Throwing Spaghetti: Small Employer 401(k) Pools By: Gabriel PotterMBA, AIFA® 2016.02.02

You can throw spaghetti against a wall to see if it sticks; if it sticks, it’s cooked.   (I usually just sample a noodle to check if it’s done.  In practical terms, I know a cook would fling an individual noodle against a wall to test for done-ness, but I keep getting a mental image of a frantic restaurant chef, running behind in his dinner orders, throwing handfuls of half-cooked spaghetti desperately hoping that some of it will stick to the wall.

This mental image came to me while considering a news story this week:  the administration is proposing several new legislative ideas for retirees.

First, they’re proposing the ability for small businesses to pool their 401(k) plans to save costs and expand their usage.  To a degree, this sort of solution already exists.  For instance, the Multiple Employer Plans (or MEPs) are used by trade associations and professional employee organizations to combine the administrative costs of related businesses into a single pool.  The newly proposed legislation would get rid of some of the restraints for companies using these options. 

Second, the administration is trying to create programs which deal with transient job-workers and enhances their ability to track and combine multiple retirement accounts.  This sort of program exists to supplement the Department of the Treasury myRA (i.e. “My Retirement Account”, like “IRA”) program which exist to expand retirement account usage at an individual level, without any required support from corporate America.

There is no way to tell how impactful these initiatives will be.  For example, exact numbers aren’t being released by the Department of the Treasury, but the myRA program isn’t popular yet.  (Admittedly, the program hasn’t been fully rolled out.)  Perhaps the government isn’t quite as desperate as the restaurant chef in my mind, but there are many people in the administration making attempts to address the under-preparedness of American retirees.  

Gabriel Potter

Gabriel is a Senior Investment Research Associate at Westminster Consulting, where he is responsible for designing strategic asset allocations and conducts proprietary market research.

An avid writer, Gabriel manages the firm’s blog and has been published in the Journal of Compensation and Benefits,...

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