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Developing ProductsThe Freelancers Union/Working Today:
Workers need portable, affordable health insurance and retirement savings vehicles to achieve economic security. This is especially true among independent workers, who now make up roughly 30 percent of the workforce and are disconnected from the traditional employer-based safety net. To address this need, the RF is funding The Freelancers Union to develop a social purpose health insurance company and an affordable retirement savings plan for independent workers in New York who lack access to employer-based coverage.
- The Freelancers Union will sponsor a “master trust” to pool and manage member contributions. This model will allow the organization to lower administrative fees and eliminate minimum balance requirements.
- They will also launch education and outreach to enroll members in the new retirement plan.
- The Freelancer’s Union health insurance company will provide portable, affordable health insurance coverage to the independent workforce, focusing on low- and moderate-income workers and their families, and eventually expanding to lower income sectors such as taxi drivers and restaurant workers.
Brookings Institution -- Annuities Research and Experimentation:
The RF is funding the Brookings Institution to conduct annuities research and experimentation. Annuities, which provide a guaranteed income for life, offer an important opportunity to mitigate the risks of defined contribution retirement accounts. However, the current annuities market is overpriced and vulnerable to adverse selection. The goal of this project is to evaluate demand- and supply-side barriers within the annuities market and to develop strategies for expanding predictable, guaranteed lifetime income for future moderate- and lower-income retirees. If the research design is determined to be effective and feasible, the team will proceed with an experiment to understand consumer decision-making. This, in turn, will help inform product design and policies to increase demand for guaranteed lifetime income products.
Criterion Ventures:
Workers need the means to weather an unexpected crisis, such as a medical emergency or an unforeseen income interruption. Medical costs incurred by patients, even those with health insurance, pose one of the greatest threats to U.S. workers’ short-term resilience and overall economic security. Each year, $255-340 billion in medical costs are either billed to individuals or absorbed by health care providers. This medical debt is the leading cause of bankruptcy in the United States, and prevents many debtors from seeking medical care. To counter this source of insecurity, RF will fund Criterion Ventures and its partners to analyze the growing crisis of medical debt, explore solutions, and draw up a detailed strategy to implement changes. Building on the examples of Fannie Mae, micro-credit, and student loans, Criterion Ventures will convene hospitals, patient advocacy groups, government representatives and financial service providers to develop a solution that connects people in need of capital to broader capital markets in a way that protects the disadvantaged, uses market principles and is eventually a self-sustaining venture.
Doorways to Dreams (D2D):
Close to 40 percent of American households do not possess sufficient assets to live above the poverty line for three months following an income interruption. Recent data have shown that 25 percent of households in the bottom income quintile have no assets at all. The evidence indicates that tax refunds offer a singular savings opportunity for low- and middle-income workers, particularly following a recent IRS ruling allowing individuals to split their tax refunds between two accounts. Peter Tufano, Harvard Business School Professor and founder of D2D (Doorways to Dreams), makes a compelling case for offering savings bonds at tax preparation sites to meet the needs of a low- or middle-income (LMI) saver. Savings bonds are credible, accessible, easy to purchase, and have low minimums, no fees and competitive returns. Further, they allow for reasonable liquidity and can serve as a stepping stone savings vehicle. RF will fund D2D to conduct a 20-site demonstration in Spring 2008 (2007 tax season) to demonstrate demand for savings bonds among LMI filers. In addition to expanding the use of savings bonds, this experiment could provide evidence to support federal regulatory changes that would make savings bonds more accessible. These changes might include adding a bond purchase option to tax returns, the reinstitution of the Treasury Department savings bond marketing budget, or the development of related bond products targeted to the LMI market.
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