A mandate by any other name. Employers “mandate” saving for retirement, what’s the big deal with health insurance?

Depending on your point of view, you may be for or against the mandate under PPACA to enroll in health insurance. Regardless, the provision certainly has gotten people riled up, likely all the way to the supreme court.  That mandate is “necessary” because a lot of people are irresponsible and will not pay for health insurance,  and instead you pay for their health care.

That irresponsibility carries into another area as well and that is saving for retirement. However, in this case it is employers doing the “mandating” and nobody seems to get excited.

More and more employers are using auto enrollment for their 401(k) plans. That is, an employee is enrolled in the plan upon employment at a modest percentage (3% or so) and defaulted into a fund selected by the employer.

Save damn it, save!

In addition, a small but growing number of employers are using re-enrollment. Under this process the employee’s investments are moved into a fund selected by the employer. The fund is likely to be a target date retirement fund which includes a mix of investments deemed appropriate for a persons likely retirement date.

Employers use these “mandates” because many workers simply do not pay attention when hired, do not enroll and many (most) individuals have no clue what they are doing when it comes to investments. Employer paternalism is alive and well in this regard.

Yes, the employee can opt out of auto enrollment (most don’t because they frequently do not even know they are contributing believe it or not) and can change investments after a re-enrollment.  However, the point is someone, in this case the employer, is taking action because of inaction by the individual. Sad that such actions are necessary, but a good thing nevertheless.

Enter the federal government and a mandate to enroll in health insurance or pay a penalty. In other words you can still opt out but with some cost like the real cost of not saving for retirement.  In both cases the failure of the individual to act prudently has consequences for society as a whole.

I consider  myself on the conservative side and I’m all for individual liberty, but nearly fifty years of running both health and retirement plans tells me individual liberty is not always consistent with individual responsibility (or common sense).

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