>> 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'smergency 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 living 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 large and growing share of the workforce doing part time work or contract work. that is the big challenge because these workers have no regular w2 payroll in come to take deductions for from. they need strong incentives to engage in retirement saves. it is time for regulators and legislatures to guide, nudge, mandate the adoption of full auto plan designs. these designs are qualitatively better than purely voluntary plans without auto features. they are more prospects of helping workers attain readiness. in short, they work. to get to a full auto system will require new legislation and

stronger safe harbors for planned sponsors who do the right thing. and we need to continue efforts already underway led by the treasury to make it easier for workplace saving plans to include guaranteed or as keith would say protection income options. annuity, longevity insurance, garn uarante guaranteed draw down plans will be critical. we would favor a tax preference allowing workers to draw the first 10,000 a year in guaran e guaranteed income tax free. we believe congress should help

by allowing tax free with drawls to cover medical expenses and health insurance. these changes will go far to fleshing out the next generation of workplace savings in america. i want to close by emphasizing the great opportunity that all of us in retirement services have to make this country more prosperous, more dynamic, and indeed more just. keeping the promise of dignified retirement after a lifetime of work is not just a decent goal to fight for. it is the way to turn what could be a crisis into an opportunity for reviewed growth and national confidence. imagine an america in 2020 where every worker has strong incentives to save and plans designed to actually deliver a dignified retirement. with those savings flowing

through the market to finance growth, entrepreneurship and job creation. imagine a country that knows that it can meet real challenges because it has just done so. that is what is solving our retirement challenge could do for america. so let's go from here to empowerment. let's set the agenda for change and retirement policy this year and then drive it forward in 2017. thanks for listening. [applause] >> i know j stand before you and lunch but i am happy to take any questions for you.