Your Retirement May be In the Future but the Time to Update the Laws is Today

May 17, 2018 - 11:00am

Executive Director, Retirement Policy

The Employee Retirement Income Security Act (ERISA) was passed in 1974 and over the years has proven to be largely successful in achieving its goals.  That said, many of its implementing regulations have not been updated since then.  Consequently, employers and participants are working under rules that were developed several decades ago.  Last year, the Chamber issued Securing America’s Retirement, a legislative roadmap indicating specific ways to modernize ERISA for the 21st Century.  On May 16, the House Education and Workforce Committee held a hearing to discuss updating policies governing the private retirement system focusing on four specific issues.  In addition to being good ideas, these proposals are also unique in that they are all reflected in bipartisan legislation. 

  • Open Multiple Employer Plans (MEPs) – A MEP is a single plan that is maintained by a MEP sponsor and one or more unrelated employers.  MEPs allow small business industries to pool resources in order to offer their employees a retirement plan. However, current rules deter employers from participating.  The Chamber believes that updating the rules will encourage further participation by small business employers.  H.R. 854, the Retirement Security for American Workers Act, eliminates two burdensome requirements affecting multiple employer plans: the “common nexus” requirement that prevents adoption of open multiple-employer plans (MEPS), in which unrelated employers may collectively satisfy plan administration requirements, and the “one bad apple” rule that punishes all employers in a plan for the failure of one employer to meet the plan’s requirements.
  • Electronic Delivery.  Plan sponsors are required to provide numerous disclosures.  Most participants are so overwhelmed by the volume of notices that must be sent to participants.  Consequently, it is important to recognize the benefit of electronic delivery. Electronic delivery allows plan sponsors to provide simple notices with imbedded information that allows those who are interested to access additional information.  The Chamber urges a standard to encourage the use of electronic delivery and to allow it to be the default delivery option for benefit notices. The Chamber believes that modernizing the restrictive rules on electronic delivery in this manner will allow for the provision of important information to beneficiaries without it being buried in an avalanche of rarely used information.  H.R. 4610, the Receiving Electronic Statements to Improve Retiree Earnings Act, authorizes the electronic disclosure of retirement plan information so that plan participants may access their plan information online.
  • Increased Cash Out Limit.  Currently, plan sponsors are allowed to automatically cash out, without participant consent, accounts for separated participants that are less than $5,000. Without this provision, plan sponsors are using administrative and financial resources on people who are no longer employees or part of the plan.  However, this limit has not been increased in over 20 years.  The Chamber recommends that Congress increase the involuntary cash-out limit and include automatic indexing so that the cash-out keeps pace with inflation.  H.R. 4158, the Retirement Plan Modernization Act, increases the automatic cash-out limit for retirement plans from $5,000 to $7,600, and defrays some of the costs of retirement plan administration for small employers.
  • Annuity Provider Safe Harbor.  One deterrent to providing annuities from a defined contribution plan is the annuity selection rule. Even with guidance issued with respect to annuity selection from a defined contribution plan, the provider selection requirements are overly complex.  It is particularly difficult for small businesses to compare different annuity options. Consequently, clarifying this safe harbor would be useful to all plan sponsors.  H.R. 4604, the Increasing Access to a Secure Retirement Act of 2017, reduces the compliance uncertainty that companies face by amending ERISA to clarify existing rules that provide a fiduciary safe harbor when selecting an annuity provider.  

The Chamber urges Congress to move forward with these recommendations that have bipartisan support and modernize the current private retirement system.

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About the Author

About the Author

Executive Director, Retirement Policy

Aliya Wong is the Executive Director of Retirement Policy at the United States Chamber of Commerce.