As part of their Strategic Issues Webinar Series, the LIMRA Secure Retirement Institute hosted a webinar on April 16 entitled “Regulatory and Legislative Trends Impacting the U.S. Retirement System.”
The presentation featured Michael Kreps, principal with Groom Law Group, and was moderated by Judy Zaiken, corporate vice president with LIMRA.
Kreps, a highly-influential voice on retirement public policy in the defined contribution space, addressed four key regulatory and legislative trends impacting retirement plan service providers, including:
- Expanding multiple employer plans
- Permitting auto-portability
- Expanding the use of lifetime income options in defined contribution plans
- Providing 401(k) student loan benefits
Kreps on Auto Portability
Kreps broadly characterized auto portability as having the potential to deliver “an enormous boost to the industry and to participants in general.”
He began by describing the problems encountered by plan sponsors and participants in today’s environment when highly-mobile participants can’t easily move their savings after changing jobs.
As a result, most participants cash out, paying taxes and penalties, or alternatively, leave their savings behind. Employers are often left holding the bag because these participants, maintains Kreps, “are not working for you, and they disappear—they’re hard to find and track down.”
LIMRA’s Zaiken offered her supporting view, referencing prior LIMRA research indicating that “$0.40 of every dollar doesn’t make it to retirement, and a lot of that comes from small accounts.”
Turning to mechanics, Kreps characterized auto portability as “establishing a hub between recordkeepers, would allow for the automatic movement of a participant’s account into their new employer’s plan.”
This approach, he continued, has “a lot of utility—obviously, having more efficiencies with the recordkeepers would be incredibly helpful and prevent a ton of leakage.”
On the issue of missing participants, Kreps shared his view that auto portability could “help plan sponsors locate missing participants once the network is built” by identifying a separated participant’s active account somewhere else.
“If you can identify the active account,” he said, “then most likely you can get the current address and contact information.”
Next, Kreps turned to 2018 guidance from the Department of Labor (DOL) on auto-portability, which came in the form of Advisory Opinion 2018-01A and a proposed Prohibited Transaction Exemption (PTE).
The DOL’s guidance, by clarifying the fiduciary obligations of the employer, and by allowing auto-portability to use negative consent, created the conditions “for a real and profound impact on the retirement system.”
He added “the DOL did a really great thing by promulgating this guidance.”
Addressing the DOL’s next steps, he noted that they are “finishing the final prohibited transaction exemption now. That should be out soon, to set up the guardrails for how this works.”
Kreps concluded his update on auto portability with an optimistic assessment of its progress and prospects, stating “this is a tremendous first step towards implementation—if we could get [auto-portability] up and running, it would be a phenomenal achievement.”
Tom Hawkins is Senior Vice President, Marketing and Research with Retirement Clearinghouse, and oversees all key operational aspects of this area, including RCH’s web presence, digital marketing and plan sponsor proposals. In other roles for RCH, Hawkins has performed product development, helped lead the company’s re-branding, evaluated and organized industry data and makes significant contributions to RCH thought leadership positions.
Tom Hawkins is Senior Vice President, Marketing and Research with Retirement Clearinghouse. He oversees all critical operational aspects of this area, including RCH’s web presence, digital marketing, and plan sponsor proposals. In other roles for RCH, Hawkins has performed product development, helped lead the company’s re-branding, evaluated and organized industry data, and makes significant contributions to RCH thought leadership positions.
