Retirement issues will remain in place, even if the politicians change

After Election Day, all of the retirement industry's challenges will still be there.

Just to name a few: fiduciary requirements, coronavirus-impact responses, litigation risk and financial wellness goals.

Solutions to these challenges will depend on political changes — a daunting collection of moving parts, uncertainty and what-ifs affecting legislation, regulation and, most importantly, participants' ability to save more.

Speakers and panelists at Pensions & Investments DCW Fall Virtual Series, a five-day event held Oct. 26-30, offered some opinions and perhaps some comfort to sponsors who soon must make many post-election decisions.

"Breathe," said Kevin L. Walsh, a Washington-based principal at Groom Law Group. The lumbering regulatory approval process could mean many proposed rules won't take effect — or at least not in their current form — if Joe Biden defeats Donald Trump, he said.

"This too shall pass," said Jeffrey Brown, professor of business and dean of business of the Gies College of Business, University of Illinois, Champaign, Ill., referring to election-related uncertainty.

The possible political permutations for the presidency, Congress and regulatory agencies mean crystal balls, like the one Mr. Brown showed on a slide during his Oct. 26 keynote address, can shatter easily.

After Nov. 2, the retirement industry will be faced with "two very different paths — not a fork in the road," Mr. Brown said.

If Mr. Trump is re-elected, he will take "a much more passive approach" to retirement security legislation "with few additional changes," Mr. Brown said. Other than the recent passage of the SECURE Act, Mr. Brown said Mr. Trump has offered "no clear plans for a second term."

If Mr. Biden is elected, he will take "a more activist" approach with "more reliance on a regulatory approach," said Mr. Brown, noting that one proposal "would upend traditional 401(k) plans."

He was referring to Mr. Biden's plan for offering a flat tax credit to savers rather than current system of pretax contributions "that provide bigger tax benefits to the rich," Mr. Brown said. The goal is to increase the savings of lower earners.

Mr. Brown cited several big retirement issues facing whomever wins the election, including low interest rates, which will "make retirement more expensive" by forcing up the cost of annuities while also pushing down the returns of retirees, who typically invest in fixed-income assets.

Another significant issue is the savings disparity among income groups, which "disproportionately affect Blacks and Latinos," he said.

Existing policies and programs "reinforce disparities by race," he said. "Plan coverage as an issue of racial justice will lead to policy changes."

Mr. Walsh, in his Oct. 28 keynote address, reeled off a series of subjects under the heading "we have almost too much to work with." It was a collection of proposed rules and guidance on subjects such as investment advice, proxy voting, private equity, lifetime income illustrations, pooled employer plans and ESG.

He described the complex regulatory process that starts with issuance of a proposed rule and moves to a public comment period.

Then, the comments are reviewed by the Employee Benefit Security Administration, which sends its suggested final rule to the Office of Management and Budget in the White House.

OMB sends the final rule to the appropriate government agency for review.

The final rule is sent to the Federal Register for publication. Lastly, the rule takes effect within 30 to 60 days of publication.

"Deadlines are irrelevant" if Mr. Trump is re-elected, Mr. Walsh explained. If Mr. Biden wins, "anything not done (by certain deadlines) likely will not be done."

A Trump administration rule would have needed to take effect by Jan. 20 — Inauguration Day — if Mr. Biden wins, and a proposed rule that hasn't been sent to OMB mid-December won't make the deadline, he said.

The coronavirus figured prominently in the DCW Virtual Fall Series, especially how sponsors could administer and participants could use the provisions of the CARES Act that relaxed restrictions on plan loans and distributions.

"There was very little impact" on participant activity, said Michon Caton, senior manager for retirement, financial wellness and lifestyle benefits for Gap Inc., San Francisco, during an Oct. 27 seminar. She said 1,887 participants in the company's $1.9 billion 401(k) plan have taken coronavirus-related distributions through October. The plan has 38,581 participants.

The average amount of distribution ($13,289) and median amount ($6,000) are well below the maximum $100,000 allowable for qualified participants.

Also through October, 18 participants took coronavirus-related loans, while 799 participants — 18.2% of participants with loans— took advantage of the CARES Act provision to allow loan repayment suspensions.

Ms. Caton declared "good news" that most participants since March stayed the course as 92.1% didn't change their 401(k) plan salary deferrals while 2.3% reduced their deferrals. Another 5.6% increased their deferrals.

The CARES Act impact was "relatively small," added T. Daniel Boster, operations manager of defined contribution savings plans for the Utah Retirement Systems, Salt Lake City, which has $7.2 billion in DC assets and 184,297 participants.

He said 534 participants (0.3%) have taken distributions averaging $13,200, representing only 0.1% of plan assets.

In addition, 33 participants have requested loan payment suspensions and four have sought loans under the law.

The sponsors' experiences match those described by record keepers at the seminar. Among Vanguard Group Inc. record-kept clients, only 3.4% of eligible participants took CARES Act distributions through July, said Richard J. Phelan, senior ERISA consultant for Vanguard's strategic retirement consulting business. The average distribution was $18,000 and the median was $9,000. Fewer than 1% of eligible participants took loans and 5% chose loan-repayment suspensions.

Sponsors also were warned to exercise their fiduciary duties to guard against cyberattacks, protecting both plan assets and participant data, said Joan Neri, an attorney with Faegre Drinker Biddle & Reath LLP, during an Oct. 29 panel discussion.

Ms. Neri explained that the dual protection of assets and participant data means that it's not enough for sponsors to merely make sure that their internal systems are adequate and constantly updated as needed. Sponsors must also look at the processes that are in place at external providers that are involved with plan asset information to "make sure that their systems are also up to snuff," she said.

Ms. Neri urged sponsors to have appropriate contractual protections in the service agreements with their providers and to have an understanding of their vendors' cybersecurity policies.

Margaret Daun, chief corporation counsel for Milwaukee County, encouraged sponsors to take a hard look at their cybersecurity insurance policies and "whether or not they work in the way that you think they are going to work."

Ms. Daun urged sponsors to identify the specific cyberrisks because there are many risks and not all policies cover all of them. "Know what you're insuring and why you're insuring it," she said.

Margarida Correia contributed to this article.