Numerous changes in the investment landscape over the last four decades, beginning with the sweeping transition from defined benefit to defined contribution retirement plans, have made their mark on both the original IRA and a proliferation of new and related products.

There are probably more changes ahead. IRAs now face at least three potentially transformative forces that could redefine the future of the platform: regulation and tax reform, demographic changes, and the expansion of IRAs to those who do not currently have employer-sponsored retirement plans.


A torrent of IRA-related regulatory developments over the last couple of years have had a direct bearing on taxable events, risk assessment, allocation/construction, reporting and distribution of assets, among other areas.

The catalyst was a widely read 2013 report from the U.S. Government Accountability Office which urged the U.S. Department of Labor and the IRS to generally improve the rollover process for participants. Since then, we've seen a steady flow of stated regulatory priorities, spanning FINRA, the SEC and the IRS.

At the IRS, we saw the elimination of the so-called one-year rule: Investors are now typically restricted to only one indirect rollover in any 12-month period, regardless of the number of IRAs they own.  Keep in mind that direct rollovers made from an employer-sponsored plan to an IRA or trustee-to-trustee IRA transfers do not count towards this rule.

At FINRA and the SEC, exam priorities have centered on rollover IRA investor communications issued by broker-dealers and investment advisors. This resulting scrutiny of marketing and advertising materials and practices means broker-dealers and investment advisers should expect examiners to focus on not just advisors' recommendations but the quality of investor education, disclosures, marketing materials, supervision and training.

Meanwhile, legislators continue to show a preference for Roth vs. traditional IRAs, largely because of tax expenditure considerations, while President Obama's MyRA proposal has also taken near-term taxability into account. It's a safe bet that we can expect to see more programs leaning toward Roth IRA plans in the year ahead. Will benefits of IRAs be eroded due to tax reform? We have already seen some movement in this direction with limits on inherited IRAs.

By far, the biggest single development this year for advisors and broker-dealers alike will be final resolution of the Department of Labor's proposed fiduciary rule, currently in public-comment phase. The final rule will bring closure to a closely watched and highly visible process that will involve new changes to the Employee Retirement Security Act of 1974.


With defined contribution plans clearly part of the future, demographics are beginning to play an important role in the IRA discussion -- particularly for baby boomers. Yet there is a potential for unintended consequences as a result of regulatory changes.

For example, I expect the wave of boomer retirements will continue to drive an increase in IRA rollovers, just as there are seemingly greater limitations being placed on IRAs. It remains to be seen how this will play out.

Millennials, meanwhile, are proving to be a significant spur to maintaining vital and relevant offerings at the IRA level. According to the Transamerica Center for Retirement Studies, some 70% of millennials are already saving for retirement, with three out of four actively discussing saving, investing, and planning for retirement with family and friends.

The shrinking Social Security pie is also a factor for this age group. Two-thirds of millennials expect their primary source of income in retirement to be self-funded through retirement accounts or other savings and investments. These trans-generational factors will influence the shape of IRAs going forward.


Many changes around IRAs are being driven by efforts to increase coverage to the significant number of workers (estimates are in the 50% range) who don't have access to employer-sponsored retirement accounts. The aforementioned MyRA platform is one such attempt to foster a new generation of people saving for retirement.

Alternatively, there are other efforts to make retirement savings accessible by rendering them automatic. Illinois just passed "Auto-IRA" legislation that provides access to retirement savings accounts for all workers, unless they choose to opt out; similar legislation is moving forward in about 30 states and in Congress. 

Will retirement savings continue largely intact or will they gradually transition into a new format? Moreover, how will the DoL's fiduciary proposal affect the retirement advice and IRAs?  Only the passage of time will answer these questions definitively. IRA programs as we know them may even evolve into something else entirely. But one thing that seems certain is the absence of compelling alternatives -- that some form (or forms) of the IRA will persist.

Robert Cirrotti is head of retirement solutions at Pershing, a BNY Mellon company. 

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