The View on Retirement in Washington Is Changing

Anne Lester is a portfolio manager and head of retirement solutions for J.P. Morgan Asset Management, and in that capacity she works to advance the firm’s various retirement investment product offerings—including the development of the SmartRetirement target-date funds (TDF) series, as well as the firm’s Dynamic Withdrawal strategy.

Given her experience, Lester is frequently called on to provide thought leadership both within the firm and for wider audiences working on the intersection of public policy and retirement. Just last week Lester was in Washington for an event hosted by the Aspen Institute, marking the upcoming 10-year anniversary of the debate and passage of the Pension Protection Act (PPA).

Joining her were U.S. Representatives Joe Crowley, D-New York, and Jared Polis, D-Colorado, along with Edmund Murphy III, president of Empower Retirement, and a number of other lawmakers and retirement industry leaders. PLANADVISER spoke with her shortly after the event to test her optimism about the potential for any new retirement-related legislation to continue the progress made post-PPA.

Q: What did the event last week, held to mark the PPA anniversary, tell you about how policymakers are viewing retirement readiness issues? Do you think positive change is likely?

First I should say that it was a fantastic event, hosted right in the Capitol Rotunda by the Aspen Institute. It was an inspiring place to hold an event about our national retirement policy and it was fantastic to see the turnout.

Besides the representatives and officials from the Treasury, there were members of academia, think tanks,  as well as a diversity of business interests and advocacy organizations including TIAA, Prudential, the Urban Institute, J.P. Morgan Asset Management, the Defined Contribution Institutional Investment Association (DCIIA), the National Institute on Retirement Security (NIRS), and the Employee Benefit Research Institute (EBRI).

We were all speaking about where we have been and where we are going in terms of trying to continue to reinforce retirement security at the national level, and I think there is a collective understanding that the 10-year anniversary of the PPA would be an appropriate time to take the next big step forward. It’s a necessary and terrific conversation.

Personally, the most exciting thing I see right now is that we’re really witnessing all the right parts of the ecosystem coming together, constructively sharing real ideas with our public policymakers. They’re coming together now with a real collective sense of identity and purpose. It’s not just a conversation that plays out along the lines of, ‘Hey look, we have the best product or the best idea.’ It’s much more robust and collective than that. It’s really becoming a public conversation.

The topic of retirement is not at the top of the list of things that people are worried about right now, we all understand that. But it is pretty high up on the list for most people, and it is one of the areas where you could actually see bipartisan consensus starting to build. When I look at who really needs to be involved in this conversation—advocates for the industry service providers, for plan sponsors, and for consumers—all these parties are starting to get involved and they’re talking directly to each other and to legislative leaders, so that makes me optimistic. 

Q: Was there much agreement about the next steps that should be taken by all these parties?

I think there was, to some extent, though not as much as will be needed to galvanize new reforms on the scale of the PPA. For example, one of the things I spoke specifically about was this topic we have been honing in on recently, which is ‘re-imaging re-enrollment.’ That’s an example of low-hanging fruit in terms of things that could be accomplished quickly, without requiring major change to the regulatory or legislative structures.

Another example could be increasing the portability and reducing the leakage of small balances, and making sure everyone has the right asset allocation. These things are already being worked on under the current regulatory and legislative structure.

Thinking medium- and longer-term, there is increasing agreement that we need to make changes to improve accessibility to tax-advantaged savings. A lot of people at the forum expressed optimism about open multiple employer plans as the most likely path forward when it comes to addressing many of these issues.

Q: Does that imply that the state governments, in a sense, are in the driver’s seat in terms of setting retirement policy?

You know, there are a lot of people who are hoping for a federal solution to emerge to help those people who right now lack access to quality retirement planning options in the workplace. But it just doesn’t seem to be happening, so another group has become much more supportive of the state-based solutions that are slowly starting to roll out—not because it’s a great answer to have 50 different approaches to retirement planning. It’s not a good approach. But it’s better than inaction in the eyes of a lot of people.

There is a real hunger to get things going and to allow us to actually see the pros and cons of the different approaches. There are some significant differences in the approaches being taken by various states, so I think it will be very informative to see this play out.

As a portfolio manager at heart, my main concern in a lot of this is to remind people that there is a difference between a mathematically optimized portfolio and what an average investor is going to find emotionally satisfying. When we’re dealing with individual investors and developing solutions for their financial problems, we absolutely must keep this in mind. We have to come up with answers that solve the underlying financial problems while also making sense to the user.

Q: So, given the time you have spent recently meeting with decisionmakers in Washington, do you see building bipartisan consensus for a national-level retirement reset reminiscent of the PPA?

Sadly, I think consensus is still too strong a word. There is a … growing understanding that there are gaps to fill. There is a growing understanding that there may be lower hanging fruit, and that there are other things that are longer-term systemic fixes that are going to need to happen.

What I do find encouraging, again, is that all the stakeholders are starting to come together publicly and saying, ‘Here are some answers that we want to put into place. Let’s get to work.’ These are the pieces that have to start coming together to really drive the conversation forward for the next decade of the PPA.