The Insured Retirement Institute (IRI) today released its 2024 Federal Retirement Security Blueprint, urging policymakers to enact changes within retirement legislation.
The report contains 33 proposals aimed at enhancing retirement security for U.S. workers and retirees in a year where the organization already anticipate “significant federal regulatory activity” from the U.S. Securities and Exchange Commission (SEC) and the U.S. Department of Labor (DOL).
“Our Retirement Security Blueprint proposals will boost retirement security for America’s workers and retirees,” said Wayne Chopus, president and CEO of IRI, in a statement. “These policies will help expand opportunities to save by improving access to workplace retirement plans and facilitate the availability of lifetime income products to retirement savers.”
In a media briefing with reporters, Paul Richman, chief government and political affairs officer at the IRI, noted that changes following the SECURE Act of 2019 and SECURE 2.0. have fortified retirement planning for workers and retirees alike. Still, more work can be done to bolster retirement security, he said.
“The SECURE Act and SECURE 2.0 have inspired the industry to take the recent steps forward so they can have a dignified path towards retirement, but retirement anxiety remains high,” Richman commented. “We know that a retirement savings gap exists today, with nearly half of workers not having a retirement savings plan. There is more that we believe we can achieve to expand opportunities for workers to save for retirement.”
Expanding opportunities to save for retirement
IRI’s first set of changes focuses on growing opportunities for workers to save for retirement, including allowing catch-up contributions for qualified caregivers, automatically re-enrolling employees three years after opting out, offering workplace retirement plans to legal cannabis businesses, and decreasing the age for participants in workplace retirement plans to 18 years of age. According to non-profit think tank The Century Foundation, 48% of all working Americans currently lack access to a workplace retirement plan.
Most of these workers are employed by small businesses and face disparities because of race and ethnicity, the IRI adds in its report. The Washington, D.C. – based association writes that nearly 64% of Latino workers, 53% of Black workers, and 45% of Asian American workers lack access to an employer-sponsored retirement plan.
IRI recommends enacting legislation, like the Automatic IRA Act of 2024, that would require all but the smallest of employers to incorporate a retirement savings plan that would automatically enroll participants with the ability to opt-out. Enacting such a law could generate 62 million new retirement savers, 98% of whom earn less than $100,000 per year, including seven million new Black savers and 108 million new Latino savers, the IRI writes.
Facilitating usage of annuity products in light of DOL rule
The organization backs the usage of guaranteed lifetime income solutions within retirement planning and encourages Congress to enact legislation that would expand the use of such products as default investment options and default distribution options; to authorize the use of indexed and variable annuities in qualifying longevity annuity contracts (QLACs); and to allow 403(b) plan usage of CITs and unregistered insurance company separate accounts, among other changes.
Additionally, the IRI suggests Congress create tax incentives—including lower tax rates, an exclusion of a portion of lifetime annuity income from taxation, or an increased catch-up contribution—to encourage usage of guaranteed lifetime income products.
“The SECURE Act and SECURE 2.0 have inspired the industry to take the recent steps forward so they can have a dignified path towards retirement, but retirement anxiety remains high.”
Paul Richman, IRI
The IRI specifically called on Congress to clarify the fiduciary status for insurance providers within workplace retirement plans and doubled down on its position regarding the DOL’s rule, labeling it “unnecessary” for issuers of general account products.
“We have repeatedly told DOL that their retirement security investment advice proposal is deeply flawed,” Chopus said. “It ignores the recent strengthening of federal and state consumer protection laws that render this proposal unnecessary and redundant, causing needless harm to millions of retirement savers who will lose access to critical guidance from financial professionals.”
Instead, the IRI recommends Congress enact the General Accounts Products Clarification Act, which would amend the Employee Retirement Income Security Act (ERISA) to “clarify that the offering and sale of general account products do not expose the insurer or its general account to fiduciary or ERISA plan asset status to ensure that retirement savers can continue to use valuable products to achieve their retirement goals.”
Boosting protections on ESG, cryptocurrencies
The IRI reinforced its stance on the DOL’s Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights rule, which clarifies that plan fiduciaries can consider environmental, social, and governance (ESG) factors when evaluating plan investments. In its report, the IRI says it supports legislation “that codifies the principle of neutrality in considering ESG and non-ESG factors,” as long as the principles and prudence are met by a plan fiduciary.
The IRI touches on the rise in interest among cryptocurrencies within investment options and asks Congress to examine and develop an “appropriate federal regulatory framework” to “oversee cryptocurrencies and the cryptocurrency market in general, as well as the potential use of cryptocurrency in retirement plans in particular.”
“This new regulatory framework must be structured properly to ensure its effectiveness for the wide range of available products in today’s market while preserving adequate flexibility to adapt to innovative new products that could be introduced in the future,” the IRI writes in its report. “Moreover, the regulatory framework must strike an appropriate balance between investor protection needs and preserving investor access to products and services that could help them achieve their financial objectives.”
As the organization issues its recommendations for Congress, the IRI says it is expecting final rules on, among others, the SEC’s proposed conflict of interest rules, aimed at predictive data analytics (PDA) and artificial intelligence (AI) and a “swing pricing and hard close” rule. Richman also noted that the House of Representatives would vote on an amendment on Friday to the Expanding Access to Capital Act, which would allow 403(b) participants to choose “more robust investment lineups consisting of lower-cost options that preserve principal and provide protected guaranteed lifetime income.”
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