A go-to guy in Washington for retirement plan policy, Brian Graff has been at the helm of the American Society of Pension Professionals & Actuaries (ASPPA) for a dozen years now, and he says he is happy to preside over the retirement industry as marketplace demand for more information continues to pour in. But he is also cognizant of the challenges for employees' savings plans in the current market environment.
During an interview in late May, Graff was on his way to answer questions for House Ways and Means staff on fee disclosure legislation, H.R. 3185, which addresses hidden fees that can cut deeply into workers' retirement savings. At the time, he was confident the committee would mark up the bill, the 401(k) Fair Disclosure for Retirement Security Act, and it was "quite possible" the House would pass a bill. However, he doesn't see the Senate acting on anything this year, because there is not a lot of time left on the calendar before the elections, Senator Ted Kennedy (D-Massachusetts) is ill, and there are a couple of Senators running for President.
Graff says his overall goal is to have all workers under the blanket of some type of retirement savings coverage. "One of my personal objectives after having been in this industry for almost 20 years now is improving coverage to try to address the coverage gap that exists now in the American workforce. In my opinion, addressing the coverage gap is the most important retirement policy objective," Graff says. About 40% to 45% of the workforce is not covered by a retirement plan, and individual savings rates are paltry, he says. The majority of workers who do have a 401(k) plan have it as their sole source of retirement savings.
However, Graff sees a sincere, earnest Congressional debate for the remainder of this year and in the next Congress on employee savings because it is a bipartisan issue, he says. "ERISA is a great experiment," he says. It offers "incentives for employers to do the right thing so workers do the right thing." However, he acknowledges it is a balancing act, and that is the reason why ERISA has been amended so many times since it came into being in 1974.
Graff expects faster action from the regulatory bodies. The Department of Labor's (DOL) newly proposed 408(b)(2) regulation, which requires extensive disclosures of direct and indirect revenue and conflicts of interest by plan service providers, will probably be finalized by the end of the year. He would have preferred more of a breakout of the fees that the plans pay--for instance, fees for recordkeeping shown separately rather than buried in one number.
ASPPA views the change as a shift in responsibility from the fiduciaries and places the responsibility to disclose information on the plan service providers. Graff embraces full disclosure of information, and sees the marketplace and the general era of accessible information leading the way. But, "larger plans have more access to information because they have more leverage. With regulation, pressure on industry, and potential legislation--there will be some changes but I would not agree that we are there [to full disclosure] yet," he says.
However, given "all the litigation going on now" with plans regarding fees, a future where fee information is not available is less of a problem. More and more plans are realizing they have to disclose fees. The costs would be for new software systems, but Graff doesn't see this as excessive.
On the automatic enrollment front, Graff's organization is fighting the proposed IRS regulation that says that a plan will not be treated as being an eligible automatic contribution arrangement (EACA) for a plan year unless the EACA provisions are in place for the full plan year. "Permitting the establishment of an EACA during the plan year would allow plans to implement EACA provisions sooner, thereby increasing participation through automatic enrollment," an ASPPA representative from ING testified before the IRS in May.
"I think the Treasury and the IRS have been very supportive of AC Plans and have been very willing to work with the industry," says Graff, who is an attorney and CPA and also formerly legislative counsel to the U.S. Congress Joint Committee on Taxation. It is a "good example of being on the same page to get higher savings rates for lower income individuals." He expects a follow-up on a recent IRS public hearing in June, on some technical issues, and is optimistic because of the commonality in agreement between the industry and the IRS.
Elizabeth D. Festa is a freelance business writer based in Washington, D.C. She can be reached by e-mail at email@example.com.