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June 4, 1998

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As President Franklin Roosevelt said, a secure retirement rests on a three-legged stool: Social Security, private pensions, and private savings. All of us --government, business, and individual Americans --must do our part to make sure that these three legs serve our people well into the next millennium.

President Bill Clinton
June 4, 1998

Today, the President is joined by Vice President Gore, and the bipartisan leadership of Congress, in attending the SAVER Summit, which will address the need for greater savings and pension opportunities for the American people. The President will affirm that existing laws permit employers to automatically enroll new employees in 401(k) pension plans, unless they opt out.

The Need For Action. American workers generally need three elements to ensure financial security in retirement: (1) Social Security; (2) an employer-provided pension plan; and (3) personal retirement savings. Currently, Social Security is the sole source of income for 18 percent of all elderly Americans, and the primary source for two-thirds of all senior citizens. For over five years, the President has worked with Congress to expand pension coverage, make pensions more secure, and simplify pension plan administration. Despite these achievements, the personal savings rate among Americans remains too low, and many workers do not have pension coverage through their employers. Research shows that:

  • More than 50 million employees -- half of all American workers, are not covered by a pension plan;
  • Only 15 percent of private sector workers under age 25 are covered by a pension plan;
  • Only 21 percent of private sector workers earning under $15,000 a year are covered by a pension plan;
  • Only 24 percent of full-time workers in firms with fewer than 100 employees are covered by a pension plan.

A New Effort to Increase Pension Coverage. At today's SAVER Summit, the President will announce that current law permits employers to structure 401(k) plans so that new employees are automatically enrolled unless they opt out. Under standard practice, employees are not enrolled in 401(k) plans unless they opt in. Automatic election into 401(k) plans would:

  • Automatically enroll new employees in company sponsored 401(k) plans, while giving the employee notice that they can choose to opt out of the program if they wish;
  • Encourage participation in 401(k) plans for some workers by eliminating the opt in requirement;
  • Potentially raise 401(k) investment rates. Available research shows that companies with an automatic enrollment policy have participation rates of 90 percent, while the overall 401(k) enrollment rates is 67 percent.

Building On A Record Of Initiatives To Increase Investment. Today's announcement builds on other initiatives that the President has called for in his budget plan, including:

  • A tax credit for small businesses that adopt pension plans;
  • A benefit plan for small firms that is simplified and better defined;
  • Encouraging those employers who do not offer pension plans to allow employees to contribute to Individual Retirement Accounts (IRA's) through payroll deductions;
  • Reducing the vesting period for employer 401(k) plans from five years to three.

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