Congress has just made major changes to the tax law. They include one change I argued for more than a decade ago. Other changes mix the good with the bad. Some are downright ugly.


One of the most significant changes in retirement policy in recent history was a provision in the pension reform law of 1996. It allowed employers to auto-enroll their employees in 401(k) plans with diversified portfolios without fear of lawsuits if the market happens to go down.

Before that time, many workers were not taking advantage of the 401(k) savings opportunities, even when there was a generous employer match. Many who did join were defaulted into money market funds, with no potential for growth. Those who did select investment options often made poor choices. (See this summary by Brooks Hamilton and Scott Burns.)

Today, an estimated 16 million employees are automatically enrolled in diversified portfolios. As a result, they can expect larger and safer returns during their retirement years. Of course, employees can always decline the enrollment or change the investment choices. But as “nudge theory” predicts, most employees tend to stay where you put them.