IMHO: Conspiracy Theories

To her credit, Ghilarducci, an economics professor at Notre Dame, actually offers a serious proposal to provide a more secure retirement income stream for Americans, certainly for lower-income individuals.   It is unfortunate, IMHO, that she devotes but a single chapter of the 300-page book to exploring the "plan to save them," leaving the bulk to "the plot."   A "plot" that includes the complicity and outright scheming of employers, advisers, providers, and even the federal government (well, at least the Bush Administration).

The plan?   Well, she gets there by imposing a mandatory 5% FICA-like withholding (yes, in addition to the current one - this one also split between employer and employee) into a "Guaranteed Retirement Account (GRA)," imposing mandatory annuitization of those benefits (no lump sums, and no ability to pass that "account" along to heirs, though she would allow you to accept a reduced benefit for the ability to include a beneficiary in an annuity stream), doing away with the current tax benefits associated with 401(k)s, and replacing that with a $600 refundable tax credit that would be indexed for inflation.  

The "Plot"

As for the "plot," in Ghilarducci's view, employers offer defined contribution plans instead of traditional pension plans not because they are preferred by workers (in fact, she rather seems to doubt that) or because they are less impactful to the balance sheet (particularly these days), but simply because they are less expensive (there have, of course, been studies that refute that notion).   She decries the 401(k)'s disproportionate benefit to upper-income workers - which apparently results from the reality that they are more likely to actually participate in such programs than are lower-income workers.  

The Pension Protection Act's tightened reporting strictures on pensions were, in Ghilarducci's view, at best an overreaction to a non-existent funding crisis and, at worst, an overt move by politicians who so desperately wanted to promote an individual account system over defined benefits that they effectively legislated it out of existence.   Oh - and if you've been worried about Social Security funding, you can breath a bit easier.   Apparently, the actuaries are notoriously pessimistic, according to Ghilarducci.

In Ghilarucci's world view, the current travails of the nation's retirement system are not due to the lack of a coherent national policy, the aberration of a voluntary savings system inadvertently converted into THE retirement savings device, or the challenges that a pay-as-you-go Social Security design naturally experiences as it tries to pay for more people going than paying.   Instead, it all seems to be the result of some form of Machiavellian plot - and one that, IMHO, is a perspective of someone who has perhaps not spent much time with plan sponsors who agonize over the very issues she seems to think they proactively set in motion.