PLANADVISER - January/February 2018 - 20

" It was a pretty remarkable surge of interest and enthusiasm
that helped propel the Pension Protection Act of
2006 into law, under a Republican administration and a
divided Congress, no less, " Musto recalls. Like other retirement
industry leaders, he says the time is ripe this year for
legislators at the federal level to " capitalize on industry and
public zeal " and build on the major successes of the PPA-to
expand, or even require, the use of automatic plan features
and otherwise factor behavioral psychology and powerful
new theories about choice architecture into retirement
planning laws and regulations.
Musto says the evidence is clear that the DC-plan-focused
PPA provisions have had a tremendous impact on improving
the overall retirement readiness of U.S. workers, making the
PPA a model for future reforms that could potentially have
as much of an impact on the retirement planning industry.
PPA. For example, there is the Automatic Retirement Plan
Act, introduced by House Ways and Means Committee
Ranking Member Richard Neal, D-Massachusetts. The bill
would require all employers-except those with 10 or fewer
employees, those in business less than three years, and
governmental and church employers-to maintain an automatic
contribution (AC) plan for their workers, beginning
in 2020. Employers who fail to maintain an AC plan would
generally be assessed a $10-per-employee-per-day penalty.
The bill would also enhance employers' ability to participate
in a MEP and permit participants to elect to receive at least
50% of their account balance in the form of a distribution
that guarantees them lifetime income.
Neal has also introduced a companion measure known
" I really do see open MEPs as
the future-and not just for small
employers, as we are hearing about
today. Farther down the road, I think it's
going to be midsize, and even large,
employers as well that are attracted
to utilizing the open MEP approach. "
What Would a 'New PPA' Include?
Similar to the atmosphere in 2006 surrounding the original
PPA, Musto says, there is an " increasing unity and cohesiveness
within the retirement plan industry advocacy,
academic and lobbying community with respect to a wish
list of regulatory and legislative reforms. " To name just a few,
these include expanding the potential for small businesses
to join together to create automated multiple employer
plans (MEPs) without demanding they be in related industries;
approving and even potentially requiring the use of
higher rates for auto-enrollment and more aggressive automatic
deferral escalation within DC plans; and easing the
fiduciary burden associated with offering " in-plan " lifetime
income products.
" In the last couple of years, there has been a re-emerging
consistency to the voice of industry experts in advocating
for the needs of retirement plans and participants, and I find
this to be very encouraging for the future, " Musto says. " This
cohesive voice helped to ensure that the final Tax Cuts and
Jobs Act, for example, did not seem to target retirement plans
in any big or negative ways. ... We're seeing the public and
private sector become more aligned around the desire to get
more Americans engaged in retirement saving. "
Musto points to some bills already circulating in Congress
that could represent a framework for the start of a new
as the Retirement Plan Simplification and Enhancement
Act, which would expand retirement plan coverage
and increase savings levels.
Similarly, other members of
Congress have put forward their
own proposals, including the
Increasing Access to a Secure
Retirement Act, a bipartisan bill
that clarifies and strengthens
existing rules to make it easier
for retirement plan sponsors
to provide guaranteed lifetime
income products as part of their
employee benefits.
Broad Support
Melissa Kahn, managing director
of retirement policy for the
defined contribution team at
State Street Global Advisors,
in
Washington, D.C., says she is " optimistic that we are in for
positive change " and cites, like Musto, a newly emerging unity
among industry advocates and government stakeholders.
Hedging her predictions with a healthy dose of caution, Kahn
speculates that, to some extent depending on the outcome
of the 2018 mid-term Congressional elections, " we could see
something major take shape in 2018 akin to a new PPA. "
On Kahn's analysis, there are many key provisions in
Neal's bills, but, in her eyes, perhaps the most crucial item
is " to take the automatic individual retirement account [IRA]
idea and go a step further. " In other words, the proposals
would essentially create an automatic 401(k) plan requirement
for all employers. Instead of having to auto-enroll
workers into an IRA, this would establish that any employer
not currently offering a tax-qualified employer-sponsored
plan for workers would have to do so. And the salary deferral
on auto-enrollment would be significant, 6%, automatically
escalating up to 10% over three years.
Naturally, some of the same political factions that have
so adamantly opposed President Barack Obama's signature
Patient Protection and Affordable Care Act (ACA), view
both the Automatic Retirement Plan Act and the Enhancement
and Simplification Act as massive government overreach.
From Kahn's perspective, however, she looks forward
to participating in this healthy debate " during 2018 and
20 | planadviser.com january-february 2018
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PLANADVISER - January/February 2018

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