Politics and public policy permeated Pensions & Investments' West Coast Defined Contribution Conference, held in San Francisco Oct. 27-29.
Various speakers told the audience that retirees, plan participants and the defined contribution industry are affected by more than Congress. The world economy and the actions by central bankers in major markets affect domestic retirement investing, while U.S. regulators and the Supreme Court might have a bigger short-term influence on retirement than action or inaction by Congress.
Other speakers offered multiple rays of sunlight demonstrating how simplicity and a straightforward approach to such subjects as plan design and education and communication can yield desired results of greater participation and greater retirement savings.
Keynote speakers talking about world and domestic policy and politics served as bookends to the conference: Mohammed El-Erian, CEO and co-chief investment officer of Pacific Investment Management Co., opened the conference; Washington insider James Delaplane Jr., principal and head of ERISA and fiduciary services at Vanguard Group Inc., closed it.
Congressional dysfunction has created a narrowly focused silver lining for the retirement industry — little chance of comprehensive legislation affecting retirement plans, Mr. Delaplane said Oct. 29.
Low approval ratings and fighting within the Republican Party will lead Washington to be less ambitious in all of its agendas, he said. As a result, Mr. Delaplane said, the odds of any kind of comprehensive tax reform, are “extremely low.”
He said tax law changes related to retirement plans could occur in limited ways, if the measures could raise federal tax revenue.
Mr. Delaplane also said that as Congress' bipartisan budget-conference committee works toward the Dec. 13 deadline for a federal spending plan for the fiscal year that began Oct. 1, that panel could propose defined benefit plan funding relief for corporations to increase taxable corporate income, which would increase federal revenue. He said a premium increase for the Pension Benefit Guaranty Corp. could be possible for the same reason.
He expects the Labor Department's regulation on putting lifetime income illustration on benefit statements to be proposed next year. He added that while many in the industry want the illustration to be voluntary, he believes it will seek to make it mandatory.
Mr. Delaplane predicted the Labor Department will reintroduce its proposal to redo the definition of a fiduciary — now known as the conflicted-advice proposal — to come out next summer.
(The House approved legislation Oct. 29 that could significantly delay the Labor Department's proposed fiduciary rule. The measure has uncertain prospects in the Senate, and President Barack Obama already has threatened a veto. “It would derail important rule-makings underway,” the Office of Management and Budget said in a statement.)
Treasury Department and Internal Revenue Service initiatives are likely to focus on guidance regarding in-plan Roth conversions. The conversions were permitted under the law that kept the U.S. from going over the fiscal cliff this year, but have not been adopted by many plan sponsors because of the lack of regulatory guidance, Mr. Delaplane said.
In his keynote speech that opened the conference, Mr. El-Erian said the constant bickering in Congress over the federal budget and the debt ceiling is affecting the country's financial reputation. When he travels abroad, Mr. El-Erian said, people are mystified by Congress. “You are behaving in really strange ways” is a common reaction, he said Oct. 28.
U.S. politicians will need a “Sputnik moment” to jolt them into cooperation, said Mr. El-Erian, referring to the comprehensive bipartisan U.S. effort to build the space program following the Soviet Union's launch of the first satellite in 1957. But he fears such a moment would come as the result of a crisis.