Investment Advice Provision Proving To Be A Tough Sell

The American Council of Life Insurers is neutral on which version of the investment advice provision should be included in the bill.

While it “strongly supports investment advice legislation,” and “prefers the House version over the Senate version,” the ACLI can live with the Senate provision, according to Jack Dolan, an ACLI spokesman. Either version “would open the door more widely to representatives of financial services firms, such as life insurers and their agents, to providing advice to 401(k) plan participants,” Dolan said. “Workers are clear on the topic: They want and need professional advice. Life companies and agents ideally are situated to help boost workers’ retirement security through sound investment advice.”

Dolan said that in many ways “life company representatives, and representatives of other financial industries, are already on the worksite, providing funds for plans and educational materials. It is a logical step to allow professionals to offer advice to plan participants.”

He noted that suggestions “that advice from these professionals would somehow be tainted fails to recognize the stiff requirements in the House bill, ensuring top quality advice from financial professionals.”

Still, Dolan said, “we also would support passage of both the House and Senate version in reconciliation. Under that scenario, employers would have the choice of the type of advice they would make available to their employees.”

NAIFA officials say they are facing “extreme difficulty” in getting key senators, like Grassley and Bingaman, to support the House version. Officials at the American Benefits Council, which is lobbying the whole bill, and lawyers, who are lobbying the entire bill for their own clients, also claim the investment advice language is a key hang-up to negotiators.

Kerley said Grassley and Bingaman “support only their language” on investment advice. Their language is restatement of current law that says that if a company wants to provide investment advice for employers, it has to hire someone who is totally unconnected to current 401(k) providers.

Kerley doesn’t think that is the best approach. “Employers think twice about doing it because it costs them extra money to do so,” he said. “In most cases, across the overall spectrum of 401(k) plan participants, the amount of investment advice reaching employees is relatively low,” Kerley said. “It means in the practical world that the people who need help the most, rank-and-file employees who don’t have experience in investing, don’t get the best advice. And therefore, they don’t get the maximum use of their money. Rank-and-file members aren’t reading investment advice magazines.

“Moreover, they don’t go out and seek that advice on their own,” Kerley said.

He calls it a “very difficult educational issue.” But some Senate members view the House language as a positive, he said, citing Sen. Mike Enzi, R-Wyo. “Enzi sees this issue the same way as Boehner sees it. Senate supporters believe the House version will get more advisors in front of rank-and-file employees,” Kerley said.

Conferee concern about the LTC rider provision deals with the cost. The Congressional Budget Office “scores” the LTC rider provision as costing the government $10 billion over 10 years, although NAIFA believes the estimate is high. “But it is worth it,” Kerley said. “Eventually, it will take the pressure off both Medicare and Medicaid.”

A similar problem exists for the FSA rollover program, which has strong support from Grassley. The FSA rollover cost is scored at $20 billion over 10 years by the CBO. It gives an individual the authority to roll over $500 annually in his FSA. Under current law all the money in the account has to be spent or it is lost.

Under the bill, $500 would be the maximum that could be rolled over from one year to the next. That provision is contained in the House bill.