Brooking Institute and NCPA to Propose New Retirement Plan on the Hill

September 14, 2004 ( - The National Center for Policy Alternatives (NCPA) and the Brookings Institute will today present a reform plan for retirement savings accounts today on Capital Hill, according to a press release.

The plan , the work of scholars from both institutes, calls for savings programs that would create adequate retirement income. This would be done, the plan states, through incentives to employers to automatically enroll employees in 401(k) plans if the employee does not explicitly opt out, to set a minimum contribution rate unless the employee opts for a lower one, to encourage employees to invest in diversified portfolios, and to default employees into diversified plans unless otherwise stated by the employee.

“People make two mistakes: they invest in what they know and in what is safe,” said NCPA President John Goodman, in the press release “What they know is their company’s stock, but putting all your eggs in one basket is risky. What is safe is government bonds and money market funds, but the returns are too low.”

“Studies have demonstrated that inertia matters a lot for saving,” added Brookings Senior Fellow Peter Orszag in the announcement. “Public policy should encourage both saving and diversification.”

The proposed plan would not be compulsory, but Brookings and the NCPA will suggest regulatory relief should be instituted to produce behavior favorable to such changes.