“This is not a [retirement] plan business,” Brian Graff said at the outset of the 2021 National Association of Plan Advisors (NAPA) 401(k) Summit in Las Vegas on Sunday. “It never has been; it’s a participant business, and there has never been a greater opportunity in the participant business.”
In a rapid-fire update of current legislation, Graff, CEO of parent organization American Retirement Association (ARA), gave an exciting, if sobering, presentation in his annual From the Hill to the Summit general session. Usually scripted, his remarks were more off-the-cuff this year “because things are changing so quickly.”
Noting that he testified before the Senate Finance Committee in late July, he had never been in a committee meeting in which every Senator on the committee was present. They were engaged over the three-hour course of the meeting, and every Senator on the committee has a retirement savings-related proposal.
Not a drill
“They finally understand retirement planning’s significance, and this is no longer a drill about what could happen; things are happening,” Graff added.
The reason, he said, is reduced worry over health care and coverage-related issues by Americans, adding that 60% of respondents to a recent Gallup poll fear not having enough money for retirement.
“Now that most Americans have health care coverage in some form, their concern is shifting to retirement plan coverage, and politicians are noticing, which is both scary and exciting.”
He said he takes offense at academic claims and other 401k critics who say it’s a failure. Comparing it to someone who would blame a drought on a well, he proceeded to argue it really is a middle-class benefit.
“Those making between $30,000 and $50,000 are 12 times more likely to save if they have a workplace plan, as opposed to saving on their own in an IRA,” he said. “The 401k is not the problem; it’s that not enough people have them.”
Coverage gap
Detailing the coverage gap for American workers, he listed statistics that found 40% of whites, 52% of blacks, and 70% of Hispanics are not covered by their employer.
“That lack of coverage, when broken out by race, is not politically sustainable,” Graff warned. “It will be addressed, either with us or to us. Academics want the government to step in with a system like Australia, which is a continuation of a Social Security-like program. We obviously don’t want that and want to make sure we have a hand in developing the policy.”
He highlighted the impact of auto-features in lessening the coverage gap and noted that racial disparities in retirement plan coverage are eliminated with auto-enrollment.
Incredible opportunity
Turning to the retirement section of the $3.5 trillion healthcare, education, and climate bill sponsored by Democrats, Graff said retirement’s placement in Subtitle B of the reconciliation bill, right behind family leave, proves its current prominence.
“It would make it a national requirement for businesses with six or more employees to auto-enroll them a 6% and auto-escalate them to 10%. Added at our request was a safe harbor provision, deferral only with no testing.”
If it passes, the impact would be enormous. Citing Employee Benefit Research Institute data developed at the ARA’s request, Graff said $7 trillion in new assets will flow into retirement plans over the next decade. It would come from 625,000 new plans and 60 million new participants, he added, citing Judy Xanthopoulos, Ph.D., with Quantria Strategies.
“They want this to be effective on January 1, 2023,” Graff concluded. “The IRS might have a grace period, so it means a little over 24 to 30 months to onboard these plans.”