January 29, 2016


Yes, the administration is really serious about retirement (Joshua Gotbaum, 1/29/16, Brookings)

What's necessary is to rethink ERISA and that's what the administration is beginning to do.  There's still a need to protect people, but maybe the way to do it is to focus on the retirement product - on its fees, its practices, and its returns -- rather than just imposing fiduciary duty on the employer and hoping they're willing to do so.

There's no reason, for example, why many employers couldn't automatically enroll their employees in a third-party plan, have the plan file the reports and be the legal fiduciary, and have the government regulate the plan instead of the employer.  This approach, allowed under ERISA, is called a multiple employer plan, "MEP" in pension-speak.  Historically, the Department of Labor has been uncomfortable with MEPs and limited their use because of the risk that a plan participated in by many employers but operated by a third party might end up being supervised by no one at all.  Nonetheless, the administration is now advancing the MEP concept in two ways:

Using the discretion it has under ERISA, DOL now allows states to set up multiple employer plans.  DOL's reasoning is that states don't have a profit motive and are politically accountable, so it's easier to trust them and let employers "off the hook".  

Proposing that the Congress enact legislation that would enable private parties to operate MEPs, with safeguards to protect retirees.  It would be easy to conclude that this is a non-starter: thanks to the widening gap between the political parties, Congress has been unable to agree on any general pension legislation since 2006.  (The entirely sensible and once-upon-a-time bipartisan proposal to require employers to offer at least an IRA, now made annually by the administration, became a casualty of the Obamacare wars.)  Nonetheless, in recent years "open" MEPs have been proposed by both Democrats and Republicans and in the last session of Congress, a bipartisan compromise almost made it into legislation.  If the endorsement of the administration doesn't taint it, Congress might decide, finally, to act.  

Posted by at January 29, 2016 4:16 PM