Just ahead of the Labor Day weekend, President Trump signed an executive order directing the Labor and Treasury departments to consider several new retirement initiatives. But what do NAPA Net readers make of their prospects – and impacts?
- to look into ways to expand access to multiple employer plans (MEPs), and even more specifically, to look into ways to expand access to workplace retirement plans by those with “non-traditional employer-employee relationships”;
- to review ways to make retirement plan disclosures more “understandable and useful,” including a consideration of a “broader use” of electronic disclosures; and
- to at least look into and consider changes to the life expectancy assumptions imbedded in current required minimum distribution calculations.
Well, there might be a lot of buzz around the subject of MEPs, but asked which of those initiatives they were most “excited” about, a clear plurality (41%) cited the improvements to retirement plan disclosures, with the second-most cited being those who were “equally excited” about all of them (28%).
Expanding access to MEPs was third, cited by nearly 19%, while changes in the life expectancy assumptions garnered the support of about 1 in 10.
As for that buzz around MEPs, one reader commented, “I’m in favor of pooling assets as long as the plans have the same fiduciary responsibility as single employer plans.” Another noted, “The MEP news will definitely create a lot of new opportunities!” Another noted: “Hopefully this will expand overall availability of qualified plans to a broader base of US workers.”
On the other hand, another commented “The MEP is a rabbithole. Way too many issues to ever amount to anything. Sounds great on paper but will be a train wreck in real life.”
Another was more intrigued by the possibility of loan portability, going on to explain: “I am truly not sure about MEPs. For small plans if the product is right I would endorse standards of fee disclosure reporting formats. Currently there are too many versions and all are different and hard to read. Some don’t disclose all fees.”
But as for which of the initiatives was likely to have the most impact on retirement savings/security, MEPs clearly dominated. Nearly two-thirds (65%) embraced that as having the most potential, while another 16% commented that “it really depends on the final recommendations.”
Another 1 in 10 saw that potential with the reexamination of life expectancy tables, with 6% “equally excited” about the prospects for all of them, and the rest citing the improved/enhanced retirement plan disclosures.
All that said, the executive order directed consideration of several possible initiatives – and so we asked readers to weigh in on the prospects. Just over half (52%) said they would turn into recommendations, of which some will become regulatory changes, while 16% said they would become recommendations that woud become regulation changes.
On the other hand roughly 13% said they would become recommendations that don’t go anywhere, 10% had “no earthly idea,” and the rest thought nothing would come of them.
Those initiatives notwithstanding, we asked readers to imagine that they were President (or were to be asked by the President to recommend) and looking for areas in which they’d like to see an Executive Order that would help enhance retirement security – and what they would recommend (though some of what follows couldn’t be accomplished that way, or as one reader commented: “Constitutionally, nothing – that's not the point of Executive Orders”). Here’s a sampling:
“I would change the distribution rules for retirement accounts. I would remove the loan and hardship provision; the ability to take cash when you change employers; and I would have the same rules apply to IRAs. I think people would be much better prepared for retirement if they couldn’t get to the money before retirement.”
“Have an affordable pension option. Teachers, etc., get to retirement with reliable pension options that gives them good piece of mind. The options available to DC plans are expensive, restrictive, and doesn't make sense.”
“The serious consideration of lower cost annuity options available in qualified plans for employees to invest in with a step up /guaranty feature for employees who need lifetime income.”
“Plan design that includes retirement income options.”
“Mandatory employer contributions tied to profitability.”
“Access to retirement benefits under uniform, more liberal eligibility terms and safe harbor guidance in offering in-plan income products.”
“Putting together a task force for social security.”
“Increase the 401(k) Contribution limits.”
“Changing the testing rules and now making all the regulations less complicated.”
“More employer employee incentives for savings. Deductions and tax free growth (Roth). Increase maximum saving amounts.”
“Safe harbor for selection and monitoring of lifetime income provider.”
“That social security goes into your 401kDIRECT plan. All participants would then have a retirement account, forcing all employers to offer a plan and the employees can never remove that money source balance until age 70. We can refine it from there. This keeps the government from spending the Social Security retirement funds that are put in the general fund.
“Increasing deferral amount limits, probability of income products.”
“Education. We don't need new laws or a nanny state. Employees and employers should have the freedom to elect the contributions they choose and invest as they like. Let individuals determine their own retirement destiny.”
“Expanding the ability of states to offer retirement plan coverage to private sector workers who do not already have coverage.”
“I’d like to see an Executive Order that would require the DOL to look at ways for simplifying 401(k) plans in general, reducing plan rules that complicate operation, increase costs, and detract employers from sponsoring plans. I would also like to see auto-portability be pushed forward.”
“Open MEPs – but he already did that.”
“Stop annual ADP/ACP testing.”
“Social Security needs to decide whether it is a defined benefit plan or a defined contribution plan. We can’t continue to have it both ways. If it’s a DB plan, it needs to funded actuarially. If it’s a DC plan, there needs to be an explicit reallocation of contributions made by higher income to lower income employees. Let's make Social Security a soundly funded, equitable arrangement that insures the retirement security of all Americans. Also, an increase in the full social security retirement age, as well as the Normal Retirement Age in ERISA, needs to be investigated. Life expectancy increases could mean that funding retirement benefits before age 70 is financially unsustainable on a national level.”
We did also get a number of other comments from readers – a sampling of which follows (parenthetical comments are mine):
“I am a little curious on the MEP proposal. Is this good or bad for the 401(k) advisor?” (As in all things, it depends – and likely depends on the final product.)
“These appear to be an odd choice of topics. Who consulted with his team on these?” (Not me.)
“I wish EOs worked at home.” (They do in mine – it’s just that I’m not the one issuing them.)
“The impact can be fleeting since executive orders can be undone by the next president.” (Indeed – but these are directives that could produce outcomes.)
“I know you won’t print this, but I would like to see employers get out of the retirement plan business and have all retirement saving be done by the individual. Employers should focus on making widgets and not have to be concerned about all these 'benefits,' like retirement and health insurance. I know that would put me out of a job, at least my current job, but I would be willing to do that for the greater good of society.” (Well, I posted it – but count me in the group that sees a lot of value in the employer involvement. Just look at how much people don’t prepare for retirement without access to a retirement plan at work… just saying.)
“Sure would be nice if the government took a solid swing at Social Security to figure out what benefits should be offered, to whom, and when. It seems as if Washington is complacent to let the program just fizzle out over time, but it has been an important component of retirement security for our citizens for generations. I understand that in the current environment, individuals need to take greater responsibility for their financial security in retirement, but the obvious inequality between those who have saved, and those that have ignored saving will take a toll on all of us. It's a foreseeable outcome, but government officials simply turn a blind eye.”
“When taking over a plan and there are so many blatant mistakes and disqualifying events, there’s a small, small part of me that wants to turn to the dark side and work for the IRS/DOL as an auditor because life would be easy...except for working in that swamp hell hole. That would suck.” (I have a feeling it wouldn’t be all THAT “easy”…)
“Really, EOs are of limited value. The Executive agencies are, at least to some degree, constrained by legislation. If I were President (a job I do not actually want), I would focus more on trying to work with Congress to get something done. Retirement policy, such as it is, seems to be more open to bipartisanship than many other areas (e.g., health insurance) and there are passionate, knowledgeable advocates across the political spectrum. I think something could be done that both sides would find satisfying.” (Like RESA? Here’s hoping…)
“This administration has used EOs excessively or has appeared to do so. This should be accomplished by congressional action. Not controversial, all could claim ‘doing something for the little worker.” (Actually, this seems to be a bipartisan thing, including the “excessive” part, depending on your perspective, and the issue involved.)
“EOs are now the only way to get things done with polarization.” (Ah, but does that make it a good thing?)
Thanks to everyone who participated in our weekly NAPA Net reader poll!