How Will Alienated America Save For Retirement?

Facades of preserved 19th century commercial buildings of the type found in some older North American small town main streetsGetty

Alienated America is the title of a new book out by Tim Carney, commentary editor at the Washington Examiner and American Enterprise Institute visiting fellow.  Its core observation is this:  while in the 2016 general election, Trump had the support of evangelicals and other pro-life Christians, because of the binary choice between Trump and Clinton (where the single issue of abortion was key for many reluctant Trump votes), quite the opposite was true for the primaries.  Then, as now, Trump’s core support came elsewhere, from those disconnected from religious communities.  What’s more, it was localities in which community institutions were strong that Trump did poorly in the primaries, and in areas where they were weak and where residents were disconnected from each other, that Trump did well.  For wealthy communities like the D.C. suburb of Chevy Chase which Carney uses as one reference point, a swim club or a book discussion group or garden club might do a great job of connecting up residents, but for most Americans, it has historically been their church/house of worship which has been their primary “community institution” and, despite stereotypes otherwise, it is among the white working class that the trend of religious disaffiliation has been most dramatic — and its impact is much more far-reaching that the results in an election, as the loss of those institutions impact the well-being of the alienated.

So what does this have to do with retirement?

In early February, the Aspen Institute published a new report, “Portable Non-Employer Retirement Benefits: An Approach to Expanding Coverage for a 21st Century Workforce,” which sought to address the 55 million Americans who, according to survey data, lack access to a workplace retirement plan, by describing/proposing six alternate ways of providing access to retirement plans which might be scaled up or, in some cases, brought into existence.

Some of these mechanisms are still very much workplace-centered.  The report proposes that employers and workers in a specific industry sector might band together to provide retirement plans in which all employees could maintain participation even as they move from one employer to another.  These sector-based plans are common in the Netherlands — for example, the Dutch multiemployer plan which I contrasted with the US equivalent back in November was a plan for the metal industry.  In Massachusetts, nonprofit organizations are partnering to provide a multiple employer 401(k) plan, as is a similar coalition in Canada for its nonprofit workers.  The report also profiles “new worker organizations” — union-like groups formed to advance the interests of workers, such as domestic workers, freelancers, app-platform drivers, and so on — and suggests that they might offer workers the ability to enroll in a retirement plan, and considers professional associations and trade associations as further sources of retirement plan access — ideas which have been proposed elsewhere.

But there are two suggestions which are new.

The report suggests that labor unions might be a source of retirement benefits — not in the form of Taft-Hartley multi-employer plans which are already so troubled in their defined benefit form, but as a sponsor of retirement savings that reaches beyond mandatory contributions as a part of collective bargaining (though it does suggest this) to acting as a plan sponsor for spouses of union members, “non-unionized workers who might join a union under an ‘associate member’ category” and workers at employers who choose to participate in the union-sponsored plan.

The report also proposes that faith communities be a source of retirement plan participation.  They observe that the United Methodist Church provides retirement benefits for all its clergy and lay employees via its Wespath entity, the “largest publicly reported denominational plan in the US.”  (Side note: you’d think the Catholics would be larger, but they manage everything at the level of the diocese rather than country-wide.)  But the Aspen report suggests taking this a step further:

A potentially more far-reaching approach would be for faith groups to sponsor portable non-employer retirement benefits for the members of their community. The addressable uncovered group here is, in theory, very large. If we assume 55 million Americans lack access to a workplace retirement plan, and 36 percent of those attend religious services once a week or more (assuming the same proportion as the population as a whole), then there is a pool of nearly 20 million regular participants in faith communities who could be served by a faith group-sponsored portable non-employer retirement benefit. Where the faith community already sponsors a retirement arrangement for its employees — especially where that arrangement has scale, as in the Wespath example — there could be opportunities to extend access to that arrangement to the broader faith community.

To be sure, for an entity such as Wespath to reach beyond the employees of the church it serves, to those parishioners, it would become more like a “retail retirement account.”  Would this, then, be no different than a church partnering with a Vanguard or Fidelity, or allowing that member whose day job is financial planner to set up a table during after-church social hour or sponsoring the after-mass donuts?  The report’s suggestion might sound trivial to educated Americans who already have done their due diligence on how to save for retirement, but the kernel of this proposal could make a big difference for those who haven’t.

Carney emphasizes that churches in America have a key role as community institutions, and, at least among churches with greater resources, they offer groups that reach beyond Bible studies to provide support for the bereaved, young mothers, the unemployed, those in recovery, and so on.  In many parishes a “parish nurse” provides further resources and referrals, visits the sick, and provides other aid.  Whether through a formal organization or simply through an informal process that materializes as needed, they deliver casseroles to families struck by illness.  And many evangelical/mega-churches offer Dave Ramsey’s “Financial Peace University” money-management classes.

In this context, it’s not so crazy to imagine that churches, community groups, and unions acting as a community group could and should have an important role to play in financial wellness and retirement savings — both as organizations which might provide education and support on the path, and because they provide the sort of informal social networks that nudge people forward towards, for example, saving for retirement.  Yet these are exactly the organizations which Carney (and others) reports are disappearing in the regions of America that turned to Trump in 2016.

How to get from here to there?  That’s another question.

What do you think?  Please let me know at JaneTheActuary.com!

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