Rebalancing Retirement: How 401(k) Plans Exacerbate Inequality and What We Can Do About It

Authors

Quinn Curtis, University of Virginia
Leo E. Strine
David H. Webber, Boston University School of LawFollow

Document Type

Article

Publication Date

2025

ISSN

1078-8794

Publisher

Stanford Law School

Language

en-US

Abstract

Incentives for individuals to save for retirement currently total 1.5% of US GDP. For that substantial investment, we get a system that actually deepens wealth inequality. The top 10% of earners capture 60% of the associated tax benefits, and employer matching contributions disproportionately favor the highest earners. Although defined contribution plans have long been subject to non-discrimination requirements aimed at ensuring that benefits do not accrue predominantly to the wealthiest participants, these rules have little bite. In an irony, we estimate that the entire 401(k) system would fail the non-discrimination test that every employer offering such a plan is expected to pass. This Article examines the structural causes of these disparities, including growing income inequality, critiques the shortcomings of the non-discrimination rules, and proposes practical reforms to the 401(k) system, alongside a supporting increase in the minimum wage. Our reforms would realign public policy to address the related needs for more economic equality and to provide equitable incentives for retirement savings for the many, not just the few. Ultimately, these reform proposals seek to get the most value for the American public out of the considerable retirement tax expenditures under §401(k).

Recommended Citation

Quinn Curtis, Leo E. Strine & David H. Webber, Rebalancing Retirement: How 401(k) Plans Exacerbate Inequality and What We Can Do About It , 30 Stanford Journal of Law, Economics, and Business 401 (2025).
Available at: https://scholarship.law.bu.edu/faculty_scholarship/4103