With all eyes focused on the midterms, the life insurance industry has its eyes trained on rich, new retirement plan possibilities they believe will become reality regardless of the who wins or loses.
The American Council of Life Insurers (ACLI) not only believes the wide-sweeping Retirement Enhancement and Savings Act (RESA) will make it through Congress during the lame duck session before Christmas, it has devoted significant resources to an ad campaign to ensure it becomes law.
“I think RESA is the best shot of progress on the retirement front we’ve seen in a decade in terms of expanding retirement plan access and increased coverage,” Kathleen Coulombe, ACLI vice president of retirement security, told Financial Advisor Magazine.
“We still feel that the lame duck [session] holds the best shot at creating a compromise between the House and Senate,” Coulombe added. “We’ve heard from leadership in both chambers that they’d really like to get to this legislation.”
RESA would make it much easier for small employers to band together to enjoy cost savings in order to offer a multi-employer retirement plan (MEP) to employees. To keep the topic of RESA front and center in lawmakers’ minds, regardless of election results, the ACLI has print ads that are ready to go. The message to lawmakers: America’s workforce is counting on you.
The legislation, which has no major opposition or costs, would do the following:
• Expand access to retirement plans for both employers and workers using all the techniques, including auto-enrollment, that work for larger employers.
• Allow for critical cost-sharing and savings for employers that set up plans.
• Encourage participation and education.
• Make it easier for employees to create lifetime income.
• Repeals the prohibition on IRA contributions for employees still working at age 70½.
The idea behind MEPs is to allow multiple employers to pool assets and buying power to create economies of scale. Employers have been able to adopt multiple-employer plans, but have faced several significant hurdles. The first hurdle that RESA will do away with, the “Nexus Provision,” requires that employers be connected in some way through business affiliations or business interests such as their trade association. RESA allows unrelated employers and associations to band together to create multi-emnployer plans.
The other hurdle is the “One Bad Apple” rule, which says that if 10 employers participate in a multiple-employer plan for a number of years, and then one of the employers violates some aspect of the rules around offering a qualified plan or they don’t make contributions on a timely basis, the entire plan would need to be dissolved. RESA would repeal the rule and allow the plan to be preserved if the problem is fixed.