Speaking at an event sponsored by Barclays Global
Investors (BGI) in New York today, U.S. Congressman Rob
Andrews (D-New Jersey) said that the real problem today was
a lack of confidence in the economy, and that it would be
"a mistake to confuse a loss of confidence in the
economy with a loss of confidence in the 401(k)
system."
Acknowledging that there were voices in Washington who
felt differently on the issue (see
The Plot to Kill
the 401(k)
), Andrews said that the best thing that could be done to
help the 401(k) system was to "fix the economy",
and that he believed President Obama had taken steps to do
just that.
He did, however, acknowledge that the current 401(k)
system could be improved, citing four areas in which he
said he has, and would continue to, press for change:
(1) Qualified independent investment
advice
Andrews noted that most individuals are not capable of
making and keeping up with complex investment decisions,
and that they needed the help of professionals to do so.
He noted that the Pension Protection Act (PPA) had provided
a roadmap to help provide those services, but that the
Department of Labor's recent regulations on advice had
gone "well beyond" what he thought the law called
for (see
DoL Delays Investment
Advice Rules Implementation
).
As a consequence, he predicted there would be a "battle
royale" on the subject, but said he was confident that a
resolution on the issue would be forthcoming (see
Miller, Andrews
Threaten to Block Advice Regulation
).
His notion - and one that he said was supported by current
law - is that if a plan sponsor exercises appropriate due
diligence in selecting an adviser, they shouldn't be
able to be sued for doing so.
(2) Unbundled fee disclosure
Andrews said that Americans do a good job of comparison
shopping when they have the information they need to make
those decisions.
"We need to build smart shoppers" when it comes to
retirement plans, he said, citing his support for recent
legislation introduced by U.S. Congressman George Miller
(D-California), who also chairs the House Labor and
Education Committee on which Andrews is also a member
(see
Miller Fee Bill
Cruises through House Committee
).
(3) Provide a more conservative fixed income
option
Andrews said that while he didn't want to mandate
fund choices, or impede worker's ability to make personal
investment decisions, he did believe in giving "every DC
participant the ability to covnert to a DB-type plan."
In essence, the availability of some kind of annuitization
option within, or attached to, the DC plan as an investment
option.
(4) Expand access
Andrews said that he - and the Obama Administration -
want to expand the kind of program benefits that are today
enjoyed by 401(k) plan participants to the 71 million
working Americans who today do not have access to such a
program (see
Proposals in
President's Budget Aim to Boost Retirement Savings
).
He acknowledged that there are details to be fleshed out -
how the program would be administered, and by whom, who
would invest the contributions - but that the program
design contemplates an automatic enrollment for every
worker not already covered by a workplace savings plan into
this new program.
He said that care would have to be taken so that this
program was "not as generous" as the current private system
model so that employers with existing plans wouldn't
abandon them for the government alterative.
He also pointed to this so-called "automatic IRA"
proposal, as "evidence of the belief" in the advantages of
the private sector solution by both he and the Obama
Administration.
QDIA Considerations?
After his presentation, Andrews was asked if he thought
the existing rules on Qualified Default Investment
Alternatives (QDIA) would be modified to provide for a
money market solution, or perhaps a stable value choice.
Noting that it was an issue that had already received "a
lot of attention," Andrews said he didn't think a change
was likely to come soon.
"It had a tortuous approval process initially," he noted,
"and the thinking seems to be that we need to give the
current approach a chance to work."