Washington Update: Industry Turns Attention to Portman-Cardin Bill

The president’s budget proposal may be short on retirement reforms, but members of Congress are already looking beyond the SECURE Act.

Art by Hayden Maynard


Even before the SECURE Act was passed, retirement plan industry trade associations were already setting their sights on what might be the next step, says Elena Barone Chism, associate general counsel for retirement policy at the Investment Company Institute (ICI).

“ICI supports efforts in Congress to seize on the momentum of the SECURE Act,” Barone Chism says. Many of the provisions in the Retirement Security and Savings Act, proposed by Senators Rob Portman, R-Ohio, and Ben Cardin, D-Maryland, “are very complementary to the SECURE Act.”

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

Chris Spence, senior director, federal government relations at TIAA, agrees that the Retirement Security and Savings Act holds great promise for the industry, calling it the next “retirement reform 2.0.”

Of the many provisions that would make changes to employer-sponsored retirement plans and individual retirement accounts (IRAs), the ICI is keen on an additional catch-up provision that would permit those over the age of 60 to save an additional $10,000 each year in their 401(k) plans, she says.

“Another provision would provide for the indexing of IRA catch-up contributions, which are currently set at $1,000 and do not change—unlike other limits that are indexed for inflation,” Barone Chism says.

The law would also make two changes to “SIMPLE IRA” plans that the ICI thinks are steps in the right direction, she adds. The first would permit employers to make additional contributions on behalf of workers, and the second would permit these plans to offer Roth contributions, she says.

Furthermore, as the SECURE Act raised the age for required minimum distributions (RMDs) to from age 70 1/2 to age 72, the Portman-Cardin bill would further extend that continuum to age 75 in 2030, Barone Chism says.

“The bill would also create another type of automatic enrollment safe harbor that would not make it necessary for a plan to do nondiscrimination testing,” she says. “The thought is that the contribution formula under the current safe harbor may work for some employers, but there are other ways to structure the contribution formula that might be beneficial for other workplaces. This one would be designed to stretch the match to encourage employees to select a higher deferral rate.”

Other provisions of the bill are designed to streamline plan administration and increase operational efficiencies, Barone Chism continues. “One would consolidate various participant notices,” she explains. “Also in the category of improving plan administration, there is a provision that would amend the IRS correction program so that plans and IRA administrators can more often utilize the self-correction opportunity for inadvertent errors and avoid paying a significant filing fee to get the corrections approved.”

Other Priorities: Student Debt and Preventing Elder Abuse 

Aside from the Retirement Security and Savings Act, the ERISA Industry Committee is focused on efforts to help alleviate student loan debt, says Aliya Robinson, senior vice president of retirement and compensation policy. “We support matching contributions into 401(k)s for student loan repayment,” Robinson says. “That dovetails into the private letter ruling by the DOL [Department of Labor]. We also support expanding qualified benefits under cafeteria plans to allow student loan repayments.”

In addition, the ERISA Industry Committee supports the modification of the definition of highly compensated employees (HCEs) from the current $103,000 salary to $130,000, Robinson says.

With recent reports finding that most Americans lack an emergency savings account, and even among those who have one, the amounts being paltry, the ERISA Industry Committee also supports the creation of emergency savings sidecar accounts, she says.

There are also other bills TIAA is focused on, such as the Retire Act, Spence says. “This would modernize the delivery of plan documents and make it easier for plan sponsors to default participants into electronic delivery,” he says. “This probably will be reintroduced soon. We are also very focused on lifetime income provisions—anything we can do to improve access to annuities.”

Paul Richman, chief government and political affairs officer at the Insured Retirement Institute (IRI), echoes that sentiment, saying, “With the passage of the SECURE Act, the first comprehensive retirement package in more than a decade, we got a lot done, but we know there is more legislation we would like to see considered because there is a lot more to do to expand savings opportunities. We would like to increase access and utilization of lifetime income products to protect against the risk of outliving retirement assets. For instance, we would like to see standard use of QLACs [qualified longevity annuity contracts].”

IRI would also like to see more legislators “step up to the plate” to propose laws to protect the elderly against financial fraud, Richman says.

Time for Members to Weigh In

Two trade associations, The SPARK Institute and the CFP Board, are in the process of assessing which issues they would like the retirement plan industry to champion.

“Back in 2016, we organized a legislative and regulatory summit of 26 industry leaders for the purpose of defining our legislative and regulatory focus,” notes Tim Rouse, executive director of The SPARK Institute. “They offered up more than 50 ideas and then voted on the best ideas for SPARK to pursue. These were electronic delivery, lifetime income, open MEPs [multiple employer plans] and the expansion of auto features. The SECURE Act and DOL guidance on e-delivery checked off all four of those.”

Since the previous roundtable was so successful, SPARK is planning to convene another roundtable this year to assemble the next slate of issues to pursue, he says.

Likewise, the CFP Board, in conjunction with the Financial Planning Association and the National Association of Personal Financial Advisors, has formed a working group of 10 certified financial planners (CFPs) to propose issues for the government to pursue, says Maureen Thompson, vice president of public policy at the CFP Board. The group is refining eight to nine ideas that it plans to make public in the first half of this year and then take to policymakers, she says.

It is clear from all these efforts that the work to improve America’s retirement savings is far from done that that there will, undoubtedly, be even more ideas and proposals to come.

Blockchain and AI’s Role in Retirement Planning

Among the most popular ideas for the use of blockchain is creating verified digital identities for participants, while others hope to use artificial intelligence to scale up personalized services.

Art by Alex Kiesling


Sitting down for a conversation with PLANADVISER about their 2020 collaboration plans, the leaders of the Defined Contribution Institutional Investment Association (DCIIA) and the SPARK Institute highlighted a shared interest in examining the potential roles of artificial intelligence (AI) and blockchain technology in the financial services space.

Lew Minsky, president and CEO of DCIIA, and Tim Rouse, Spark Institute executive director, say their member firms see the related topics of cybersecurity, AI and technology development as being of paramount importance in the coming decade. In their experience, firms are already eagerly investigating and implementing new technology solutions meant to address some of the age-old challenges of the advisory and investment services industries—and to address mounting competition and fee pressures.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

An Edge via Artificial Intelligence?

A sizable survey conducted by Nationwide Advisory Solutions shows that 33% of registered investment advisers (RIAs) and fee-based advisers were already using AI in some capacity as of last year. Among this group, 37% expected their profitability would expand substantially over the next few years. Recordkeepers and investment managers, as well, have embraced data analytics, AI and machine learning to provide a more customized experience for each retirement plan participant and to help them make better decisions to improve their retirement readiness.

Still, while there have been some early adopters, experts agree that AI is still in its nascent stage within the broader investment management industry. In terms of applications that already exist, firms are using AI to supplement client service in the form of chat bots or robotic process automation, wherein repeatable, non-judgmental tasks such as client report preparation can be augmented by a computer. Using such AI support, an analysis that formerly could take an hour or more to put together ahead of a client meeting can now be delivered in minutes.

As an example of this, Redtail Technology has added AI elements to its customer relationship management (CRM) system, which can now analyze emails, notes and text messages to predict client needs. Specifically, the CRM system looks for client sentiment by identifying and categorizing their opinions, so advisers can mitigate any issues that arise. Other technology providers are taking different approaches to integrating AI, but their shared interest is to make practices more efficient in a fee-sensitive environment.

According to DCIIA research, recordkeepers and plan sponsors are both interested in AI, but they have different focus areas. Recordkeepers, for example, are focused on the potential to address operational efficiency issues, whereas plan sponsors are more focused on investment topics and on the risk of fraud. On the other hand, when asked about how AI might be of most help to the retirement plan industry, plan sponsors and recordkeepers both selected “to address participant retirement planning and readiness” and “to address holistic financial wellness” as their top two choices.

According to DCIIA, plan sponsors’ and recordkeepers’ chief concerns about AI include the potential for inaccuracy/unreliability, data privacy issues and an unclear value proposition at this early stage. Both groups say the industry must think carefully about the ethics of AI in managing biases, preventing conflicting goals/incentives and avoiding the misuse of data.

The Blockchain Debate Is Just Beginning

In 2020 and beyond, Minsky and Rouse say, DCIIA and SPARK Institute will be working to foster a cooperative outlook on these subjects, noting they are planning to inspect the topic of blockchain technology in greater detail.

For context, a “blockchain” is a series of digital records of data that, in basic terms, cannot be retroactively modified and it is managed across many distributed computers of independent entities. Each of these blocks of data is secured and bound to the others using advanced cryptographic principles, in theory making blockchain records both highly secure and transparent without requiring a centralized clearinghouse to manage the whole process.

Minsky and Rouse say their member firms are highly interested in blockchain technology, but they also want to learn more about its potential before they commit significant resources to implementing the technology. This makes sense from both a practical but also from a business standpoint, as well-established financial services firms have invested huge amounts of capital to build their centralized digital account processing infrastructure. Depending on how it is used, the emergence of blockchain could hypothetically reduce their influence in the financial system.

“The consensus at one recent DCIIA/SPARK event was that blockchain could have a huge impact on our space,” Rouse observes. “Like cybersecurity, blockchain is an area where collaboration is needed and which thrives on a consortium model. At this stage, the most popular ideas for the use of blockchain are creating protected digital identities for participants, and doing the same thing for plan data. We’re just at the beginning of this conversation, but it’s a very important one to start.”

«