Your 401(k) plan is a 401 (F)--for failure.  

Turn it into a 401 (A) by getting Congress to pass the 401(k) Security Act, which requires companies to triple their contribution to employee accounts.

Mention the word Australia and the images that come to mind are “shrimps on the barbie,” Koala bears and kangaroos. We’d like to add another image: people who can actually afford to retire. Australians between the ages of 30 and 34 are projected to have more than $540,000 in today’s dollars in their accounts by the time they are ready to retire; those between 20 and 24 will have nearly $700,000.

How do those six-digit projected nest eggs for the typical Australian compared with of a typical American approaching retirement?

Here’s the bad news: the median balance for those age 60 to 65 is between $35,000 and $50,000--not enough to last most people a year or two-. The formula that’s often used to calculate benefit in a regular pension is that people need to have 10 times “final pay”--or the salary they are earning right before retirement, in their accounts. In other words, if you’re 65 and earning $65,000 a $650,000 account balance isn’t a windfall--it’s the goal.

Here are our findings--corroborated by leading pension actuaries--38 million people can’t retire. Unless they are the tiny percentage of the workforce that has long job tenure at a company that still offers an old-fashioned pension or in academia, most of those 38 million Boomers born between 1946 and 1956 who are scheduled to retire between 2011 and 2020 will have to stay on the job another eight to 10 years to achieve a 401(k) balance equal to at least 10 times their salaries near retirement--and that’s if reform takes place. This means that the nearly 40 million young adults born between 1989 and 1998--a larger Baby Boom--who are graduating during that period will very likely not be able to find jobs. If reform DOESN’T place these Boomers will have to work another 20 years.

The reason why Australians’ nest eggs are fuller than those of their American counterparts? Very simply: Australian employers are REQUIRED to contribute to their version of a 401(k) account—the current contribution rate is 9% of salary up to a salary ceiling of $137,880 up to age 75. In addition, the contribution is made regardless of whether the employee contributes--it’s not simply a “matching contribution.” One in four Americans doesn’t contribute to a 401(k) account and therefore ends up with nothing.

What’s more, Australian employers aren’t allowed to stop or “suspend” making contributions, as is the case in the U.S. More than 60 major U.S. employers announced that they were lowering or suspending contribution to 401(k) accounts as of early 2009, including Reader’s Digest Inc. Sprint Nextel Corp, US Steel, Unisys, FedEx and Eastman Kodak.

Get Congress, the White House to pass the 401(k) Security Act.

The bad news is that currently most Americans can’t afford to retire from a 401(k) plan. The good news is that there is a new administration in the White House and President Obama seems to understand that most Americans are under severe financial stress. On January 30 2009 he announced the initiation of a Task Force on Working Families, headed up by Vice President Joe Biden, to address the financial stress facing most Americans. The goals for the task force include “protecting retirement security.” In the press release announcing the Task Force, Vice President Biden said: “America’s middle class is hurting. Trillions of dollars in home equity and retirement savings are gone.”

Action plan:

401k Security Act: “The 9% Solution”

1. Coverage mandate: Every employer with 10 or more employees who doesn’t offer a regular pension plan-- or whose plan is frozen to new hires--must offer a 401(k) plan and contribute 9% of pay as of 2010. If the 9% contribution rate is challenging in these recessionary times, then we should take a “phase-in” approach similar to Australia’s: start at 5% in 2010, increasing to 7% in 2016 and 9% by 2020.
    
2. All employer contributions must be in cash, not company stock. As was the case with Enron employees, a stock match carries the risk that the contribution is worthless if the company goes out of business.
    
3. Get rid of the low ceiling on 401(k) contributions: $16,500 for those under 50, $22,000 for those over 50 in 2009. It makes absolutely no sense to limit how much people can contribute, especially since most of us will have to contribute more to make up for lost time.
    
4. Get rid of the low ceilings and income restrictions on saving in an IRA outside of the plan. Current rules make it impossible to save enough for retirement inside or outside of a plan, given that the conventional and Roth IRA limits are also too low: $5,000 for those 49 and below and $6,000 for those 50 and above (these limits typically increase slightly every year). What’s even more ridiculous is there are also income limits, so some households aren’t allowed to save anything.
    
5. Disclose necessary employee contribution “co-pay”: Participants must be informed what their contribution rate should be based on their age when they start to save, based on the new requirements. For example, even with the implementation of the new 9% contribution of salary by employers, individuals who start contributing to their accounts at age 25 need to know they should contribute an additional 4 percent, another 7% if they start at age 30, another 11.25% at age 35, another 17.25% at age 40 and another 42% at age 50.
    
6. Enable realistic catch-up contributions: In order to enable participants in their 40s and 50s to make “catch-up contributions” that will actually enable them to catch up, there should be no ceiling on tax-deductible employee contributions so that a spouse can contribute 100% of her pay in the event that a couple is falling behind. In addition, Americans should be able to sell other assets such as their homes, as is the case in Australia, and put the proceeds in their accounts.

Your message to Washington: Currently the Obama Administration’s only stand on 401(k) plans is to support automatically enrolling Americans in 401(k) plans or IRAs. Americans must deliver the message that only if employers are forced to kick in higher contributions will most folks be able to afford to retire. Along with contacting your own Congress person, go to the contact page on the White House website: http://www.whitehouse.gov/contact/ and submit an email asking Biden to support the Security Act mandating 9% employer contributions to 401(k) accounts.

Second, contact the member of Congress who heads up the committee that oversee pensions: the House Education Labor Committee: Rep. George Miller. Here is his contact info: http://georgemiller.house.gov/contactus/2007/08/post_1.html.

Third, we also need to send a message to AARP that the advocacy group for retirees needs to do more for would-be retirees who are currently can’t-be retirees. AARP says they have not been actively involved with retirement security because there hasn’t been a hue and cry from the general population. So they’ve limited their efforts to “ways in which we can expand access…such as the automatic IRA. We have promoted auto-enrollment. Adequacy is a tougher nut to crack.”

We need to send a “hue and cry” to AARP that if Australians can ”crack tough nuts,” we need to as well. Contact AARP at: http://www.aarp.org/about_aarp/contact/a2003-01-28-contact-issuesform.html and urge them to support my Security Act.

Fourth, contact a new organization that supports retirement reform called Retirement USA at info@retirement-usa.org and ask them to consider my proposed legislation.

Finally, please email the two TV news shows with the biggest audiences and ask them to cover this crisis: NBC Nightly News with Brian Williams and NBC’s Today Show.