The 2017 PLANSPONSOR National Conference kicked off Wednesday afternoon in Washington D.C.’s Renaissance Hotel.
The setting, barely a mile from both the U.S. Capitol and the White House, could not have been more appropriate for the conference’s popular recurring session: The Washington Update.
Featured on the panel this year were Bradford Campbell, partner, Drinker Biddle & Reath LLP, and former assistant secretary of labor overseeing the Department of Labor (DOL)’s Employee Benefits Security Administration (EBSA) under President George W. Bush; as well as Michael Kreps, principal, Groom Law Group Chartered, and former senior pensions and employment counsel for the U.S. Senate Committee on Health, Education, Labor and Pensions from the 110th through the 114th Congresses.
Even with those impressive credentials, both Campbell and Kreps freely admitted this is a vexing and even a bit frustrating time from the perspective of trying to get in front of potential major regulatory and legislative change. One just has to look at the example set by the ongoing fiduciary rule kerfuffle to see the challenge.
Just in the last year, the fiduciary rule’s future has seemingly flipped at least two or three times, Kreps and Campbell said, starting with the election of Donald Trump and the bicameral Republican majority in the U.S. Congress. Given the new president’s and the GOP’s rhetorical stance towards government regulation of financial markets, it was naturally assumed that the fiduciary rule would, by one mechanism or another, be prevented from taking effect.
However, the full Congress has failed as yet to pass any measures impacting the fiduciary rule implementation, and the new administration took four full months to fill the position of labor secretary. This left Alexander Acosta precious little time to begin the process of somehow removing or revising the rulemaking prior to its first implementation deadlines. Trump’s DOL managed to delay the rulemaking’s earliest compliance deadlines, from April to June, but it has given up trying to fully halt the implementation—coming imminently on June 9.
Campbell and Kreps both suggested that the future of the fiduciary rule, even now that the implementation is picking up steam, is far from set in stone. Congress could still certainly find a way to successfully move, as it has attempted to before, to repeal the rule in full and then require the Securities and Exchange Commission (SEC) to set any new advice standards. The CHOICE Act, which has recently passed the House Financial Services Committee, for example, seeks to do just that.
NEXT: Uncertainty still reigns
In an interesting twist of events Secretary Acosta actually addressed a House committee on the opening day of PSNC 2017, regarding his plans for reviewing and potentially overturning the fiduciary rulemaking, suggesting that the Obama administration “overlooked” key industry concerns with the tighter conflict of interest standards. Also providing some important context, an unscientific live poll of plan sponsors at PSNC showed less than 10% identified either the fiduciary rule or retirement-related tax reform as their top concern looking forward. Far more identified low savings rates and the inability of employees to retire on time as their top concerns.
Still, Campbell and Kreps warned that the fiduciary rule transition period is starting now, and it’s unlikely that the rulemaking will be dialed back within the next year or even two years—if ever.
Kreps stressed that plan sponsors don’t have as much to worry about as do advisers or service providers, but all players in the retirement planning space must take heed: “Provider-client relationships are subject to change, in terms of education practices, advice tools, call center scripts, and in many other areas. It is your express duty as a plan sponsor to monitor all of this and continue to maintain an understanding of what your service providers do and how they are compensated. You will likely see new disclosures coming in very soon.”
Campbell agreed, warning that the standards for rollover advice in particular are changing significantly, “and this will impact how participants behave around the retirement point.”
On the subject of retirement-related tax reform, similar amounts of uncertainty were voiced by both panelists, but they strenuously warned plan sponsors that “Congress could very likely make real mistakes here that would damage the private-employer retirement system.” The mandatory use of Roth accounts for at least some—if not all—contributions, rather than the traditional 401(k), is one very real possibility.
Both panelists concluded that the only likely positive development that could come out of Washington this year, from the perspective of private defined contribution retirement plans, is the opening up of the multiple employer plan (MEP) system to allow small businesses to pool their resources when starting and maintaining retirement plans.