Their criticisms of 401k are somewhat illogical, saying both "they are not suitable" and "they are under utilized." That's like "this food doesn't taste good and you didn't give me enough of it."
If 401ks are bad (the fees, returns, investment options) then they should be relieved that the accounts aren't used so much.
But if the goal is to make 401k type accounts more available, that belies some faith in the tool as being one of the valid options available. So which is it?
They weren't illogical if you consider them as related but separate problems. Shitty 401ks are often better than none, IF people utilize them when they might not otherwise save. Saving anything is better than saving nothing, even if the 'anything' ends up (as it has) completely insufficient for most peoples' retirement needs. The goal of the founders was not to expand use of 401ks necessarily. It was to help people save sufficient funds for retirement (which at the time they hoped 401ks would do).
Now, they acknowledge that the 401k system is not working for most people.
If the system isn't providing sufficient retirement funds for the majority of Americans, then either you could scrap it entirely (which they discussed) and develop a completely different system (e.g., develop something on top of SS that worked like a forced savings plan into a federally guaranteed annuity); or alternatively, if that is a political non-starter, then you could tinker with the existing private account 401k system (e.g., standardized consistent worker education, better 401k options with lower fees and easily accessed regardless of what job you work ie opening the TSP to all workers, automatic enrollment with opt-out provisions instead of opt-in) to try to improve outcomes.
First, I understood the goal to be to enable deferment of income tax for high earners.
My problem with the 401k criticisms offered, it's that it's not really a 401k problem. It's a problem of most mutual funds and of human nature: failure to act in one's own best future interst..
As a mutual fund problem, IRAs, 529s, HSAs and even taxable investments in high fee funds are subject to the same issue.
In terms of the underutilization criticism, for some, that is overblown. If GenX-er Bob or Boomer Mary each have $0.00 in 401k, but $200k and $400k in an IRA, then, once again, the lack of 401k isn't at all a problem. For those who have access to a 401k with good investment choices, however, hearing from experts that 401ks are bad encourages inertia, which is even worse. Many who should save or save more fail to do so. This is human nature. Man is an irrational and undisciplined animal.
How much non participation is inertia; how much is a wise decision given all the facts; and how much is simple lack of funds is not disclosed if it is even known. But the answer matters if you hope to craft a replacement for what exists today. You can only lead a horse to water. IRAs, RothIRAs, HSAs, have been around. The person who has zero retirement savings outside of SS, isn't going to be helped by yet another program or product. The paradox in expanding SS "for their own good" is that taking a larger share of the lower paid person's wages to beef up his or her retirement savings in the future will take more money away from those least likely to live long enough to collect.
My FIL, like a significant chunk of minority populations, particularly poor people like him, dropped dead before collecting SS or his pension. It's the unspoken truth of Social Security and pensions that they are only solvent if enough participants die before being able to draw much of anything.