Data & Research July 27, 2012

Harkin's Privately Run Pension Proposal Receives Mixed Reviews

 

Senator Tom Harkin’s (D-Iowa) new report, "The Retirement Crisis and a Plan to Solve It," has received mixed reviews.

 

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The heart of his plan is a new system of privately run pension plans, which requires that individuals who are not covered by an employer-sponsored retirement plan be automatically enrolled in regulated, privately run retirement funds. This concerns David John, senior research fellow at the Heritage Foundation.

“We’re delighted the senator is looking at the issue,” he told PLANADVISER. “At the same time, it has some fairly significant weaknesses compared to some of the other proposals that are out there. The problems that we’ve got with it include the fact that it appears the senator is creating a large central pension plan that will directly compete with many of the existing plans.”

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Others see the plan as a solution for the retirement savings crisis.

“The report makes a compelling case for a new private retirement system that would provide a meaningful supplement to Social Security for the millions of employees whose employers do not offer pensions or retirement savings plans,” said Karen Friedman, the Pension Rights Center’s executive vice president and policy director. “The report also makes common-sense recommendations for strengthening Social Security, the foundation of our nation’s retirement system. Together, these measures would help ensure that all Americans can retire with security and dignity.”

The report is available here.

 

 

The report also includes suggestions to strengthen Social Security in three key ways:

  • Providing improved benefits for all retirees, particularly workers with very low lifetime earnings;
  • Using a more accurate method for calculating cost-of-living adjustments to better help retirees weather inflation and increases in health care costs; and
  • Strengthening the program’s finances by phasing out the provisions that allow high-income employees to avoid making payroll tax contributions on all of their wages.

“The Pension Rights Center salutes Senator Harkin for his vision, creativity, and courage,” Friedman said. “We urge the Senator’s colleagues on both sides of the aisle and in both Houses of Congress to read this report, join the discussion, and work with the Senator to solve the retirement crisis.”

 

Compliance July 27, 2012

House Bill Would Fund More SEC Exams

The Financial Planning Coalition welcomed the Investment Adviser Examination and Improvement Act of 2012, while the Bachus self-regulatory organization (SRO) bill got shelved.

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The Adviser Examination Act—introduced by Rep. Maxine Waters (D-Calif.), and co-sponsored by House Financial Services Committee Ranking Member Barney Frank (D-Mass.) and Rep. Michael Capuano (D-Mass.)—would authorize the Securities and Exchange Commission (SEC) to collect user fees to increase examinations of registered investment advisers (RIAs).

By comparison, the Investment Adviser Oversight Act of 2012—introduced by Committee Chairman Spencer Bachus (R-Ala.) and Rep. Carolyn McCarthy (D-N.Y.), would authorize one or more SROs. (See “Bipartisan Bill Seeks Expanded Oversight of Advisers.”)         

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However, with the financial adviser industry so sharply divided over whether to create a new SRO, or rely on FINRA or the SEC, the Bachus bill has reportedly been shelved.

On the one hand, the Investment Adviser Association and the Financial Planning Coalition (FPC) support the Waters bill. “Creating a new SRO is not the right solution,” FPC said. “The burden of excessive regulation and cost would fall unfairly on small business owners, while many larger firms would be exempt and would go unaffected.”

On the other hand, the Financial Services Institute (FSI) is supporting the Bachus bill. Thus, a consensus is nowhere near at hand. “We’ve said from day one that this was a multi-year process,” said FSI spokesman Chris Paulitz. “What is encouraging with the release of Rep. Waters’ bill, is that now everyone agrees the status quo is not acceptable, and we must increase examination to protect investors.”

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