After decades of working in the retirement plan industry, David Wray, himself, retired on Sept. 28. For 25 years, Wray served as president of the Plan Sponsor Council of America, a Chicago-based industry group that helps educate 401(k) plan sponsors and the millions of workers who participate in these plans. In his final month at work, Wray spoke to Workforce contributor Patty Kujawa.
Workforce: What got you into this industry and why did you stay in it?
David Wray: In my former association, I was responsible for managing the benefits program. We had a defined benefit plan with a 401(k) profit-sharing match. We flipped our plan into a 401(k) in 1982.
I was very committed to the concept of partnership in the workplace that is demonstrated with defined contribution programs. It is a way for … people to accumulate personal wealth. How you manage your workforce is very much a partnership arrangement. [Employers] must have a financial way to reinforce that the company is committed to its workforce, and the defined contribution approach is a great way to do that. I was very much interested in this concept, and in 1987 when PSCA was looking for a president, I saw an opportunity to follow my passion.
Workforce: In the '80s, did you think that defined contribution plans would become the primary resource for Americans to save for retirement?
David Wray: I knew it was going to be much bigger than it was at the time. In the mid-'80s, there was a restructuring of American businesses in reaction to international competition. Those were the days when people were talking about the Japanese making all of our products. It was a brutal period. Millions of people were downsized out of their corporations. I think it was clear at that time that—except in limited cases—it was going to be difficult to maintain defined benefit plans.
The idealized working pattern [one employer for life], was certainly popped. People started realizing that they were going to work for multiple employers.
The pension system was under stress, not because employers wanted to choose one or the other, [defined benefit or defined contribution plans] but because of external factors that forced employers to make certain kinds of decisions. That meant we had to do everything we could to make the defined contribution program as viable an alternative as possible.
Workforce: Can you say that the 401(k) concept is successful?
David Wray: I think it has been massively successful. If a person saves 10 percent a year for 40 years, it is a smashing success. It is very much dependent on a participant choosing to work at companies that have plans and choosing to participate in them. It is a false choice to say the defined contribution system is not working because a lot of people don't participate.
What we need to do is make our voluntary system as attractive and as user-friendly as possible. For example, the fee structure—which has been attacked for quite some time—most 401(k) participants pay far less in fees than people who are retail investors. We have companies with thousands of employees, where the plan charges the participants one or two basis points—not 150 or 250 basis points, like you find in the retail market. …
If someone wants to save for retirement, we have given them the superior alternative to do that. But it is a voluntary system.
Workforce: There are so many Americans who don't have access to a defined contribution plan. Are you in favor of mandating retirement plans in the workplace?
David Wray: We have universal retirement coverage—it's called Social Security. The government needs to deliver or adjust the promises of Social Security before coming up with more mandatory programs. If they are concerned that the benefit in Social Security is inadequate, the system is easy to fix: raise the minimum benefit and raise the taxes appropriately to pay for it. I'm not suggesting that, but it is far more efficient than creating a whole new infrastructure. We have a mandatory system, and we have to make that program work better. To impose more obligations on the small-business community is wrong.
Workforce: Do you feel secure in retiring? Is the system in good shape right now?
David Wray: I have followed the prescription of the system. I have been saving consistently since 1981. It definitely works and it has worked well for me.
If you talked to a typical worker in the 1980s and asked whether they were saving for retirement, they'd probably give you a blank look. People today know they need to save. I think that message is clear to any worker—whether they are saving or not. There is fundamental support for a retirement savings system, and I believe it's going to survive.
The system itself is very strong. The fact that the 401(k) system has prospered right through this horrible financial event that we have been experiencing, is proof. These 401(k) participants have been the most steady savers and investors in the world, and they have benefited from it.
Clearly I plan to stay engaged. This is still my passion and I hope that there will be opportunities for me to be helpful. Right now, I need to take a break. More importantly my wife needs me to take a break. We have been married for 42 years, and I think she has earned the right to make the calls on what I do for the next few months.
Patty Kujawa is a writer based in Milwaukee. Comment below or email firstname.lastname@example.org.