Social Security is running out. Can stronger 401(k)s fill the gap?

When Congress passed the Social Security Act in 1935, a widely distributed poster touted the forthcoming benefits for workers who paid into the system.

“A monthly check to you,” the poster read in cursive script, pictured above an illustration of the US Capitol and a monthly check from the government. The poster promised these checks “for the rest of your life…begining when you are 65.”

Ninety years later, it’s not at all certain that eligible workers can count on receiving these checks for the rest of their lives. The trust fund that administers these benefits is expected to run out of money as early as 2034, at which point the Social Security Administration would only be able to pay out 77% of scheduled benefits unless Congress acts.

At the same time, the landscape for employer-sponsored retirement benefits has also grown shakier. Whereas most workers used to have access to a pension that guaranteed income in retirement, the predominant savings vehicle for US employees is now a 401(k)—a plan that’s generally viewed as less secure given its strength depends in part on employee contributions, and is subject to the whims of the stock market.

Nevertheless, HR teams and policymakers are exploring ways to make employer-sponsored retirement benefits stronger. One potential solution could soon bring a windfall to the private equity industry.

Why the 401(k) became king. Between 1989 and 2022, defined-contribution plans surpassed defined-benefit plans as the primary form of employer-sponsored retirement benefits. Whereas about 60% of US workers were enrolled in some type of defined-benefit plan, such as a pension, as of 1989, that number had dropped to about 20% as of 2022.

Meanwhile, about 80% of workers were enrolled in defined-contribution plans like 401(k)s as of 2022, up from just 55% in 1989.

Part of the reason employers moved away from defined-benefit plans was because they no longer wanted to be on the hook for funding workers’ retirement income themselves, said Ron Ulrich, VP of product consulting and compliance with ADP Retirement Services. Under pension plans, employer contributions can vary from one year to the next depending on how the stock market performs, “so it’s very unpredictable,” he said.

This new benefits landscape puts the onus on workers to save for retirement themselves, rather than rely on their employer to do it for them, experts told HR Brew.

The rise of defined-contribution plans has “shifted all of the decision making essentially onto workers to figure out whether to save, how much to save, how to invest those savings, and how to turn that into income when they retire,” said Angela Antonelli, executive director and founder of the Center for Retirement Initiatives at Georgetown’s McCourt School of Public Policy.

Ted Benna, a consultant who developed the first 401(k) savings plan in 1981 by taking advantage of an easy-to-miss provision in the tax code, told HR Brew he believes pensions would’ve gone by the wayside regardless of whether his invention became popular. Benna, who started as a defined-benefit consultant, said employers became wary of offering such plans after the Employee Retirement Income Security Act was enacted in 1974 with specific protections for pension enrollees. Pensions also make less sense for modern-day workers, Benna said. They work for people who have stayed with one company for a long time, but less so for today’s transient workforce.

But Benna, who has also said he didn’t intend for 401(k)s to become the dominant retirement benefit, concedes that there are weaknesses in this type of plan.

While 401(k)s tend to work well for some middle and higher income earners, lower-income workers “cannot afford to have money taken out of their paycheck,” Benna said.

That’s assuming these workers are offered a 401(k) plan at all. While this benefit is popular in the private sector, it isn’t ubiquitous, especially in industries that employ hourly and low-income workers. Some 79% of full-time workers in the lowest-earning tenth of the population lacked access to a retirement plan as of 2024, according to an Economic Innovation Group analysis.

As a result, insecurities about retirement pervade the American workforce. Upwards of 40% of US workers aren’t saving enough to comfortably retire, according to surveys cited by the Federal Reserve Bank of Minneapolis. In another recent Goldman Sachs survey, 58% of respondents said they believed they’ll outlive their savings.

Finding workarounds. The 401(k) may not be perfect, but employers are exploring ways to make it more accessible and effective.

Some have done so by taking advantage of provisions included in the SECURE 2.0 Act, which was enacted in 2022 with the goal of encouraging “more employers to offer retirement plan benefits to their workers” and making it “easier for Americans to save,” according to a statement issued by the Biden administration at the time.

One SECURE 2.0 provision allows employers to match 401(k) contributions based on an employee’s student loan payments. The benefit was first piloted by healthcare company Abbott Laboratories in 2018 after employees expressed concerns about being able to save for retirement while also managing student loan debt.

“We heard from our employees that they would love to take advantage of our match, but they couldn't, because they felt the stress of needing to pay down their student loan debt,” said Mary Moreland, Abbott’s head of HR.

Abbott has contributed $10 million to employees’ retirement savings since it launched the program in 2018, according to figures shared by the company. As of Q2 2025, 3,834 had enrolled in the student loan match program.

Another promising feature of SECURE 2.0 is auto-enroll, which requires most employers offering 401(k)s to enroll their workers in them automatically, while giving them the option to opt-out. The auto-enroll provision took effect this January but some employers were already onto the idea by that point.

Workers who are auto-enrolled in 401(k) plans tend to have higher participation than those who aren’t, research shows. Of the 5 million participants enrolled in Vanguard retirement plans in 2023, for instance, 94% who were automatically enrolled were participating, while 67% who were offered a voluntary plan participated.

The life science software company MasterControl has automatically enrolled employees in its 401(k) plan for at least five years, according to chief people and culture officer Alicia Garcia. This feature has “greatly increased the health of the plan,” which has more than 90% participation, Garcia said. “Auto-enrollment definitely helps with that participation,” she said.

Other SECURE 2.0 provisions—like those that encourage the adoption of emergency savings accounts and allow workers to make emergency withdrawals from 401(k) plans—aim to help the low- and middle-income workers Benna referenced, who may not feel financially secure enough to contribute to retirement. Though uptake data for these policies is limited, it appears they weren't yet widespread in retirement plans as of 2024.

The future is diversified. If policies like SECURE 2.0 were designed to help more workers access employer-sponsored retirement plans, and feel comfortable contributing to them, more recent executive actions have been geared toward diversifying the assets within these plans.

One such executive order, issued by President Donald Trump on Aug. 7, seeks to expand access to alternative assets for Americans enrolled in 401(k) plans.

Historically, plan sponsors have been hesitant to incorporate investments like private equity in their 401(k) programs due to concerns about volatility, higher fees, and a lack of liquidity. Intel and Lockheed Martin are among the employers that have been sued for adding alternatives to their 401(k) plans. If the president’s order results in regulations that reduce the risk of litigation, though, that calculation could change.

The private-equity industry is eager to tap into the defined contribution market, which holds more than $12 trillion in assets, should the White House provide a pathway. Firms like BlackRock, Blue Owl Capital, and Partners Group are already developing 401(k) solutions that incorporate public and private markets, while retirement providers Empower and Vanguard have already announced they plan to offer such solutions to their customers.

Proponents of alternative assets argue they have the potential to deliver higher returns for plan participants, and in turn help alleviate concerns about saving enough for retirement. BlackRock believes integrating private markets into target date solutions—one common type of 401(k) investment product—could enhance participants’ retirement savings by 15% over 40 years.

“HR leaders should see this as an opportunity, because it enhances the values of their retirement plans,” said Nick Nefouse, global head of retirement solutions with BlackRock. Though Nefouse cautioned that private markets aren’t a “silver bullet,” he noted that other types of retirement plans—notably pensions—have long incorporated these assets into their portfolios.

Whether employees want private assets in their 401(k)s is a different matter. Abbott’s Moreland, for one, said the company has received very few questions thus far from employees about the trend.

And even if the promises of private equity’s proponents deliver, such a shift would still only solve part of the issue facing workers trying to plan for retirement today. Investment returns are one factor driving “retirement readiness,” but “the biggest lever is contribution,” said Holly Verdeyen, defined contribution business leader with the consulting firm Mercer.

Americans may have been able to count on a monthly retirement check from the government back in 1935, but today that responsibility has shifted more heavily onto workers and the companies that employ them. However the US retirement landscape shakes out in the future, benefits leaders will continue to play a strong role in shaping it.

This is one of the stories of our Quarter Century Project, which highlights the various ways industry has changed over the last 25 years. Check back each month for new pieces in this series and explore our timeline featuring the ongoing series.

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