Compliance June 8, 2022

RISE & SHINE Act Markup Scheduled

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Lawmakers will convene an executive session to mark up the RISE & SHINE Act on June 14, according to a spokesman from the Senate Committee on Health, Education, Labor and Pensions.

Comment letters from retirement security organizations—including the ERISA Industry Committee, Insured Retirement Institute, Pension Rights Center and U.S. Chamber of Commerce—broadly support the bipartisan retirement legislation from Senators Patty Murray, D-Washington, and Richard Burr, R-North Carolina, the chairwoman and ranking member, respectively, of the Senate HELP Committee.  

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The wide-ranging Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg—aka RISE & SHINE—Act includes provisions for defined benefit and defined contribution plans. Lawmakers designed the bill to bolster emergency savings, increase access to retirement plans and provide additional information and transparency to help workers manage their finances.

The RISE & SHINE Act subsumed an emergency savings bill proposed by Senators Cory Booker, D-New Jersey, and Todd Young, R-Indiana. The bill also builds on and incorporates legislation passed in the House of Representatives such as the Securing a Strong Retirement Act of 2021, called SECURE 2.0; the Retirement Improvement and Savings Act, called the RISE Act; and the Retirement Security and Savings Act.

Act Feedback

IRI’s comment letter ticks off each previous legislative effort included in RISE & SHINE that the retirement security advocate supports.

“IRI supports a number of provisions in the draft language that align with the association’s 2022 Federal Retirement Security Blueprint, such as expanding eligibility of pooled employer plans to non-profit organizations using 403(b) retirement plans and allowing employers to offer emergency savings programs to workers,” the letter states.

The letter also reaffirms that the organization supports the Lifetime Income for Employees Act, termed the LIFE Act, as well as the RISE Act and SECURE 2.0. 

ERIC, IRI and Pension Rights Center have all voiced concerns that the discussion draft left out the lost-and-found retirement plan registry overseen by the Department of Labor.

“While ERIC supports the draft of the RISE & SHINE Act, we have provided suggestions to the HELP Committee to help further strengthen the proposal,” says Andrew Banducci, senior vice president of Retirement and Compensation Policy at ERIC. “For example, the bill would be improved by making disclosure requirements less complex and adding a lost-and-found registry for plan participants to find former employers so that they can receive their benefits. We’re looking forward to continuing to work with HELP leaders and other policymakers to improve the retirement system.”

Additional Comments

Further comments on the draft legislation provisions address Section 303 of the RISE & SHINE Act, which incorporates the Information Needed for Financial Options Risks Mitigation Act, termed the INFORM Act. Section 303 would require pension plan sponsors to provide plan participants and retirees with what it terms the “critical information” needed to fully consider an employer’s offer of a lump-sum payment option in place of a lifetime annuity option.

The IRI letter argues that the section would be improved by modifying the 90-day advance notice to reference the start date of the annuity rather than the participant’s election, and recommends that plan sponsors be required to disclose whether the plan’s lump sum would be “reasonably likely” to replicate the stream of payments by purchasing a commercial annuity.

“Because annuity prices could vary daily and retail products may not include identical features, this disclosure should provide greater flexibility by eliminating the ‘reasonably likely’ statement and replacing it with a statement that the lump sum could be used to purchase a commercial annuity, but that the annuity may have a different value and features than benefits under the plan,” the letter states.

In its letter, the U.S. Chamber of Commerce criticizes lawmakers for including INFORM Act provisions in Section 303. Chantel Sheaks, vice president for retirement policy at the Chamber, writes that such provisions are not necessary.

“We believe this requirement is unnecessary because plans currently provide explanations to participants before offering a lump sum window,” Sheaks writes. “Instead of requiring disclosure, Congress should instead look at the reasons that plans are offering such windows, such as reducing their substantial PBGC premium liability.”

Data & Research June 7, 2022

Insight on Retirement Industry Trends

A study of consulting and advisory firms reports on trends in retirement income, ESG and more.

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T. Rowe Price has released new insights into retirement trends from its latest study of 32 consulting and advisory firms that provide services to more than 33,000 plan sponsor clients and report nearly $7.2 trillion of assets under advisement.

The “2021 Defined Contribution Consultant Research Study” gives insight into environmental, social and governance adoption, support for the continued evolution of target-date investments and retirement income solutions and the growing interest in financial wellness programs in light of the COVID-19 pandemic.

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Retirement Income

Traditionally, defined contribution plans were built to help workers accumulate retirement assets. Qualified default investment alternatives have played a central role in meeting this objective since the emergence of automatic enrollment, the study says. QDIAs that are used to help save for retirement and retirement income solutions for living in retirement may be conceptually linked.

More participants are remaining in their DC plans for longer after they retire, and many plan sponsors are looking for ways to address their needs, the study says. Lower costs for investments compared to a rollover IRA, flexibility in drawing down assets and investment solutions that generate income were all cited as features that may best persuade more participants to stay in plan after they retire.

Consultants rated simple systematic withdrawal capabilities as the best way to deliver retirement income from DC plans, despite limitations. Multi-asset investment solutions—managed accounts with income-planning features and target-date investments with embedded managed payout features—followed closely behind in rated appeal.

The study found that consultants strongly support increasing their focus on collective investment trust-based target-date solutions and pursuing blend solutions that may deliver the benefits of active and passive investment management. Consultants voiced less support for the use of managed accounts as QDIAs and mild support for adding or increasing allocations to diversifying asset classes such as private equity, real estate or Treasury inflation-protected securities.

When it comes to managed accounts, consultants cited a greater need for participant engagement and difficulty in getting information on other participant assets as key factors that have stood in the way of greater adoption of QDIAs, the study says.

ESG Interest

Despite the growing pressure on fees, consultants and advisers believe DC plans should offer investment options across all asset classes that are either actively managed or a combination of both active and passive management, the study says. Interest rate and inflation concerns coupled with more retiree plan assets are influencing the evaluation of fixed-income and capital preservation investment options. Interest in ESG factors is being motivated by the desire to drive positive engagement among participants and better align with corporate sustainability targets.

Consultants tended to recommend stable value ahead of money market strategies, the survey says. While they reported that stable value is used by more of their clients, 31% of clients still use government money market investments.

Regarding ESG, consultants recommended active investment management over passive investment management or providing access through self-directed brokerage windows, the study says. They shared that plan sponsors are monitoring Department of Labor progress with ESG guidance and are considering current plan offerings before implementing.

Consultants are also seeing plan sponsors evaluate investment managers’ diversity, equity and inclusion baseline reports to satisfy basic due diligence, the study says. Further integration of DE&I information into plan and investment decisions may require more evolution.

Financial Wellness

In response to the pandemic and the “Great Resignation,” employers are more aware of the need for financial wellness programs, the study says. Employers’ key financial wellness objectives are to improve worker satisfaction and retention and reduce financial stress, which are also reported as the most measurable. Consultants largely believe that the pandemic has increased the relative importance of both emergency savings and debt management.

The study found that the majority of consulting and advisory firms reported that at least a quarter of their clients offer health savings accounts. Student debt and emergency savings programs are offered by far fewer plan sponsors.

Consultants and advisers broadly offer evaluation of recordkeeper-provided financial wellness solutions, while just over half evaluate third-party wellness solutions, the study says. And while most consultants currently evaluate recordkeeper-provided and third-party financial wellness solutions, a smaller number also provide proprietary financial wellness solutions for their clients.

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