Congress should develop a simpler, more flexible workplace savings framework, and it should put administration of the accounts in the hands of financial institutions, not employers.
Policy wonks Kent Conrad and Walter Russell Mead gave that advice Wednesday, during a hearing on U.S. retirement security. The economic policy subcommittee of the Senate Committee on Banking, Housing and Urban Affairs held the hearing in Washington and posted a video recording on its website.
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Conrad, a former Democratic senator from North Dakota who is now a senior fellow at the Bipartisan Policy Center, said the current framework works poorly for modern workers, who may change jobs many times over the course of a career.
The Bipartisan Policy Center found when it looked at retirement account data that employers and financial institutions are administering 25 million orphaned accounts.
“What sense does this make?” Conrad asked.
Mead, a distinguished fellow at the Hudson Institute, said the fact that Americans tend to have so many small, scattered accounts is one reason why the Department of Labor’s effort to impose a fiduciary standard on all retirement advisors is unrealistic.
Financial institutions might be able to afford to meet a fiduciary standard for all retirement accounts if the balances were bigger, Mead said.
Today, however, the typical retirement account balance is too small for the cost of complying with the fiduciary standard to make business sense, Mead testified.
Conrad said he is worried about the possibility that retirement advisors operating under any standard other than a fiduciary standard might fail to disclose potential conflicts of interest.
“I wouldn’t go to a company advising me on wealth management that didn’t have it,” Conrad said.