The excitement over my column on the swellness of the Dutch pension system continues. Here’s the reaction of Steve Utkus, who runs the Vanguard Center for Retirement Research:
The Dutch system is interesting but has some limitations from a European perspective. One is that it ties benefits to working in the Netherlands, a small country and job market, inhibiting workers from moving across the continent. Another is that the pensions are organized on occupational/industry lines, and so there are issues in moving from pension system to system when an industry is in decline.
Also, the US does have a compulsory DB system known as Social Security. The relevant issue in the US is not probably whether we need more DB, but whether we need workplace DC for the mid/small employers who don’t offer 401Ks.
A sensible system to match the Dutch system, with more flexibility, would blend the DB/SS system with a compulsory DC system for small employers. And that’s exactly what policymakers are debating in the mandatory auto IRA proposals.
DB means defined benefit, like a pension plan. DC means defined contribution, like a 401(k). The “mandatory auto IRA proposal” Utkus is talking about is something that comes up from time to time among wonky Washington types, but I have no idea what kind of traction it has among actual lawmakers.
