U .S. Chamber of Commerce Event on Retirement
U.S. Chamber of Commerce
“Private Retirement Benefits in the 21st Century: Achieving Retirement Security”
Friday, February 5, 2016
Key Topics & Takeaways
- State Run Retirement: California Chamber of Commerce’s Fisher explained that many California employers have raised the same concerns that the Chamber has, including the lack of guardrails for administrative duties, adding that the guidance is “more complicated than it appears.”
- MEPs: DOL’s Borzi agreed with the idea of expanding multiple employer plans (MEPs) as there is “potential” for expanding coverage as long as consumers are protected. Treasury’s Iwry noted that a MEP without the requirement of a commonality among unaffiliated employers is supported by the Administration as long as there are appropriate conditions and safeguards.
- myRA: Iwry explained that many states are working to incorporate Treasury’s my retirement account (myRA) into marketplace approaches, such as Washington and New Jersey, but stressed that myRA is not a long-term solution.
Speakers
- Tom Reeder, Director, Pension Benefit Guaranty Corporation
- Sarah Holden, Senior Director, Retirement and Investor Research, Investment Company Institute (ICI)
- Marti Fisher, Policy Advocate, California Chamber of Commerce
- David Certner, Legislative Counsel and Director of Legislative Policy for Government Affairs, AARP
- Phyllis Borzi, Assistant Secretary of Labor, Employee Benefit Security Administration
- Paula Calimafde, Chair, Small Business Council of America and Principal, Paley Rothman
- Jeanne de Cervens, Vice President & Director of Federal Government Affairs, Transamerica Companies and Director, Transamerica Institute
- Lori Lucas, Executive Vice President and Defined Contribution Practice Leader, Callan Associates
- Lew Minsky, President & CEO, The Defined Contribution Institutional Investment Association
- Edmund Schweitzer, President & Chairman of the Board, Schweitzer Engineering Laboratory
- J. Mark Iwry, Senior Advisor to the Secretary and Deputy Assistant Secretary (Retirement and Health Policy), U.S. Treasury Department
- Beth Bell, Tax Counsel, Office of Senator Ben Cardin (D-Md.)
- Aharon Friedman, Tax Counsel, House Committee on Ways & Means Majority
Keynote Speaker
Tom Reeder, Director, Pension Benefit Guaranty Corporation (PBGC)
The U.S. Chamber of Commerce published a white paper outlining recommendations for policymakers for strengthening the employer-provided retirement system and increasing plan coverage for workers. Reeder discussed areas in the retirement white paper that the PBGC is working on, including the missing participants program and how to engage more with plan sponsor advocates. He explained that the PBGC’s Board of Directors works closely with the plan sponsor advocate to resolve concerns, and said PBGC is conducting initiatives in response to suggestions the advocate provided in their report. Reeder also stated that PBGC will be placing a small business representative on the advisory committee.
When asked by an audience member if small businesses will have to fund gaps in larger business’ pension systems, Reeder explained that small employers would not be able to fund the amounts necessary to bail out larger businesses.
Regarding ways the PBGC can be helpful to the retirement system, Reeder commented that defined benefit (DB) plans should be encouraged and preserved. He continued that one method to keeping savers in the retirement system is to educate employees on the importance of DB plans, as “so many employees don’t know what they are.”
Panel 1: Increasing Coverage and Participation – Incentives or Mandates?
Sarah Holden, Senior Director, Retirement and Investor Research, Investment Company Institute (ICI)
Holden explained where retirement income originates, referred to as the “retirement resource pyramid,” which includes Social Security, home ownership, employer-sponsored plans, and individual retirement accounts (IRAs). She noted that when it comes to plan coverage, large employers are more likely to offer retirement plans than small employers due to administrative costs. Holden went on to say that a recent ICI study found that close to 80 percent of near-retiree households have savings allocated for retirement.
Marti Fisher, Policy Advocate, California Chamber of Commerce
Fisher explained her concerns with the Department of Labor’s (DOL’s) recent state guidance, including: (1) Employers may be at risk for the plans being covered by the Employee Retirement Income Security Act (ERISA); (2) It is mandatory rather than voluntary; (3) The guidance does not explain who bears the risk if a program fails; (4) The complexity of the program and burdens on employers are “underplayed”; and (5) Guidance does not explain what type of enforcement there will be.
David Certner, Legislative Counsel and Director of Legislative Policy for Government Affairs, AARP
Certner stated that he is not lobbying for a mandated retirement system, but rather “required access” to plans for employees. He continued that the majority of investors prefer to save for retirement through payroll deduction and commented on how effective auto enrollment is. Certner stressed that employers should have a minimal role in the plan and only be responsible for selecting a provider and collection of funds, but that they have a “critical role” in providing employees with access to the system.
Discussion
Fiduciary Responsibility
When asked if an employer should have a fiduciary responsibility, Certner explained that they should not be managing plans or investments, only deducting from the employee’s paycheck and ensuring it reaches the provider.
StateRun Retirement
Regarding the DOL’s state guidance, Fisher explained that many California employers have raised the same concerns that the Chamber has, including the lack of guardrails for administrative duties, adding that the guidance is “more complicated than it appears.”
An audience member asked if employers who currently offer plans will discontinue and replace them with state plans. Fisher commented that conversations have been had on the issue, and that while smaller businesses may think it is a better alternative due to the costs of 401(k) plans, larger employers are unlikely to change.
When asked when California may consider legislation, Fisher explained that the deadline to introduce legislation is February 19 and that the sponsor, who is the Senate President, “wants to move it this year.” She said a bill will likely be introduced under the same number it was previously introduced, SB 1234, but said it will simply serve as a placeholder until the California Secure Choice Board has a chance to vote on various features to include in the legislation.
An audience member noted their concern with state plans, as “every state will have a version of the plan,” making it difficult for employers that have employees in different states. Certner replied that since the plans are IRAs, national IRA rules will apply rather than ERISA.
Saving for Retirement
Holden commented that employers play an important role in the retirement system, as they know what benefits to include in compensation packages for their employees. Fisher added that private market solutions should be further explored prior to imposing employer mandates that would impact small businesses.
Fisher explained there are many conversations in California on how the financial services industry can penetrate the small business market, in addition to offering private market solutions, but that they should not be subject to a mandate. Certner agreed with encouraging private savings options, but stressed that some smaller savers are not accumulating a large enough amount of money for larger financial institutions to see value in assisting.
Keynote Speaker
Phyllis Borzi, Assistant Secretary of Labor, Employee Benefit Security Administration
Borzi commented that she agrees Congress should not be using employee benefits as a revenue raiser, as system updates should be based on “good, solid policy.” She continued that that there is rarely evidence that supports policy options considered and that deliberation is not long enough during the legislative process.
She explained that expanding saving and coverage opportunities are some of the biggest challenges going forward, to include ensuring savers take advantage of such opportunities. Regarding state plans, Borzi commented that states have “given up” on federal legislation being enacted and that while the target state audience is employers without plans, it is a concern that an employer with a plan may discontinue in exchange for “simpler” programs. She agreed with the idea of expanding multiple employer plans (MEPs) as there is “potential” for expanding coverage as long as consumers are protected.
When asked how to appeal to younger investors, Borzi explained that there needs to be a focus on “intergenerational cooperation” and a focus on independence, but that these investors think in the short term, not decades from now.
Regarding the Department of Treasury’s guidance on lifetime income, Borzi explained that the DOL needs more data before releasing any guidance on the subject.
Panel 2: Looking Forward – New Ideas, Tools, and Opportunities
Paula Calimafde of the Small Business Council of America and Paley Rothman said that if Congress examined the Chamber’s retirement white paper, “we would be in a better situation.” She argued that the retirement system is working “incredibly well,” with 77 percent of employees in businesses with over 10 workers covered by a workplace plan, and added that the 401(k) actual deferral percentage (ADP) test should be simplified. Calimafde opined that the younger generation’s interest in Roths can be attributed to financial education.
Jeanne de Cervens of Transamerica Companies explained that her company delivers information to their investors to ensure they are retirement ready, such as basic information about their plan, and saving and investing. She continued that education is tailored to the employee population and that traditional marketing is used in addition to more modern methods, such as social media and podcasts. de Cervens added that while the majority of Americans do not plan to work past 65, many are having to work later due to financial reasons.
Lori Lucas of Callan Associates stressed that increasing the automatic default contribution rate can significantly improve a retirement plan and questioned why there is resistance to including existing employees into auto enrollment. Lew Minsky of The Defined Contribution Institutional Investment Association agreed with Lucas and added that automatic features have an “important, positive impact” on plans, creating a multiplier effect when combined.
Edmund Schweitzer of Schweitzer Engineering Laboratory explained that his company offers an employee stock ownership program (ESOP) that is 100 percent employee owned, with owners ranging from assemblers to higher management.
Keynote Speaker
J. Mark Iwry, Senior Advisor to the Secretary and Deputy Assistant Secretary, U.S. Treasury Department
Iwry noted that a MEP without the requirement of a commonality among unaffiliated employers is supported by the Administration as long as there are appropriate conditions and safeguards. He continued that it is being proposed that the DOL receive funds to help create pilot projects that focus on portability, adding that most people who are self employed are unaware they can set up their own plan.
Regarding state initiatives, Iwry explained that in addition to the DOL’s state guidance, many states are working to incorporate Treasury’s my retirement account (myRA) into marketplace approaches, such as Washington and New Jersey, but stressed that myRA is not a long-term solution. He added that the program is meant to be a platform for financial literacy and that Treasury welcomes advice from those using the program.
In response to the “bad apple” provision in MEPs, Iwry explained that there is a concern if one employer violates the qualification rules it will taint the entire plan, and added that Treasury wants to release guidance that will eliminate the concern. He continued that it should be possible for employers to make decisions in MEPs, such as selecting the administrator, and added that if the employer chooses an investment array that applies to ERISA, “they can do it.”
Panel 3: Views from the Hill
Beth Bell, Tax Counsel, Office of Senator Ben Cardin (D-Md.)
Bell explained that work is being conducted behind the scenes from the Senate Finance Committee, with a possibility that retirement provisions or a retirement package could be picked up this year. She continued that the Senators have a focus on pension and retirement modernization, in addition to access to plans, accumulation concerns, workforce demographics and lifetime income options. Bell stated that open MEPs are “on people’s minds” and that a hearing on the issue can be expected in the Senate Finance Committee. In addition, she added that nondiscrimination testing remains an issue for Senators Ben Cardin (D-Md.) and Rob Portman (R-Ohio).
Aharon Friedman, Tax Counsel, House Committee on Ways & Means (Majority)
Friedman explained that when it comes to 401(k) plans, participants have control and should be able to do “what works for them.” He commented on the recent DOL rule markups in the House Ways & Means Committee and House Education and the Workforce Committee, adding that there is support from several Democratic members and stressing that the DOL’s proposed fiduciary rule will drive small businesses and savers from the marketplace. Friedman commented that the most urgent issue for the committee is multiple employers.
For more information on this event, please click here.
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U.S. Chamber of Commerce
“Private Retirement Benefits in the 21st Century: Achieving Retirement Security”
Friday, February 5, 2016
Key Topics & Takeaways
- State Run Retirement: California Chamber of Commerce’s Fisher explained that many California employers have raised the same concerns that the Chamber has, including the lack of guardrails for administrative duties, adding that the guidance is “more complicated than it appears.”
- MEPs: DOL’s Borzi agreed with the idea of expanding multiple employer plans (MEPs) as there is “potential” for expanding coverage as long as consumers are protected. Treasury’s Iwry noted that a MEP without the requirement of a commonality among unaffiliated employers is supported by the Administration as long as there are appropriate conditions and safeguards.
- myRA: Iwry explained that many states are working to incorporate Treasury’s my retirement account (myRA) into marketplace approaches, such as Washington and New Jersey, but stressed that myRA is not a long-term solution.
Speakers
- Tom Reeder, Director, Pension Benefit Guaranty Corporation
- Sarah Holden, Senior Director, Retirement and Investor Research, Investment Company Institute (ICI)
- Marti Fisher, Policy Advocate, California Chamber of Commerce
- David Certner, Legislative Counsel and Director of Legislative Policy for Government Affairs, AARP
- Phyllis Borzi, Assistant Secretary of Labor, Employee Benefit Security Administration
- Paula Calimafde, Chair, Small Business Council of America and Principal, Paley Rothman
- Jeanne de Cervens, Vice President & Director of Federal Government Affairs, Transamerica Companies and Director, Transamerica Institute
- Lori Lucas, Executive Vice President and Defined Contribution Practice Leader, Callan Associates
- Lew Minsky, President & CEO, The Defined Contribution Institutional Investment Association
- Edmund Schweitzer, President & Chairman of the Board, Schweitzer Engineering Laboratory
- J. Mark Iwry, Senior Advisor to the Secretary and Deputy Assistant Secretary (Retirement and Health Policy), U.S. Treasury Department
- Beth Bell, Tax Counsel, Office of Senator Ben Cardin (D-Md.)
- Aharon Friedman, Tax Counsel, House Committee on Ways & Means Majority
Keynote Speaker
Tom Reeder, Director, Pension Benefit Guaranty Corporation (PBGC)
The U.S. Chamber of Commerce published a white paper outlining recommendations for policymakers for strengthening the employer-provided retirement system and increasing plan coverage for workers. Reeder discussed areas in the retirement white paper that the PBGC is working on, including the missing participants program and how to engage more with plan sponsor advocates. He explained that the PBGC’s Board of Directors works closely with the plan sponsor advocate to resolve concerns, and said PBGC is conducting initiatives in response to suggestions the advocate provided in their report. Reeder also stated that PBGC will be placing a small business representative on the advisory committee.
When asked by an audience member if small businesses will have to fund gaps in larger business’ pension systems, Reeder explained that small employers would not be able to fund the amounts necessary to bail out larger businesses.
Regarding ways the PBGC can be helpful to the retirement system, Reeder commented that defined benefit (DB) plans should be encouraged and preserved. He continued that one method to keeping savers in the retirement system is to educate employees on the importance of DB plans, as “so many employees don’t know what they are.”
Panel 1: Increasing Coverage and Participation – Incentives or Mandates?
Sarah Holden, Senior Director, Retirement and Investor Research, Investment Company Institute (ICI)
Holden explained where retirement income originates, referred to as the “retirement resource pyramid,” which includes Social Security, home ownership, employer-sponsored plans, and individual retirement accounts (IRAs). She noted that when it comes to plan coverage, large employers are more likely to offer retirement plans than small employers due to administrative costs. Holden went on to say that a recent ICI study found that close to 80 percent of near-retiree households have savings allocated for retirement.
Marti Fisher, Policy Advocate, California Chamber of Commerce
Fisher explained her concerns with the Department of Labor’s (DOL’s) recent state guidance, including: (1) Employers may be at risk for the plans being covered by the Employee Retirement Income Security Act (ERISA); (2) It is mandatory rather than voluntary; (3) The guidance does not explain who bears the risk if a program fails; (4) The complexity of the program and burdens on employers are “underplayed”; and (5) Guidance does not explain what type of enforcement there will be.
David Certner, Legislative Counsel and Director of Legislative Policy for Government Affairs, AARP
Certner stated that he is not lobbying for a mandated retirement system, but rather “required access” to plans for employees. He continued that the majority of investors prefer to save for retirement through payroll deduction and commented on how effective auto enrollment is. Certner stressed that employers should have a minimal role in the plan and only be responsible for selecting a provider and collection of funds, but that they have a “critical role” in providing employees with access to the system.
Discussion
Fiduciary Responsibility
When asked if an employer should have a fiduciary responsibility, Certner explained that they should not be managing plans or investments, only deducting from the employee’s paycheck and ensuring it reaches the provider.
StateRun Retirement
Regarding the DOL’s state guidance, Fisher explained that many California employers have raised the same concerns that the Chamber has, including the lack of guardrails for administrative duties, adding that the guidance is “more complicated than it appears.”
An audience member asked if employers who currently offer plans will discontinue and replace them with state plans. Fisher commented that conversations have been had on the issue, and that while smaller businesses may think it is a better alternative due to the costs of 401(k) plans, larger employers are unlikely to change.
When asked when California may consider legislation, Fisher explained that the deadline to introduce legislation is February 19 and that the sponsor, who is the Senate President, “wants to move it this year.” She said a bill will likely be introduced under the same number it was previously introduced, SB 1234, but said it will simply serve as a placeholder until the California Secure Choice Board has a chance to vote on various features to include in the legislation.
An audience member noted their concern with state plans, as “every state will have a version of the plan,” making it difficult for employers that have employees in different states. Certner replied that since the plans are IRAs, national IRA rules will apply rather than ERISA.
Saving for Retirement
Holden commented that employers play an important role in the retirement system, as they know what benefits to include in compensation packages for their employees. Fisher added that private market solutions should be further explored prior to imposing employer mandates that would impact small businesses.
Fisher explained there are many conversations in California on how the financial services industry can penetrate the small business market, in addition to offering private market solutions, but that they should not be subject to a mandate. Certner agreed with encouraging private savings options, but stressed that some smaller savers are not accumulating a large enough amount of money for larger financial institutions to see value in assisting.
Keynote Speaker
Phyllis Borzi, Assistant Secretary of Labor, Employee Benefit Security Administration
Borzi commented that she agrees Congress should not be using employee benefits as a revenue raiser, as system updates should be based on “good, solid policy.” She continued that that there is rarely evidence that supports policy options considered and that deliberation is not long enough during the legislative process.
She explained that expanding saving and coverage opportunities are some of the biggest challenges going forward, to include ensuring savers take advantage of such opportunities. Regarding state plans, Borzi commented that states have “given up” on federal legislation being enacted and that while the target state audience is employers without plans, it is a concern that an employer with a plan may discontinue in exchange for “simpler” programs. She agreed with the idea of expanding multiple employer plans (MEPs) as there is “potential” for expanding coverage as long as consumers are protected.
When asked how to appeal to younger investors, Borzi explained that there needs to be a focus on “intergenerational cooperation” and a focus on independence, but that these investors think in the short term, not decades from now.
Regarding the Department of Treasury’s guidance on lifetime income, Borzi explained that the DOL needs more data before releasing any guidance on the subject.
Panel 2: Looking Forward – New Ideas, Tools, and Opportunities
Paula Calimafde of the Small Business Council of America and Paley Rothman said that if Congress examined the Chamber’s retirement white paper, “we would be in a better situation.” She argued that the retirement system is working “incredibly well,” with 77 percent of employees in businesses with over 10 workers covered by a workplace plan, and added that the 401(k) actual deferral percentage (ADP) test should be simplified. Calimafde opined that the younger generation’s interest in Roths can be attributed to financial education.
Jeanne de Cervens of Transamerica Companies explained that her company delivers information to their investors to ensure they are retirement ready, such as basic information about their plan, and saving and investing. She continued that education is tailored to the employee population and that traditional marketing is used in addition to more modern methods, such as social media and podcasts. de Cervens added that while the majority of Americans do not plan to work past 65, many are having to work later due to financial reasons.
Lori Lucas of Callan Associates stressed that increasing the automatic default contribution rate can significantly improve a retirement plan and questioned why there is resistance to including existing employees into auto enrollment. Lew Minsky of The Defined Contribution Institutional Investment Association agreed with Lucas and added that automatic features have an “important, positive impact” on plans, creating a multiplier effect when combined.
Edmund Schweitzer of Schweitzer Engineering Laboratory explained that his company offers an employee stock ownership program (ESOP) that is 100 percent employee owned, with owners ranging from assemblers to higher management.
Keynote Speaker
J. Mark Iwry, Senior Advisor to the Secretary and Deputy Assistant Secretary, U.S. Treasury Department
Iwry noted that a MEP without the requirement of a commonality among unaffiliated employers is supported by the Administration as long as there are appropriate conditions and safeguards. He continued that it is being proposed that the DOL receive funds to help create pilot projects that focus on portability, adding that most people who are self employed are unaware they can set up their own plan.
Regarding state initiatives, Iwry explained that in addition to the DOL’s state guidance, many states are working to incorporate Treasury’s my retirement account (myRA) into marketplace approaches, such as Washington and New Jersey, but stressed that myRA is not a long-term solution. He added that the program is meant to be a platform for financial literacy and that Treasury welcomes advice from those using the program.
In response to the “bad apple” provision in MEPs, Iwry explained that there is a concern if one employer violates the qualification rules it will taint the entire plan, and added that Treasury wants to release guidance that will eliminate the concern. He continued that it should be possible for employers to make decisions in MEPs, such as selecting the administrator, and added that if the employer chooses an investment array that applies to ERISA, “they can do it.”
Panel 3: Views from the Hill
Beth Bell, Tax Counsel, Office of Senator Ben Cardin (D-Md.)
Bell explained that work is being conducted behind the scenes from the Senate Finance Committee, with a possibility that retirement provisions or a retirement package could be picked up this year. She continued that the Senators have a focus on pension and retirement modernization, in addition to access to plans, accumulation concerns, workforce demographics and lifetime income options. Bell stated that open MEPs are “on people’s minds” and that a hearing on the issue can be expected in the Senate Finance Committee. In addition, she added that nondiscrimination testing remains an issue for Senators Ben Cardin (D-Md.) and Rob Portman (R-Ohio).
Aharon Friedman, Tax Counsel, House Committee on Ways & Means (Majority)
Friedman explained that when it comes to 401(k) plans, participants have control and should be able to do “what works for them.” He commented on the recent DOL rule markups in the House Ways & Means Committee and House Education and the Workforce Committee, adding that there is support from several Democratic members and stressing that the DOL’s proposed fiduciary rule will drive small businesses and savers from the marketplace. Friedman commented that the most urgent issue for the committee is multiple employers.
For more information on this event, please click here.