Sep 30, 2026 · 32 min · 9 segments
Michael Finke, PhD, CFP®, Vanguard’s Fu Tan, PhD, and Ted Benna, father of the 401(k), hold an informative and insightful discussion on the creation and modern applications of the 401(k), how 401(k)s…
Ted BennaGuestFu TanGuest
Michael FinkeHost
But the problem there is if they have to repay the loan, then their ability to make contributions is likely to make it much more difficult because now they have to repay the loan that they've taken.
So one of the points that was introduced in some research using Vanguard data recently is that employers need to consider making their own contributions to the plan and not require that participants elect.
that employer might just contribute maybe two or 3%, and that would create this sort of base.
It wouldn't require that there be a salary reduction, but I think there really is this trade-off, right? Because we've seen that there are some very positive effects of having high default savings rates.
But at the same time, it may not be appropriate for a lot of lower income workers.
And this sort of concept, which I think Radish addresses also, and that is not requiring for those lower income hourly workers where there's super high turnover, not requiring that they actually reduce their salary in order to achieve a certain level of liquidity and flexibility.
And to study this issue, is this match formula, including the non-matching contributions, are they progressive or regressive in terms of distributing employer's part across the income distribution of their employees? Of course, as expected, those formula with have a non-matching contribution component.
Second, having a really generous non-matching contribution component is going to make this more equitable, meaning that they're going to be able to add more employer contribution to the lower and middle income workers than the higher earners in their plans.
And so that's where it motivated us a bit to think more about, of course, there is a trade off for employer.
And of course, there's a separate issue about health care benefit, which is a growing cost.
And so we're not asking the employer to contribute more, but if you have the same budget, can you achieve more equitable kind of outcome in thinking about introducing a non-elective component in a match formula.
If you look at our Howard Macro states 20 years ago, that there's about, like for those who actually providing employer match, there's only maybe less than 30% actually are providing this non-matching contribution.
But there is a cost that the number of plans actually providing the matching contributions reduced.
So that's why I want to add to that more balanced view about the problem faced by employers.
But the problem there is if they have to repay the loan, then their ability to make contributions is likely to make it much more difficult because now they have to repay the loan that they've taken.
So one of the points that was introduced in some research using Vanguard data recently is that employers need to consider making their own contributions to the plan and not require that participants elect.
that employer might just contribute maybe two or 3%, and that would create this sort of base.
It wouldn't require that there be a salary reduction, but I think there really is this trade-off, right? Because we've seen that there are some very positive effects of having high default savings rates.
But at the same time, it may not be appropriate for a lot of lower income workers.
And this sort of concept, which I think Radish addresses also, and that is not requiring for those lower income hourly workers where there's super high turnover, not requiring that they actually reduce their salary in order to achieve a certain level of liquidity and flexibility.
And to study this issue, is this match formula, including the non-matching contributions, are they progressive or regressive in terms of distributing employer's part across the income distribution of their employees? Of course, as expected, those formula with have a non-matching contribution component.
Second, having a really generous non-matching contribution component is going to make this more equitable, meaning that they're going to be able to add more employer contribution to the lower and middle income workers than the higher earners in their plans.
And so that's where it motivated us a bit to think more about, of course, there is a trade off for employer.
And of course, there's a separate issue about health care benefit, which is a growing cost.
And so we're not asking the employer to contribute more, but if you have the same budget, can you achieve more equitable kind of outcome in thinking about introducing a non-elective component in a match formula.
If you look at our Howard Macro states 20 years ago, that there's about, like for those who actually providing employer match, there's only maybe less than 30% actually are providing this non-matching contribution.
But there is a cost that the number of plans actually providing the matching contributions reduced.
So that's why I want to add to that more balanced view about the problem faced by employers.
The rest of this transcript — segmented and speaker-labeled, so you land on the exact moment something was said
Search every transcript — by keyword, by phrase, or by meaning, across every show Radar indexes
Trends — what is surging across podcasts, measured against its own baseline
Alerts — when a name you follow appears in a newly indexed episode
No account is needed to search Radar.
