Financial security dominated discussions at the recent Pensions & Investments East Coast Defined Contribution Conference as speakers said the SECURE Act can make DC participants' retirement more secure while COVID-19 will make it less secure.
The advance in security will take time to achieve because the Department of Labor will write a series of regulations covering such areas as in-plan annuities, pooled employer plans and disclosure statements for participants, said Preston Rutledge, the agency's assistant secretary for the Employee Benefits Security Administration, during a keynote speech Monday.
The challenge to security, however, may happen uncomfortably quickly because the coronavirus outbreak has substantially increased the risk of recession, said Megan Greene, a Harvard University economist, at the conference held March 8-10 in Orlando, Fla. She delivered her remarks two days before the Dow Jones Industrial Average dropped into bear market territory — falling 20% below its February high.
If the global supply shortage caused by the virus leads to companies failing, it could lead to a "demand shock," exacerbating the financial turmoil roiling the markets, Ms. Green said Monday in a keynote speech.
Already there are indications that the "supply shock" is turning into a global demand shock, she said. One is that inflation expectations have dropped sharply over the past month.
"Rate cuts aren't that effective in the face of this kind of shock," said Ms. Greene, noting that the Federal Reserve and central banks worldwide are limited in what they can do. "No one has that much room to cut rates."
Fiscal policy, rather than monetary policy, can play a much bigger role, but "politicians have to agree on what measures to implement," she said. Any fiscal stimulus will need to be carefully tailored to make sure it goes to businesses that need credit and workers who are losing their jobs, she added.
The heightened risk of recession, however, doesn't mean retirement savers "need to liquidate and get out of the market," she said. Instead they need to "invest defensively" in industries such as utilities and health care, Ms. Greene said.