Singing the 401(k) blues

As if Amazon.com didn’t have enough PR problems already, Bloomberg.com just published an article slamming the Seattle-based company’s 401(k) plan. It noted that many of Amazon’s lower-paid employees were not participating in the plan, to the extent that the company had to pay back the government upwards of $5 million for the plan to retain its privileged tax status. The article does not explain why lower-paid employees are not participating. It’s fair to assume that many (particularly if they are seasonal employees) lack the income to sock away money for their Golden Years. Others may not be receiving helpful plan information. Or perhaps the reason is more prosaic: Bloomberg ranked Amazon’s 401(k) plan last among the top 50 public companies. Wow. One wouldn’t expect a billion dollar global behemoth to be called on the carpet for its lousy 401(k) plan. Traditionally, it is employees at the smallest firms (those with less than 100 employees) that have gotten the short end of the retirement stick. These plan participants tend to pay twice as much in fees as much as their counterparts at larger firms; they lack access to robust investment products; and they receive less investor education and support. Needless to say, these shortfalls tend to translate into negative outcomes. This is something of a national scandal, particularly given the adulation to which Americans accord small business. Indeed, the Federal government, fearing a doomsday scenario in which older Americans start outliving their savings, has become increasingly active in trying to right the retirement ship. At the same time, a new crop of 401(k) plan providers is offering smaller companies access to low cost, digitally focused platforms, as I discuss in a recent report. The reach of these upstart providers in a highly fragmented market is limited, however, and the response of the largest plan providers to the needs of small business has underwhelmed. I have to wonder, given the emotions around retirement and the centrality of the 401(k) plan to the lifetime earnings picture, how long it will be before Bernie Sanders takes on this topic.