“We are at the beginning of what I expect will be a continuous battle for several years over the future of America’s retirement plan system.”
Pretty heady stuff to kick off the NAPA 401(k) Summit in San Diego on Sunday from American Retirement Association CEO Brian Graff, during his traditional “From the Hill to the Summit” session that opened this year’s event in front of a record crowd of retirement plan advisors.
“Frankly it’s not the specifics of this particular proposal that matter. What you should be worried about is that there is actually bipartisan support for the idea of a federally run retirement savings plan.”
ARA’s Brian Graff
What’s this upcoming battle? No less than whether employer-based retirement plans remain the domain of the private market or get taken over by the government.
Advocates for the private retirement plan industry hardly got to bask in the glow of SECURE 2.0 passing before having to turn their attention to what looks be the next big challenge to employer-sponsored retirement plans.
“I’m afraid that we’re now going to turn the page and we’re going to be going towards a period of time where we’re going to have to play some defense,” Graff said. He emphasized that while workplace retirement plans work really well for the people that have them—the problem has been that not enough people have them.
He pointed to statistics such as 60 million Americans still lacking access to a workplace retirement plan, including 52% of Black workers and 68% of Hispanic workers lacking access compared to 40% of white workers.
And at some point, he said, the policymakers in Washington D.C. are going to get tired of this coverage gap. He just didn’t think it would be so soon after the passage of SECURE 2.0—designed specifically to address the coverage gap.
And the landmark retirement legislation reform very well should, given a proper runway to do so. But the question now will be whether policymakers will give these reforms the chance to close the coverage gap before trying to tackle the coverage gap issue with a—groan—government-sponsored “solution.”
“Could we at least get a minute with the provisions of SECURE 2.0 and give them a chance to see if they make a difference? Well, we got about 60 days,” Graff said. “The first salvo in this debate is a proposal called the Retirement Savings for America Act. Think of it as a MEP operated by the Treasury Department.”
Graff said the ARA expects the bipartisan legislation to be introduced in Congress in the coming weeks. The bill is being backed by a formidable, well-funded Washington D.C.-based “think tank” called the Economic Innovation Group, which launched in 2021 with a white paper by economists Teresa Ghilarducci and Kevin Hassett that outlined an idea to significantly expand retirement savings for millions of low- and moderate-income Americans through a new program modeled after the federal government’s Thrift Savings Plan (TSP).
“Do not underestimate this organization,” Graff said. “They are extremely well-funded. They have hired some very well-respected D.C. lobbyists.”
Last December, U.S. Senators John Hickenlooper (D-CO) and Thom Tillis (R-NC), and Representatives Terri Sewell (D-AL) and Lloyd Smucker (R-PA) introduced the “Retirement Savings for America Act,” a bipartisan, bicameral bill based on the EIG.
Under the proposal, all uncovered or excluded employees would need to be auto-enrolled into the program at 3%. It would be exempt from ERISA and nondiscrimination testing even if the owner participates. The federal government—not the employer—provides the safe harbor match and 1% non-elective contribution. It would supposedly be paid for by eliminating retirement savings tax incentives for wealthy Americans.
“Talk about unfair competition! A plan exempt from ERISA where the federal government is covering the match?” Graff said.
“I’m not panicking that this is going to become law this year. And I’m really not too worried it’s going to become law next year,” he continued. “Frankly it’s not the specifics of this particular proposal that matter. What you should be worried about is that there is actually bipartisan support for the idea of a federally run retirement savings plan.”
In concluding on the subject before moving to other issues, Graff said the ARA has “got this” in the short run, thanks to member support.
“But with your help, we need to make it crystal clear –both from a policy and a political standpoint that the federal government competing with the retirement plan system will never be acceptable.”
That drew a rousing round of applause from the audience.
SEE ALSO:
• TSP-Like ‘Retirement Savings for Americans Act’ Introduced with Eye on 2023
• NAPA 401(k) Summit Takes Over San Diego
• Mayors Want TSP-Like Program for Workers Lacking Access to Retirement Plans
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
Anyone who loves our industry and their job, heed what Brian is saying. Opponents of a free and open ‘private-sector’ retirement system are chipping away and gaining strength quickly. The time to speak up and act is NOW! No more infighting over SEPs, MEPs, PEPs, GOPs or any other private-sector plan. We have a much bigger foe that we need to come together to defeat before we don’t have a private-sector retirement system left to defend.