap is more than just about providing options for retirement income. it is also an issue of social justice and helping us become a more perfect union. i wanted to ask jack a question about the three percent glitch in the tpa itself. isn't there somewhere in the bill, jack, where there is a reference to three percent as a starting point and you are not

necessarily required to escalate through there? perhaps that legislation caused a lot of people to use three percent and create the issue "the wall street journal" story brought up. >> i haven't read pta in ten years so i might be rusty in the details. i don't know if mark is here yet but i would bet the vast majority of the people who came in at three percent were coming in because of what was written back in the '90s when they were getting the guidance at two-three percent default was going to be okay with irs and the treasury. whether or not you are basically going to be compelled to follow three percent for anything other than safe harbor i don't think that was the intent of pta certainly.

>> so, we will move on to our next thing. please join me in thanking a wonderful panel. [applause] >> ida is going to introduce your keynote speaker. >> thanks, jeremy. i started out this morning saying there was a room full of experience and was i wrong? it has been an amazing conversation and careers dedicated to these issues and the path forward. so it is my pleasure to get the opportunity to introduce yet another one of the leaders who has emasked many years of experience and expertise to share with us.

please join me in welcoming edward who i will call ed for the rest of the introduction who is president of empower retirement which is the second largest plan provider in the country with over eight million savers and 35,000 plans serving all segments of the employer sponsored plan market. ed brings over 30 years of experience to his role with empower and has been with putnam since 2009 and in 2014 took over the role of president of empower. prior to putnam, he was head of the fine contributions and investments and prior to 2009 he was an executive leadership with fidelity for 20 years. a lot of publications, a lot of leadership already exhibited by you, ed, and also you are frequently here in washington, d.c. so i think it might be your second home speaking with

congress, department of labor, department of treasury, the irs, around many of the conversations about reform, inclusion, and expansion of retirement system and their effectiveness to our policy leaders in the country. earlier this week, or was it last weeks, at the spark conference, an industry conference here you got headlines from your call to peers in industry to speak with one collective voice on public policy issues relating to expanding and improving retirement saving systems in this country. i want to thank you for that leadership and i cannot wait to hear what you have to say. i know we have slides for you, ed. if i can invite you up and everyone give a warm welcome to ed murphy. [applause] >> good morning, everyone. thank you, ida, and thank you to the aspen institute for hosting this event. i do think it is timely

particularly in light of the election and what we can expect in 2017. i think we are optimistic about the opportunity of retirement legislation. today is an interesting day at empower for us. we have 5,000 associates and we are busy with call volumes up 25% and we have eight million americans we support. one interesting thing is unlike years ago when we had periods of volatility like this in the market we are not seeing there panic selling. i think investors, through relations they have with adv th advisors are not reacting and realize they are 20-40 year investments. i think that is good to see especially with the market down 500 points. first of all, i think this is a

great group that we have here. i know many of you were involved in helping to shape the pension protection act of 2006. others are working on kind of the next generation as we look to build off the tpa. so, as ida mentioned, i have a little bit of a multimedia show but i think it is interesting and empirical data i want to share. i will cut right to the chase and say the key to solving america's retirement challenges are right in front of our noses. first is a baseline. we must all foster the political will to make social security solvent. we heard the previous panel address this and also the congressman. beyond that in the defiant contribution saving arena we conducted a mass investing experiment for well over a generation now. the results are in.

we know that it works. in fact, we can trace the most beneficial factors that lift retirement readiness directly back to the tpa itself. it's endorsement of automatic plan features, legal safe harbors, and planned sponsor was a qualitative change in the american retirement policy. indeed, the benefits of the best practices that the tpa endorse literally jump off the page is in the lifetime income score survey that empower retirement has been conducting for the past six years. these surveys take stock of the total networth of more than 4,000 worker americans from age 18-65. it is weighted to match the u.s. census parameters. the assets we found are comprehensive. social security, planned

benefits, define contribution balances, contribution rates, other savings, real estate, equity in the home, equity in small businesses to the extent that applies. our analysis then projects the share of pre-retirement income people are on track to receive after they are out of work to generate the score. we see income replacement as the prime goal the best, the only metric of success of shortfall for any retirement system or plan. you can see on the far left of this slide we project income replacement of just 44% at the median for 20 million plus households who have no access to saving plans on the job. that was a topic of the decision

of the previous panel. at the far right, nearly 11 million households who stand at the median to draw incomes in retirement well over full repla replacement. 117 percent in fact. as the dotted line shows, we estimate the median working americans are on track to replace roughly 62% of their current incomes in retirement. clearly tens of millions of americans may face a sharp fall off in living standards in retirement or at least real financial stress and that is the challenge. but what i would like to suggest to you today is that the chart also provides us with something like a road map or an action checklist to identify priorities and solutions for america's entire retirement challenge. for example, since our data includes projected social

security income, we have we can see how vital this program is and why making it solvent should be retirement faulties job one. let's take a look. here is how retirement readiness would drop in the absence of social security. tens of millions of people would fall into destitution. many millions more would be sorely stressed. that is why all of us who care about retirement policy should urge our political leaders to make social security solvent. it is a high priority because the system is under threat and time is not on our side. many of you know roughly 17 years from now the systems own trustees project the last of the trust funds will be drawn down.

all recipients will face a cliff drop of 23% or more in social security benefits. every american under the age of 48 today who plans to retire at age 65, in 2033 and beyond, faces a nasty retirement income paycut. that is the very predictable price of inaction. let's hope the next president and congress have the courage to take on this challenge, compromise fairly and shore up the foundation of american's retirement security. let's help them do that. they need prodding, they need support for compromise and sacrifice. if people like us here today don't offer the help who will? let's come together on the most salient priority and that is

getting every working american access to saving plans on the job. >> here is the difference between having a payroll deduction plan and not having one. it is pretty stark. access alone raises income from 44 to 79 percent. at empower we believe everyone who pays fica tax should have the option to set aside part of their paycheck for retirement. data from the employee benefit research instustute shows roughly 70% of workers earning 30-50,000 dollars who do have access to workplace plans chose to save at some level. the fact it is close to 75% of those people.

but among an identical cohort of moderate income workers who don't have a payroll saving plan less than five percent open up an individual retirement account. payroll deduction is 14 times more effective than the tax incentive itself. this suggests to us the only real path to retirement readiness runs through the workplace. that is why we support robust solutions to the access or coverage gap at the national level. outre, multiple employer plans, a simplified 401-k are all critical measures we think will expand workers access to payroll savings. we know the primary reasons why small business owners do not create new plans is tied to

complexity, the concerns about fiduciary responsibility can be addressed. manyf of us are working on these. savers who draw on professional advice, for example step up their median income replace rate to 87% at the median, it remains to be scene whether the fiduciary rule will help or harm this. i think the jury is out particularly among small savers who need the advice more than every. workers whose company adopt auto enrollment in plans take a furth furth further step up. they are on track to replace 92% of their work life income. firms that go on, as they all

should, to add automatic saving bring their rates to just over a hundred percent which is success be anyway measure we would agree, i think. lastly we come to the highest success category on the far right. these workers are deferring rates of ten percent or more. this cohort of workers may be able to step up their living standards in retirement. this group isn't a tiny number of well heeled outliers. it includes 20-30 people from a variety of income levels. that is why we are pleased to

see the roundtable endorse the goal through their great save ten campaign when we have been a part of. we don't expect to win the noble prize by learning more and more and higher savings compounded over time. we think saving a target of 10% system wide is an ambitious targett and well worth pursuing. today's saving and deferl rates are just over 7%. what we are calling for with the save ten is actually a step up of nearly 40% in the savings rates of tens of millions of americans and washington, d.c. plans today. let's face it, we don't serve anybody well by allowing them to

believe that they are on track for retirement readiness at saving rates of 3-7 percent. if americans want financial security for 20-30 years after their work life ends we will have to save more and a lot of more than we are doing today. let's just tell people the truth. you might think that what lifts people to the solid readiness we are seeing on the far right is sheer income but that is not the case. it is true higher income people are somewhat more able to save. though surprisingly a large number of higher income people don't. our survey finds plenty of low and moderate income people reach

high levels of readiness because of the features that get them v engaged in saving. plan and design matters critically. it is possible and should be our goal to create a define contribution scientiystem that success easy and failure hard. one example from the survey suggests that it may be gaining traction. we are seeing an uptake in the retirement of millennial to 81path in this year's survey. we suspect many are adopting on enrollment.

we see that in our own business particularly for new hires. we will watch to see if we we consistency and momentum going forward. i don't think we need a lot more data to tell us, americans have been ling through this experiment over the past years. we simply must spread the best practices found in the define contribution universe as widely as humanly possible. access itself is vital. having nearly 50 american people outside of the system is a scandal. besides coverage, we need full auto plan design as universal as possible. at empower we feel a fiduciary

responsibility. because our data tells us we can really solve the accumulation of the retirement challenge just by implementing the proven successes that tpa helped foster. once we do that we should move on to finish the job that the tpa started and that means solving for the distribution phase. the next slide i want to touch on at empower we call our vision for the next generation of workplace savings in the country workplace saving 4.0 because it follows three previous sometimes overlapping generations of workplace savings. one dot if you will was the

initial explosion from the mid 80s to 90s. workplace 2.0 took place in the mid 90s who progressive sponsors and providers started experimenting with features and trying out auto enrollment and saving escollation. workplace 3.0 began in 2006 with the pension protection act and codified these best practice. but today with nearly 10,000 baby boomers moving into the retirement every day we are entering a new phase in the evolution of workplace savings. we still have to finish implementing tpa endorsed best practices, take the system to a new level and move on to solve the new challenge of lifetime income. this slide shows our workplace 4.0 agenda in a nutshell.

we start by preserving all existing savings incentives and seeking to correct the bogus scoring method that make retirement savings such a juicy target for budget hawks. this is for honest arrhyithmeti and distinguishing between tax referls and tax expenditures and doing that before any tax reform. closing the access gap at the national level is the next goal. we will actively support regulatory and legislative measures to do that. through ira, simplified 401-k, employer plans. favoring a more generous and refundable tax credit to encourage employees to establish plans. we support efforts to engage the