Will Open MEPs Soon Have Their Day?

The executive director of the Aspen Institute Financial Security Program, reflecting on a recent summit of government and industry leaders, suggests the stars may finally be coming into line for open multiple employer plans.

J.P. Morgan Asset Management this week hosted an informative video webcast on the topic of “Building a More Robust and Inclusive U.S. Retirement System Amid a Changing Economy.”

PLANADVISER was invited to attend the live event and to speak afterwards with the presenters, who included Anne Lester, head of retirement solutions for J.P. Morgan Asset Management, as well as Ida Radamacher of The Aspen Institute Financial Security Program.

Their presentation mainly focused on lessons learned from the April 2017 inaugural Aspen Leadership Forum on Retirement Savings, held in Middleburg, Virginia. The forum brought together roughly 60 senior leaders from industry, government, academia and the lobbying community to discuss “breakthrough solutions to one of the most critical financial challenges facing American households—the lack of adequate savings for retirement.”

Reporting her experience at the forum, Radamacher said at least one thing is very clear: “Any large-scale action on retirement reform will require trust, a willingness to take risk and experiment, and a sense of the greater good.”

Among the diverse stakeholders there was actually significant agreement on the challenges facing U.S. retirement savers—as well as those workers who aren’t saving at all. Radamacher ran through the list: “Millions of Americans have no easy way to save for retirement through work. While forum participants disagreed about the exact size of the gap and how best to measure it, most agreed that it was a fundamental shortcoming of the current system that not everyone has an opportunity to save at work. There was further widespread agreement about the challenge presented by increases in longevity. Even as workers face economic headwinds, they are generally enjoying longer lifespans—and thus longer and frankly more expensive retirements.”

During the presentation both Lester and Radamacher repeatedly stressed the huge opportunity open multiple employer plans, or “open MEPs,” offer for broadly improving retirement readiness in the U.S. workforce. This approach would allow small employers to take advantage of the same economies of scale that make large 401(k) plans effective savings vehicles from both the perspective of the employer and the employee. 

Both speakers noted that the Pension Protection Act of 2006 has helped many employers implement increasingly successful individual retirement savings programs. In short, they argued, employers that are committed to automatically enrolling employees into a robust defined contribution (DC) plan that features automatically diversified and rebalanced portfolios are already seeing success in boosting retirement readiness among populations of workers not offered a traditional defined benefit pension plan.

“It is simply common sense to open up this effective DC system to more workers through open MEPs,” Radamacher stated. “Open MEPs will take the pressure off of small employers while delivering professional management and support to individual savers.”

Both Lester and Radamacher suggested they have seen an increasing number of members of Congress “become interested in the open-MEP issue as a way to solve one of our biggest challenges.” So far there is not quite enough political will to take up open-MEPs as a stand-alone issue, the pair agreed, but this could very soon change.

“Although forecasting the future is a risky undertaking, there is no doubt that the retirement system will continue to undergo significant change for the next few decades,” Radamacher concluded. “The nature of the change, however, is not predetermined. Decisions made by those leaders today in government, business, academia and the non-profit sector, will shape the system the next generation inherits.”