Move to Block State Run Plans - I can hear the cheers from Industry already!

Greetings all and Happy New Year!  Is Feb. 16th too late in the year to still say that?  Well, since this is my first posting in a few months, I feel good about saying it to any of you who feel good about reading my blog! 

It's been a tumultuous time for everyone over the last few months.  Not to rehash daily news, but the election results and subsequent policy making that's transpired since the new regime has taken office have put the 401(k) world into a confusing state where no one really knows what will or what will not actually transpire regulation-wise.  I've intentionally stayed silent publicly about the whole Department of Labor (DOL) Fiduciary Rule mess because it seems like every day the narrative changes.  That will continue to be my position until we have clarity.

Speaking of the DOL, the latest is that Mr. Puzder is out and a new favorite for the position has emerged, Alex Acosta.  Mr. Acosta is a dean at the Law School of Florida International University and has some public policy experience as an assistant attorney general for the Civil Rights Division under President George W. Bush, is a former U.S. attorney for the Southern District of Florida and previously served on the National Labor Relations Board.  Time will tell where he stands with respect to the 'Conflict of Interest' rule and when/if some version of fiduciary regulations will actually transpire.

In the meantime, something that I was very happy to see just transpired with the other giant threat to the private sector retirement system.  Just yesterday, the House of Representatives (highly Republican tilted) passed TWO separate resolutions that would effectively "roll back" the regulatory Safe Harbor that was put into effect for states in the creation of public sector "mandatory" retirement plans.  You can read about the resolutions here, House Passes Resolutions to Block State-Run Plans.

Not surprisingly, these two resolutions passed with consistent voting along party lines.  The usual suspects of the anti-private sector-401k  movement, Pelosi, Neal and Ghilarducci all had much to say about these resolutions.  My favorite of all of the quotes was from Ms. Ghilarducci (who still thinks that a mandatory 3% contribution to a govt. plan is the answer.....saying this since Carter was president) is this one, “This would be a painful step backwards for the millions who are shut out from the dwindling number of employer-sponsored plans,”

I love that quote.  It just shows how out of touch this person is.  Employer's have free will to create or not create plans and employees have free will to choose to work for or not work for employers who don't offer a workplace retirement plan.  If this system is free and open to all in this regard, how are they being shut out?  Whereas, the safe harbor for state-run plans effectively a.) gives the states a competitive advantage as a sponsor over what can be gotten in the private sector as private sector plans are subject to ERISA and state plans are exempt and b.) create confusion and a prime opportunity for local governmental corruption (I know.....this never happens....).

The other part about that quote I like is just a fundamental disconnect on basic facts.  She says "dwindling number of employer-sponsored plans".  That is plainly incorrect.  The number of employer sponsored plans in the U.S. increases daily, weekly, monthly and annually and has done so for three decades.  What's dwindling are the number of traditional Defined Benefit Pension plans.....which by the way have been replaced by and large by Defined Contribution Plans because DB Plans are financially unsustainable for most employers, including.....eh hem.....by almost ALL of the states, cities and municipalities who have them!!!!

Hope this gets done and we get rid of this lopsided opportunity for the states.  Sorry for the rant (not sorry). 

- Jason Grantz, QPA, AIFA

Scary Times (not an October pun)

First, I'd like to apologize to those who regularly read this blog for delays between my last and this blog post.  It's been an extremely busy summer and often the first thing that gets pushed to the side when time is short are passion projects.  That said, while this is not a political blog and I'm not a political person, no post in mid-October of this particular election year couldn't ignore the scariness of our current presidential race and the potential ramifications.  

Earlier today, I read a blog post from 401(k)specialist.com, linked here called How a Hillary Win Means Government Run 401ks.  That's a pretty scary title!!  I'm not giving a presidential opinion, but rather opining on the....aghast.....thought of the government taking over and running (er...eliminating) the 401(k).  The ramifications of this are scary as well, complete elimination of an entire industry that's been helping people for over 30 years and despite what they tell you, an even WORSE result.  Despite the negative noise around the private sector system, the 401(k) helps more people financially then ANY other program out there with the exception of Social Security, and everyone acknowledges that Social Security falls far short for most and when supplemented with 401(k) can give people a financial chance.

In the article, it describes how Hillary Clinton is considering Tony James for Secretary of the Treasury.  Tony James is a co-promoter of Guaranteed Retirement Accounts, an idea that's been put forth by Teresa Ghilarducci, the professor of economic policy analysis at the New School for Social Research and a well known enemy of the 401(k) and the 401(k) industry.  She often makes glib disparaging commentary about the 401(k) referring to it as an 'immature child' and the like. 

Her  idea is to mandate a 3% of compensation contribution into a new retirement system run by the government.  This would be in addition to what folks already put into Social Security.  This "new" idea has been around since Carter was president!!!!  If anyone thought that 3% was enough to make retirement inadequacy a thing of the past, they would have passed it through already!!!  We're talking almost 40 years and 6 Presidents!  Don't get me wrong, I think we can all acknowledge that their are problems, coverage is certainly an issue and costs, while already compressing, still have room to go down.  But, most professionals in this space will tell you that a minimum of 10% of compensation is what people need to be saving to ensure financial security in retirement.  That's the FLOOR, so 3%.....REALLY???!!! 

It is alarming that this type of socialist reform is the main idea of the folks advising this future potential president.  However, if Hillary wins the presidency, there's no guarantee that she'll be re-elected and scrapping an entire retirement system in favor of this sort of reform is going to be highly resisted, four years won't be enough time, not to mention, Secretary's of Treasury don't make laws.  So, in my opinion, this won't be what actually occurs, but it is something that we should all be keeping an eye on as these types of ideas from powerful and influential people have a way of sticking around. 

- Jason Grantz