As the baby boomers reach retirement age and life spans lengthen, the issue of retirement security is gaining increasing prominence. Social Security has been the subject of innumerable talk show segments, political debates, and newspaper editorials.  Corporate scandals involving previously high-flying companies like Enron and WorldCom temporarily shifted the focus to 401(k)s and highlighted the risks of concentrating  significant retirement assets in a single stock.

Despite all of the attention, the most significant problem of the current retirement system has been conspicuously overlooked in the public debate. That is, half of American workers – over 69 million working adults – do not have access to a private pension, either a traditional defined benefit pension or a workplace-based retirement savings plan.

Certain categories of workers are particularly unlikely to have pension coverage. These include:

• Small business employees – 73% of workers employed by businesses with fewer than 25 employees do not have a pension.
• Low-income workers – 82% of workers with annual incomes of less than $20,000 lack pension coverage.
• Part-time and temporary workers – 79% of workers who worked part-time or part of the year do not have a pension.

The crux of the pension problem is that many businesses find it unaffordable to implement and maintain a pension plan. This paper will propose a solution to this problem in the form of a state-sponsored, universal, portable, 401(k)-style program called Washington Voluntary Accounts (WVAs).

WVA investment funds would be well diversified, which would prevent an Enron-style meltdown from devastating participants. Conservative investment options, such as bond funds and a savings pool, would also be available to investors who wanted to guard against market fluctuations.

WVAs would have a positive impact on:

• Retirement security – WVAs would help the nearly 1.5 million Washington workers who don’t currently have access to a pension to save for a more secure retirement.
• Business competitiveness – WVAs would improve the competitiveness of many businesses, and particularly small businesses, that are currently unable to offer pensions.
• Economic performance – WVAs would improve the personal saving rate and reduce future government costs for senior services.