The Summer of Our Discontent: PPA Anniversary Hits Unimagined Retirement Landscape

Four summers ago, Congress passed a landmark piece of legislation that sought to make sweeping changes to the American retirement system.
By PS

When then-President Bush signed the Pension Protection Act (PPA) into law, it outlined more than 900 pages of bold changes to employer-sponsored retirement plan options in both the DB and DC worlds, as well as nonqualified plans. From allowing plan sponsors to auto-enroll employees in DC plans to defining “at risk” funding levels for DB plans, the PPA felt revolutionary.  For those of us who clearly remember August 2006, it seemed like the dawn of a new era. There was a sense among those who worked to shape the legislation that this was historic and the start of something big.   

At the time, I was working with the Business Roundtable’s Pension Coalition, a group of employers, service providers and trade associations working to advance retirement security through voluntary employer-sponsored plans. It was an impressive coming together of blue-chip employers, including Dow Chemical, The DuPont Company, Ford Motor Company, General Motors, IBM, International Paper, John Deere, Kodak and Xerox, as well as industry-leading partners such as the American Benefits Council, The ERISA Industry Committee, Financial Executives International, the National Association of Manufacturers and the U.S. Chamber of Commerce. These Pension Coalition members lobbied members of Congress. They wrote letters. They gave media interviews. They were tireless, and they did not agree on everything, nor did they get everything they wanted in the final legislation. Still, there was this sense of the greater good. When all was said and done with the PPA, the feeling was that there was more right than wrong.  

Over the next two years, there would be bumps in the road. Not surprisingly, there were some who said the PPA did not go far enough. An even more common criticism was that it didn’t go fast enough. Plan sponsors were slow to adopt its provisions and participants continued to fall behind in their retirement savings as the silver tsunami of baby boomers hurdled ever closer to retiring in droves. Or so we thought. And then came the financial crisis of 2008. The world changed, and the concept of retirement in America changed in a way that the PPA could never have foreseen.   

As Pension Coalition members gave up their summer vacations in 2006 to work around the clock to make the PPA the best legislation it could possibly be, the fundamental belief in the existing retirement system in America remained constant. Employers wanted to continue sponsoring DB and DC plans and were firmly committed to enhancing retirement security for their participants, but they did so in an economic and legal context and wanted the legislation to reflect an understanding of their balance sheet realities. While the PPA cleared that hurdle in 2006, none of us could have predicted the fragility of Wall Street powerhouses, insurance firms, banks and the entire U.S. auto industry just two short years later. By the end of 2008, baby boomers in DB plans indicated they were postponing retirement while total assets in DC plans had declined by over $1 trillion, and target-date funds had lost nearly 30 percent of their value. The result was a crisis of confidence, and the PPA went from seeming historic to prehistoric. 

Looking back to 2006, the retirement communications of the PPA era have taken on a museum-like quality. The images of the content from that time often show carefree baby boomers strolling on the beach or smiling as they imagine retirements within their grasp. Today, the lucky boomers are the ones who are still working. National Public Radio recently reported that the unemployment rate among boomers is 7.7 percent, the highest rate on record for workers aged 55 and older since World War II. We could not have foreseen a seismic economic shift of this magnitude four summers ago. The other thing that’s striking about communications that sought to shape the PPA is that social media was virtually absent. This would be unimaginable today.    

The use of social media and interactive tools has the power to change and rewrite the communication rules for retirement plan providers, sponsors and participants. In response to the economic collapse, expectations related to financial transparency have increased and social media is one channel to help plan participants feel more empowered. There are now online tools available that allow plan sponsors and advisors to view data to benchmark the performance of their workplace retirement plans. Participants can measure how their employer-sponsored retirement savings compare to peer companies based on salary deferrals, total plan cost and quality of investment options. Employees who want to compare projected fees from their employer-sponsored plan with an IRA can take another five minutes to input their age, salary and investment information. Digital experiences also help providers drive down their cost per participant by allowing interactivity to provide a highly customized experience for a relatively low cost per interaction.  

In 2010, retirement plan providers are beginning to leverage social media to provide their points of view on industry issues and beginning to consider using social media to reach their participants in ways that would have been impossible in 2006. From LinkedIn, Twitter and Facebook to social media-optimized news releases, some providers are beginning to use social media to share content. If compliance and regulatory issues can be resolved, this testing of the waters may become a tidal wave in a few years. Following the lead of banking and asset management firms, retirement plan providers may increasingly turn to mobile media with the launch of smart phone-compatible websites and iPhone apps to allow participants to manage account information, investment choices and monitor investment performance.  

Another sea change since the PPA was signed into law by then-President Bush is an amplified debate about the role of the federal government in an increasing array of sectors of our economy. Employer-sponsored healthcare benefits played a key role in the recent legislative battle culminating in the passage of the Patient Protection and Affordable Care Act (PPACA) signed into law by President Obama this spring.  

With healthcare reform passed, the Obama Administration now appears to be turning its attention to retirement. Consider the Department of Treasury and Department of Labor’s jointly issued Request for Information (RFI) Regarding Lifetime Income, which drew more than 800 responses during the public comment period that ran from February through May of this year. In response to the RFI, several private citizens said essentially to the government “hands off my 401(k),” while others, including key industry players said the government should promote guaranteed lifetime retirement income options, especially given the unprecedented economic changes we’ve experienced since the PPA was passed.  

Perhaps most important of all, the RFI specifically asked for public comment on the necessity of participant education and how it should be provided, which seemed to be yet another acknowledgement of how the world has changed. Thankfully, plan sponsors have more tools and communications channels available than ever before, which is essential since they will be on the front lines of meeting this enormous challenge.  

- Brooke Worden  

Brooke Worden, APR, is a vice president in the Financial Services practice at Weber Shandwick, a global public relations firm. She has advised industry-leading retirement plan providers for the past decade and has worked extensively on retirement services industry thought leadership initiatives and issues. She can be reached via email at bworden@webershandwick.com. 

«