Retirement is front and center in politics today, especially with the Obama administration focused on two major issues: coverage for more people at work; and removal of potential conflicts of interest. According to Bob Reynolds, CEO of the parent company of Empower-Retirement with seven million DC participants, the government’s intentions are admirable but the execution is severely flawed and presents a “strange contradictory” approach.
Though not technically the father of 401k plans, Reynolds is credited with making them popular heading up Fidelity’s initiative in the early 1990’s leading to the proliferation of defined contribution plans as we know them. So he has the experience, knowledge and gravitas especially running one of the industry’s largest DC record keepers and money managers. Reynolds calls Obama’s two retirement initiatives flawed, costly and unfair to the private sector which could lead to big problems for employers and their workers. And rather than have a national debate on the important issue of retirement in Congress where it belongs, Reynolds accuses the administration of putting the new initiatives through the DOL in a “black box” regulatory process.
Though more impactful to financial advisors, broker dealers and DC service providers, the DOL’s pending conflict of interest rule which, while well intentioned requiring advisors to put their client’s interest first acting as fiduciaries, it would actually limit access to tens of millions of investors to routine advice and prevent DC service providers from presenting advice and options to businesses with fewer than 100 employees, Reynolds believes. He calls the proposed DOL regs “unwieldy, complex and costly”.
Many states have launched their own separate initiatives to cover the 50 million American that do not have access to retirement plans at work which is also an admirable goal. But Reynolds is critical because it could create a patchwork of retirement plans and affords state plans with an unfair advantage which, unlike private options, would not be subject to ERISA.
Why should employers be concerned? Many companies have employees in different states and would have to keep track of various state laws along with complex Federal laws rather than a national retirement system. Even if a company offers a retirement plan, state plans could pose issues like requiring people to be covered from the first day of employment or demand that certain investments be offered. If access to advice and education to participants are limited to employees by advisors and providers, chances are they will be less prepared for retirement and keep working raising healthcare, disability and other benefit costs while lowering productivity and morale.
