Although they played prominent government roles in the development and expansion of retirement security, Phyllis Borzi and J. Mark Iwry say defined contribution sponsors can make improvements without waiting for the next regulation, law or political administration.
Financial wellness, emergency savings and auto features are already available for more plans to help more people, said Borzi, former head of the Employee Benefit Security Administration and assistant secretary of labor from 2009 to 2017 during the Obama administration.
More employer contributions to participants' accounts and better business practices will improve retirement security, said Iwry, senior adviser to the secretary of the Treasury from 2009 to 2017 as well as deputy assistant secretary for retirement and health policy, Office of Tax Policy, U.S. Department of the Treasury from 2009 to 2017.
They offered their prescriptions in separate email interviews several days before they were honored with Lifetime Achievement Awards presented annually by the Employee Benefit Research Institute.
The awards were announced Oct. 22 at Pensions & Investments' West Coast Defined Contribution Conference in Pasadena, Calif. Neither recipient attended the conference. They delivered their acceptance speeches via recorded videos.
For Borzi, the retirement security toolkit includes opportunities already on the books such as an emergency savings program via SECURE 2.0.
This "takes the pressure off existing 401(k) plans to allow loans or withdrawals," she said.
"It is likely to create an incentive for those workers who are worried about locking up their savings in a 401(k) plan to contribute to the plan if an emergency savings opportunity is offered in conjunction with the savings opportunities through the retirement plan,” she added.
Borzi said sponsors should offer financial wellness or investment advice programs "as long as the advice-giver is an independent entity free of conflicts of interests," and as long as the advice-provider declares in writing that it is acting as a fiduciary.
Borzi strongly supports auto features, especially automatic enrollment, but she counseled sponsors on understanding the financial characteristics of their workforce before they act. "It may be better to begin with a lower contribution rate and encourage employees to pay off consumer debt first," she said.
Employer contributions
For Iwry, employers should provide more matching and non-matching contributions "instead of mainly exhorting employees to increase their contributions.”
He called for "more institutional, professional — not self-directed — investing" and "changing business practices to eliminate conflicts of interest."
Employers must “step up to reverse their decadeslong transfer of most retirement-related financial risks and responsibilities to the individual,” Iwry said. "This has produced a system dominated by IRAs and by 401(k) plans that still too often are do-it-yourself savings accounts."
Although ERISA and other retirement security laws and regulations have led to greater benefits, both said more legislation and regulation is necessary.
“We need significant reforms to improve the private retirement savings system without replacing it (by) expanding coverage (and) making the system more equitable and inclusive,” Iwry said.
He advocated a nationwide automatic IRA, “building on the existing state-facilitated auto IRAs,” as well as “implementing an expanded and improved saver’s match/credit” and “prohibiting conflicts of interest.”
Borzi wants Congress to examine rollover IRAs because she has “serious concerns” about their impact on retirement security because the IRA marketplace has fewer protections than institutional retirement plans. “Congress needs to take a careful look into this trend and perhaps consider adding various consumer protections to IRAs, such as spousal protections,” she said.
“Although there seems to be confusion among vendors regarding the necessity of spousal consent for rollovers, currently spousal consent may be required for the participant to roll benefits out of their plan but once the money is in the IRA, protections for the spouse may disappear,” she said.
