What a Year!
Alison Cooke Mintzer (photo by Chris Ramirez)
It’s difficult to come to the end of the year and not write some sort of piece about reflection. This year, I find that to even write an editorial about it is hard because the year has been so bizarre!
That being said, as I spent time reflecting on the last 11 months, I found myself noting what an interesting and busy year it’s been in the retirement plan space. So much has happened that almost seems unnoticed, not because of its lack of importance, but rather because it seemed overshadowed by the bigger issues facing the country.
Not only did we see the implementation and beginning of many of the Setting Every Community Up for Retirement Enhancement (SECURE) Act provisions, but then we got the Coronavirus Aid, Relief and Economic Security (CARES) Act, and the many advisory opinions and regulations from the Department of Labor (DOL) relating to proxy voting; environmental, social and governance (ESG) investing; the use of private equity investments in defined contribution (DC) plans; the expansion of electronic retirement plan disclosures and communications to participants; lifetime income illustrations under the SECURE Act; and, of course, yet another iteration of the fiduciary rule.
With a new administration on the horizon, some of these may be revisited—though I hope, for everyone’s sake, that we might be able to finally call “time” on the fiduciary rule redo and just implement the new standard. But overall, as we enter 2021, I think we’ll start to see what a big year this was from a regulation standpoint as the changes start being effected.
Not everything will have broad influence. Will private equity start to see its inclusion in more plans? Probably not widely, in my assessment, despite the advisory opinion from the DOL and the desire of private equity firms to take their piece of the DC pie. The ESG investing rule was softened a bit, and, ultimately, I don’t see it dampening the interest in such investments—especially as studies continue to show that such factors can and do have a positive influence on returns. I think the ability to move, where appropriate, to electronic disclosures and communications about the retirement plan is a welcome change and will see many sponsors switching, but I don’t know that it will drive changes to outcomes. The future of income illustrations under the SECURE Act could still see some changes, and I think that’s warranted in order to help participants grasp the many assumptions made in calculating that number they see on statements.
The big question marks for 2021 when it comes to outcomes—which are, in my opinion, what we should focus on as an industry—would be what happens with pooled employer plans (PEPs) once they start rolling out in January, and what positive and negative effects resulted from the CARES Act distributions?
We talk about the importance of participants staying invested in their plan but continue to promote the retirement plan, oftentimes through regulation, as the place to go when catastrophe hits. At some point, we need to square that with the goal of these savings plans. For us to really do that, we have to look at what was exposed this year: a lack of access to retirement and savings plans overall; an under-savings rate; and the impact of market volatility and sequence of return risk for participants and retirees, among other issues.
As we finally close out this year, I hope all of us will see brighter days in 2021. In the retirement plan world, this year saw some positive developments, but also showed us where we must look to help Americans be more financially secure. In that is a good New Year’s resolution.