Tens of thousands of employers in the U.S. contribute to multiemployer pension funds that are in critical and declining status, collectively facing an unfunded liability well above $100 billion; Society of Actuary researchers warn of potential ripple effects should many of their plans fail at once.
Willis Towers Watson researchers present various opportunities “outside of traditional hedging assets other than long corporate credit that may be added to [pension funds'] hedging portfolios to help provide a diversifying source of long-term credit premia.”
U.S. Senators Orrin Hatch and Sherrod Brown are seeking public and industry input on ways to improve the solvency of multiemployer pension plans and the Pension Benefit Guarantee Corporation.
Peg Knox, chief operating officer of DCIIA, points to both the coverage gap and retirement income adequacy as being top of mind; there is also a strong fee litigation focus, given how near and dear this topic is to both plan sponsors and service providers.
The fact that two U.S. Circuit Courts of Appeals, the Fifth and the Tenth, have issued conflicting rulings about the propriety of the DOL’s process in creating and implementing a stricter fiduciary standard, leaves the retirement plan industry with a number of challenging questions.
“I really like the idea of promoting default-driven plans, and the evidence is abundantly clear that automatic retirement plans can be very effective,” says Jeff Kletti at Wells Fargo. “However, my experience has been that the pendulum can swing too far in terms of mandates.”
Following the GOP tax cuts, plan sponsors may wish to coordinate administration of their loan offset rollover rules with their TPA, attorneys suggest, in order to avoid inadvertently defaulting participants' plan loans.
Alongside numerous changes, the bill seeks to eliminate the current 10% cap on automatically-increased deferral rates of employees who are automatically enrolled in a plan.
The debate started when the American Council for Capital Formation published a sharply written report alleging that, as the group puts it, “CalPERS has prioritized relatively poor performing environmental, social and governance [ESG] investments at the expense of other investments more likely to optimize returns.”
The House GOP majority adopted a unified version of the Tax Cuts and Jobs Act Tuesday afternoon; they may have to repeat the process one more time.
However, employers will likely have some difficulty in knowing how to handle the January 1, 2018, effective date that has been assigned for many provisions in the House and Senate tax reform proposals, especially for the purposes of income tax withholding.
House and Senate Democrats warned that, if nothing is done, many of the more than 200 multiemployer plans in the U.S. are projected to fail within just the next 10 years.
At this interim juncture it seems that essentially all of the changes to 457(b) and 403(b) plans that were being contemplated by the Senate have been dropped.
Each having passed their own version of the bill, the House and Senate now enter the conference committee phase, during which key legislators will attempt to craft a unified version of the Tax Cuts and Jobs Act.
Among other adjustments viewed as vital to the expansion of open multiple employer plans, the bill would remove the “one bad apple” rule and the commonality requirement.
Following the earliest stages of debate, both the House and the Senate seem to have backed away from major changes to deferred compensation arrangements, as well as from other retirement-industry focused proposals.
The GOP tax reform proposal leaves 401(k) deferrals alone, but there are other significant reforms in the package that would change the treatment of hardship withdrawals and in-service distributions for DC, DB and 457 plans, among others.