Melissa Kahn is the managing director of retirement policy for the defined contribution (DC) team at State Street Global Advisors, and in that role she spends a lot of time meeting with Congressional and executive-branch policymakers and staff.
Her role primarily involves lobbying, she tells PLANADVISER, but it also includes developing and communicating the team’s strategic business positions as they relate to the retirement market. Prior to joining SSGA, Kahn was an independent consultant providing strategic planning, policy analysis and advocacy work on a variety of issues, including retirement, long-term care, Social Security, and global employee benefits, to financial institutions and large plan sponsor clients in the U.S.
Even with that background, Kahn admits there is a real measure of uncertainty that has injected itself into the retirement planning marketplace—and indeed the financial services realm in general. However, she remains markedly optimistic that retirement policy will be addressed in a positive way by the new Republican majority and President Donald Trump. Probably the most likely path for this to occur will be as part of broader tax reform, she says.
Kahn feels that at this stage there are a variety of approaches on the table, with a clear forerunner yet to emerge. In fact this week may finally bring greater clarity, she speculates, given that President Trump has promised to introduce his own tax reform proposals on or around April 26.
Personally, she hopes and expects to see retirement-related tax reforms that would help small businesses establish and maintain retirement plans. “I have personally had conversations on this topic and the idea of providing five-year tax credits to help small businesses establish plans,” she says. “One idea that seems to have some traction would be requiring all employers to offer a retirement plan, but not requiring contributions, especially for small businesses. Even though we wouldn’t require employer contributions, if small employers make contributions, they could get additional tax credits. This is the kind of give-and-take discussion we are hearing.”
NEXT: Taking a step back
Kahn stresses that the specifics of what Congress and President Trump will decide to do—and how—are still far from clear. “What is clear is that there are far too many people who do not have access to high quality retirement plans, and that Congress has an opportunity and an obligation to help make real improvements to the DC retirement system, which is the main vehicle for the future of retirement in this country.”
She agrees that the current (rocky) political and regulatory environment has made it increasingly wearisome to make predictions about what may unfold next. Yet Kahn also warns that complacency is simply not an option, either.
“We know from looking back at the recent history of the retirement market that regulation has largely determined where the opportunity for growth and success will be,” Kahn observes. “As perhaps the clearest example you just have to look back at the Pension Protection Act (PPA) and how this one law basically established the dominance of target-date funds.”
SSGA, in this environment, feels the time is right to push for wider retirement reform. Kahn expects one approach that could gain some traction is to “move more towards a universal Roth approach,” where more of the tax burden is paid up front by investors. As compensation for losing the ability to invest dollars for retirement pre-tax, investors would see less of a limitation on how much can be saved in a given year in a DC retirement account. She also expects ongoing conversations about multiple-employer plans (MEPs) that would allow small employers to administer their plans together, vastly increasing efficiency and creating valuable economies of scale.
“Talking with Congressional members and staff we have been getting fairly good reception on these ideas,” Kahn says. “I feel there is an appetite to do something about retirement, the question is, how does it get done? Will we see a big stand-alone measure like the Pension Protection Act? Probably not. It is far more likely that reforms would be attached to tax reform … A lot of elements could move together in that respect.”