Retirement, Small Business

The Government’s Increased Interest In Retirement Issues

9/7/16 8:00 AM

iStock_000006080713_Small-2.jpgThe government has been quite active in the area of retirement recently. For example, a final version of the Labor Department’s new fiduciary regulation was unveiled this past April, with the goal of providing consumers with additional financial protections by making it harder for conflicts of interest to exist where financial advisers are able to recommend products that are “good for their bottom line but not as good for their clients.” The new regulation has been met with much criticism and legal opposition has only increased. Oral arguments, for instance, began late last month in the first of several major suits against the Labor Department’s updated fiduciary rules, with National Association for Fixed Annuities (NAFA) plaintiffs making the case before the U.S. District Court for the District of Columbia for a preliminary injunction to block the implementation of the new regulation. Legislative challenges have also been pursued in both the Senate and the House this year.

Another retirement issue that the government has focused on recently is expanding access to long-term savings vehicles. Indeed, a study out earlier this year from the Federal Reserve Board of Governors found that nearly a third (31 percent) of non-retired Americans have no retirement savings or pension at all, including 27 percent of non-retirees age 60 or older. Further, there have been numerous studies highlighting the success of automatic enrollment in relation to getting more workers to participate in a retirement plan. Several state governments have taken notice of such research and responded by implementing auto-IRA or similar programs that would require employers without workplace retirement plans to enroll their workers in IRAs. California last month became the latest state to approve such an initiative, with new rules that will apply to every employer with five or more workers. The Investment Company Institute, though, has already submitted a letter to Gov. Jerry Brown that severely criticizes the state’s “Secure Choice” program.

Other states are considering similar initiatives, and the Labor Department in August even finalized regulations that would create a non-ERISA safe harbor for state administered auto-IRA programs in what is basically an attempt to encourage even more local governments to pursue such efforts. Industry trade groups, though, have already argued against the DoL’s final rules, such as the Financial Services Institute which voiced concerns about the “unintended consequences this rule may have for small business, the states and investors.” The Investment Company Institute similarly warned that that Labor Department’s final rule has “removed conditions that would have prohibited states from imposing any restrictions on employee withdrawals from their individual retirement accounts. This ‘Hotel California’ provision effectively allows states to ‘lock in’ employees and their savings, barring workers from moving their own money to private-sector IRAs that offer lower costs and a broader range of options.”



Sources: U.S. DoL, National Association of Plan Advisors, FRBG, Benefits Pro, Think Advisor, P&I Online, CNBC, Financial Services Institute, Investment Company Institute

Post author: Charles Couch