Since most private employers traded in traditional defined benefit pension plans in favor of do-it-yourself 401(k)s, the big losers have been employees who aren't investment gurus and can't be expected to be.
In the last couple of years, after the economic meltdown in 2008 and 2009 made that infinitely clear, there have been calls from many quarters to better regulate retirement accounts and give workers saving for retirement more assistance and protection.
One notable effort has been the call to hold 401(k) administrators to a fiduciary standard. In other words, require them to have workers' best interests at heart when they are managing their money.
At a Department of Labor hearing on the topic earlier this month, most of the largest providers of workplace 401(k)s argued vociferously against the proposal, saying that it created a risk for providers of 401(k)s that would result in workers getting less useful information than they get now. Meanwhile, the Government Accountability Office argued that current standards give 401(k) providers too much leeway to sell financial products that benefit them -- not workers. At stake is what is expected to be $4 trillion in retirement savings by 2015, according to research firm Cerulli Associates.
One of the financial services gurus who is not arguing against more regulation is Robert Reynolds, president and chief executive officer of Putnam Investments. In a statement released today, Reynolds called on Congress to create a new Lifetime Income Security Agency to administer an industry-funded, risk-based national insurance fund to protect current and future retirees, much like the bank deposit insurance fund overseen by the Federal Deposit Insurance Corp.
An insurance plan like this that would protect retirees living on their savings from provider failures sounds like it could be a real retirement planning boon, and so would be a law to protect savers from being offered lousy deals by the companies that administer their 401(k)s.
Will either actually happen? I wouldn't hold my breath.