Retirement planning officials threw their support Wednesday behind a bipartisan package of bills designed to update the Employee Retirement Income Security Act by opening the door to annuities in retirement plans, electronic delivery of participant documents, relief for multi-employer plans and easing of small businesses retirement plan costs.
“Many ERISA provisions related to retirement plan administration are in desperate need of updating, with some having last been revised over two decades ago,” Rep. Tim Walberg, R-Mich., chairman of the Subcommittee on Health, Employment, Labor and Pensions, said during the hearing, called “Enhancing Retirement Security: Examining Proposals to Simplify and Modernize Retirement Plan Administration.”
The four proposals, which the committee is looking to vote on soon, are:
- H.R. 4604, the Increasing Access to a Secure Retirement Act of 2017;
- H.R. 4158, the Retirement Plan Modernization Act;
- H.R. 854, the Retirement Security for American Workers Act; and
- H.R. 4610, the Receiving Electronic Statements to Improve Retiree Earnings Act.
The Insured Retirement Institute, an annuity trade group, told the committee that it backs H.R. 4604 because it establishes “clear guidelines” for employers who want to include annuities in their retirement plan menus.
The current Labor Department rule “is a barrier to most employers offering lifetime income products because they don’t have the technical or financial resources to meet the unclear requirements of the rule,” IRI said. The Increasing Access to a Secure Retirement Act bill provides “a workable and appropriate path for employers to meet their obligations when choosing an annuity provider.”
Krista D’Aloia, a vice president and associate general counsel at Fidelity Investments, who testified on behalf of the American Benefits Council, stated that the “cash-out threshold is one of the few dollar figures applicable to retirement plans, which is not currently indexed for inflation.”
To address this, the Council supports the Retirement Plan Modernization Act, which would “build in an inflation index to the cash-out limit, which is the value of benefit that a plan would be able to distribute to a participant if the participant terminates employment before retirement age.”
The proposal, ABC said, “would also update (for the first time since 1997) the current $5,000 cash-out limit to $7,600.”
Said D’Aloha: “Updating the cash-out limit will increase efficiency in plan administration, lower costs, as well as reduce the potential for individuals losing track of their benefit.”
The RETIRE Act (H.R. 4610) makes it “more feasible for employee benefit plan sponsors and their service providers to use electronic communications instead of paper,” said IRI’s senior vice president and general counsel, Lee Covington.
“It is estimated the bill will reduce the communications costs for sponsoring a plan by 38%,” Covington said.
At the same time, Convington continued, the bill “continues to provide and maintains important safeguards to ensure participants who still want to receive required communications in paper format can do so.”
J. Mark Iwry, nonresident senior fellow in economic studies at the Brookings Institution and a former Treasury official, said that while the electronic communication proposals has a “great deal of merit,” he questioned whether the bill contains the “consumer protections we need to get that ready” to mark up.
“I don’t think we’re ready yet,” he said, adding that there’s a path to including “not too burdensome protections to get there and move electronic communications forward.”