Automatic enrollment has gained a following. What about one-click IRA/401(k) consolidation?
The scattered-accounts problem is actually a risk with the auto-I.R.A., too. Its architects envision a strict limit on the number of investment choices. That makes it different from normal I.R.A.’s, where you can often invest in whatever you’d like. Even if all auto-I.R.A.’s offered the same limited menu, no matter which bank or brokerage was administering it, account owners could still end up with a bunch of different I.R.A.’s years from now.
Mark Iwry, nonresident senior fellow at the Brookings Institution, said that he and David John, a senior fellow at the Heritage Foundation, who together came up with the auto-I.R.A. idea, were well aware of this potential problem. “Our direction is to facilitate the potential consolidation,” Mr. Iwry said…“You’re told that you have two I.R.A.’s, here’s where they are, and if you want to combine them you could just click here.”
If that sounds a bit messy, well, that’s the paradox of simplification. “Simplifying is a lot of work. It’s a complex undertaking,” said Pamela F. Olson, a partner at Skadden Arps in Washington, who was assistant secretary for tax policy at the Treasury Department during George W. Bush’s first term as president…In fact, it’s hard to get people riled up about the topic in the first place.
Or as another tax lawyer in the story notes, “There’s no real constituency for simplification.” Actually, there is a constituency. It’s just large and diffuse, and therefore, unlikely to organize.
Hat tip: Amelia Kaye