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The Evolution of Retirement-Income Adequacy Under ERISA With a Focus on Defined-Contribution Plans

A Review of the Status Quo, Counterfactual Evidence, and an Analysis of Changes for the Future

The Employee Retirement Income Security Act of 1974 (ERISA) marked a significant milestone in safeguarding the retirement prospects of American workers. The evolving landscape of retirement planning since then, especially the shift from defined-benefit, or DB, to defined-contribution, or DC, plans has had strong implications for retirement preparedness for many. In this paper, our researchers explore how potential changes to defined-contribution plans may affect retirement income adequacy and what that may look like for everyday Americans.

The Findings:

  • The elimination of DC participation and savings may reduce the probability of reaching retirement goals particularly for middle-income groups.
  • Transitioning from voluntary to automatic enrollment in DC plans, coupled with auto-escalation features, might enhance retirement savings.
  • Proposed legislation for automatic enrollment into IRAs with opt-out features and auto-escalation could improve retirement outcomes.

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