Compliance February 1, 2021

DOL Secretary Nominee Walsh Faces Senate Hearing This Week

Sources say Marty Walsh’s long-term ties to organized labor will likely be a main topic of discussion at the forthcoming confirmation hearings, but pension issues and retirement security are also likely topics.

Reported by

Marty Walsh, who is President Joe Biden’s nominee to become the next secretary of labor, is scheduled to testify later this week before the Senate Committee on Health, Education, Labor and Pensions (HELP).

Walsh’s February 4 confirmation hearing is expected by some sources to be one of the more hotly contested hearings of the incoming Biden cabinet, given the relatively high profile of his body of work in the public eye, which includes winning two terms as the mayor of Boston and serving as president of the Laborers’ Union Local 223. Notably, Walsh first joined Local 223 at age 21 as a member before eventually advancing to becomes its leader, a fact underscored by the Biden administration in a statement confirming Walsh’s nomination.

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

In the statement, the administration says Walsh is “a champion for workers,” arguing he has the relationships and deep experience necessary to usher in “a new era of worker power.” Such ambitions have earned the praise of union leaders across the U.S., while soliciting notes of caution and concern from business groups and chambers of commerce.

IBEW Local 103, the largest electrical workers union in New England, issued a statement characteristic of Walsh’s standing in the organized labor movement in the United States.

“Marty Walsh is a tremendous leader with the kind of empathy, vision and commitment to working families that our nation needs,” the union states. “IBEW Local 103 has seen firsthand that Marty Walsh is a champion for all working people. We share his values that every worker deserves access to great training, great careers and a chance at the American dream. As an organizer, legislator and mayor, Marty Walsh has demonstrated his profound commitment to making stronger communities and safer workplaces.”

Such statements stand in sharp contrast to those sent by some Republican members of Congress. For example, Representative Virginia Foxx, R-North Carolina, issued a derisively worded statement suggesting Walsh would seek to “crush our economic recovery by strangling business owners with an onslaught of job-killing regulations and vindictive and overzealous oversight.”

Practically speaking, Walsh’s confirmation is possible without Republican support, though it could be difficult, given the Democrats’ razor-thin majority in the Senate. The Democrat’s majority makes it appear likely that Walsh will ultimately be confirmed, though it is still possible that the administration and the Democratic leadership in the Senate could choose to nominate someone else who has more bipartisan appeal. Readers may recall the lasting confirmation challenges the Trump administration faced early on in this area.

What is clear at this point is that, historically, an actual vote being cast that does not go in Walsh’s favor would be a rare thing indeed. According to an analysis from the National Constitution Center, Senate records show that only nine Cabinet nominees have been officially rejected once their nomination made it to a full floor vote. As the center reports, the last major cabinet rejection was for John Tower in 1989.

“Tower had headed the Senate Armed Services Committee until he retired in 1985,” the analysis recalls. “President George H.W. Bush had nominated Tower as defense secretary. The public debate over Tower’s nomination included a lot of mudslinging, and Tower lost the vote along party lines in the Democrat-controlled Senate. He was the only former Senate member rejected for a cabinet position by the Senate in its history. Dick Cheney was later approved in Tower’s place.”

Given the intensity of feelings about Walsh’s labor ties, some sources say they will be working hard to get senators to raise important retirement security issues during the upcoming nomination hearings. To that end, one source suggested Senators should explore the following questions:

  • How would the nominee propose to expand opportunities for America’s workers and retirees to save for their retirement during their working years? Nearly 5 million employers currently do not offer a workplace retirement plan, leaving 28 million full-time employees and 15 million part-time employees without access to a workplace retirement plan. Would the nominee support generally requiring small businesses with 10 or more employees to offer a workplace retirement plan into which workers would be automatically enrolled with the right to opt-out?
  • Many households have student loan debt and the average amounts owed continue to rise. Many younger workers cite their student loan debt as a primary reason for their inability to save for retirement. Would the nominee support allowing employers to provide matching contributions into an employee’s retirement account based on the amount of the employee’s student loan payments?
  • America’s workers are not saving enough to ensure their own financial security. Current law allows individuals over the age of 50 to make catch-up contributions to improve their chances of saving enough for retirement. Would the nominee support extending this opportunity to other categories of individuals? If so, what other categories of individuals does the nominee believe should be given the ability to make catch-up contributions?
  • How would the nominee propose to encourage and facilitate access to and use of protected lifetime income to ensure America’s workers and retirees do not outlive their retirement savings?
  • Would the nominee support an increase in the required minimum distribution (RMD) age, adjusting mortality tables to reflect longer life expectancies, and modifying and exempting certain annuity benefits and payments from the minimum income threshold test to improve their retirement security?
  • Would the nominee support expanding the options now authorized to be used as qualified default investment alternatives (QDIAs) in retirement plans to include protected and guaranteed lifetime income options such as an annuity?
  • How would the nominee propose to preserve and promote access for retirement savers to professional financial guidance, education and information?
The Markets February 1, 2021

Expect More Usage of Managed Accounts

As workforces reduce in-person interactions and strengthen online engagement, experts are anticipating an increased interest in personalized advice managed accounts.

Reported by


Christian Mango, president of Financial Fitness for Life, a financial wellness consulting firm that works with recordkeepers, plan advisers and plan sponsor clients, has noticed a steady increase in interest in managed accounts over the past year.

“We for sure are seeing a higher level of interest in managed accounts,” Mango says. “You’re seeing more managed accounts being offered, and the more you see that, the more people are going to use them.”

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

The shift to remote work has undeniably led to an increase in the use of managed accounts in defined contribution (DC) plans. Interactions between investment experts and participants that used to be in person have moved online, to webinar-based engagements, for example, likely hindering engagement levels in retirement plans in general. What was once accessible to participants—on-site meetings and one-on-one coaching sessions with recordkeeping partners, providers, financial advisers and financial wellness coaches—has moved online and challenged the remote workforce, says Mango.

Swift personal changes in the era of COVID-19, including layoffs, furloughs and the financial insecurity that followed, also led to a higher demand for personalized coaching. Whereas target-date funds (TDFs) tailor a participant’s investments based on their age, managed accounts offer an adaptive, holistic view that takes a participant’s current life into account. The investment accounts consider a participant’s other retirement savings and income sources, beyond what’s in their DC account, to determine the ideal contribution amount.

“Those remote workers are receiving more personalized coaching, and, as an extension of that, there is more enhanced coaching in retirement managed accounts,” Mango adds. “You think of financial wellness coaching, managed accounts are the natural extension of that. That is what is driving more interest and utilization.”

Managed account engagement for the remote workforce isn’t new, however. In fact, remote workers have been attracted to the investment offering since before the pandemic started. A Morningstar study conducted pre-COVID-19 found that remote employees were 7.4% less likely to use the plan default investment option and 1.3% more likely to use managed accounts. As the percentage of remote workers increases in coming years (Morningstar predicts a growth from 13% of the workforce being remote in 2019 to 22% by 2025), managed account offerings are expected to rise as well.

“They’re absolutely becoming more prevalent,” says Dan Bruns, head of managed solutions at Morningstar and an author of the study. “The adoption of managed accounts in plans, from single digits in 2007 to 50% of plans today, is just something that is accelerating in general.”

The availability of managed accounts in DC plans has progressively risen since the passage of the Pension Protection Act (PPA) of 2006. With that legislation, they were named one of the three safe harbors within qualified default investment alternatives (QDIAs) (the other two being TDFs and balanced funds), but managed accounts were rarely used as the default investment option because of their high costs. As prices have decreased, more recordkeepers and advisory firms are using the option. Bruns notes that in Morningstar’s network of 24 recordkeepers, 23 currently offer managed accounts. “It’s growing pretty rapidly. There is more expansion right now than we’ve seen in the past five years altogether,” he says.

Even younger remote investors, who are generally defaulted into a TDF that bases their risk allocation on age, are taking an interest in managed accounts. Workers who grew up adapting to technology are likelier to be comfortable with managed accounts and its exposure to retail and robo apps, Bruns observes.

As COVID-19 uproots the lives of many, some younger investors are searching for options that no longer just take their age into account. A different Morningstar report surveyed young investors and their response to the market swings caused by COVID-19. One 28-year-old investor surveyed said he chose to enroll in a managed portfolio program in his retirement account, due to worries of the market volatility experienced in March and April.

Experiences like that exemplify a growing number of investors—especially those in the remote environment—willing to forego traditional default investments and, instead, opt into accounts offering personalization with little risk, says Stan Milovancev, executive vice president at CBIZ, a financial services and business consulting firm. “TDFs don’t look into the whole picture, but managed accounts do,” he says.

At CBIZ, Milovancev says he is seeing a greater need for managed accounts among plan sponsor clients, so much so that the firm has partnered with Morningstar to push adviser managed accounts for DC plans. Unlike managed accounts, adviser managed accounts source local or plan-level advisers to create or personalize plans, with both Morningstar and CBIZ serving as fiduciaries to the participant. “We create macro versions and are fiduciaries to participants, and then we use the algorithm of meta data from Morningstar to help execute those with the recordkeepers,” he explains.

Milovancev attributes a growing understanding of technology and tech-based data to the evolving shift toward managed accounts. When managed accounts were first expanded in 2006, the world was also introduced to new tech-based platforms, he says. Now, society is caught up. “When Congress first added managed accounts to QDIAs, that meant they saw something in them as a future vehicle, but we were just getting started with the Googles of the world,” he recalls. “But now we have the ability to scale with technology, with partnerships and recordkeepers. Now we’re here.”

«