Just as the contentious Department of Labor fiduciary proposal took an important step forward, the Senate Finance Committee convened a hearing to examine various proposals to strengthen the retirement system, specifically looking at ways to expand access to employer-sponsored savings plans.
The fiduciary proposal has now been passed onto the Office of Management and Budget for review, likely the last major step before the rule is promulgated.
There was no talk of the DoL's proposal at the Senate hearing on Thursday. But most of the momentum toward blocking or delaying the rule has come from the House.
"There hasn't seemed to be the same level of interest in the Senate in advancing legislation to stop the DoL rule," says Barbara Roper, director of investor protection at the Consumer Federation of America. "That can always change, of course. But so far most of the action on that front has come from the House."
In the meantime, senators are focused on less contentious tweaks to expand employer-sponsored retirement plans that received a showing of bipartisan support at this week's hearing.
Witnesses and senators alike acknowledged the challenges facing small businesses in particular, which often forgo sponsoring retirement plans owing to the cost, complexity or administrative and regulatory burdens that running a plan can entail, leaving workers without one of the most critical tools to ensure a secure retirement.
"Financial security, and retirement policy in particular, have never been more important," says Finance Committee Chairman Orrin Hatch. "Over the years, we've learned that, for most American workers, successful retirement saving largely depends on participation in a retirement plan at work. Unfortunately, many employers, mostly small businesses, do not sponsor plans for their employees."
'TIME HAS COME'
One step forward that could help ease the administrative and financial burden would be to permit businesses to join together to offer employees access to a pooled 401(k), known as a multi-employer plan, or MEP.
Hatch spoke in favor of that proposal, calling it "an idea whose time has come" that will be the focus of legislation he is working on with other members, including the ranking Democrat on the Finance Committee, Ron Wyden (Ore.). The White House also endorses that proposal and has said it will be included in President Obama's budget request for fiscal 2017.
Wyden expressed concern for how retirement security factors into the expanding "gig economy," where freelancers, independent contractors and part-time workers might not have access to a workplace plan. Obama has already rolled out the myRA savings plan through the Treasury Department, and lawmakers voiced support for policies that could improve the portability of retirement plans as a new generation of workers who will like work for numerous employers over their careers.
"Gone are the days of the golden watch at the end of a 40-year career with one company," Wyden says.
But simply having a savings plan available isn't enough, argues Alicia Munnell, the director of the Center for Retirement Research at Boston College. She urged committee members to promote mandatory enrollment in employer plans, giving workers the chance to opt-out, but making participation the default setting. That, coupled with a schedule of escalating contributions, could get at one of the most elemental challenges of the retirement picture.
"People absolutely do not save on their own. They really don't," Munnell says. "The only way the save is if they have an automatic savings mechanism that forces them to put some money aside each month."
A FIGHT LOOMING?
As lawmakers debate these proposals, many of which will be included in the president's budget request, the fight over the Labor Department's fiduciary plan is also likely to flare up again.
In a note to clients this week, the fiduciary training firm fi360 noted the relatively brief time that Labor took to send the proposal to the White House following the comment period, suggesting that the department is "plowing ahead full-steam," despite congressional opposition, and also that it is unlikely to have made major changes to the substance of the rule in the course of its review of the thousands of comments interested parties submitted.
Now, OMB will have up to 90 days to review the rule, though fi360 is anticipating a quicker turnaround -- maybe around 60 days -- to push the rule out and give advisors a grace period to implement the rules, which would push the ultimate compliance deadline out to the waning days of the Obama administration.
In the interim, fi360 anticipates some activity in Congress and potentially in the courts to try to derail the fiduciary rule. The firm is skeptical that any of the variety of bills that would slow or halt the DoL's effort could win final passage from both chambers, and sees an uphill fight for any judicial challenge from industry in what would be a legal battle that would drag on for months, or longer.
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