President Obama has his eye on automatic enrollment in individual retirement accounts and an expansion of the Saver’s Credit Act as a way to encourage Americans to prepare for retirement, according to a retirement policy expert.
President Obama has his eye on automatic enrollment in individual retirement accounts and an expansion of the Saver’s Credit Act as a way to encourage Americans to prepare for retirement, according to a retirement policy expert.
“As the year unfolds, the president will pick a signature issue … such as the auto [IRAs], while Congress will drive a range of issues, such as 401(k) fee disclosure and scrutiny of plan investments,” said James M. Delaplane Jr., a partner at Davis & Harman LLP in Washington.
He hosted a presentation, “Retirement Policy Update: What the Financial Crisis and the New Administration and Congress Mean for America’s Retirement System,” yesterday at the InvestmentNews third annual Retirement Income Summit in New York.
“The administration really cares about this auto IRA, and there are conversations between the White House and Capitol Hill about making this an early win for the Obama administration. The odds of it happening are way, way up,” Mr. Delaplane said.
Amid the crisis and depleted retirement accounts, there is suddenly a new focus on the shift of risk to participants, resulting in heightened attention to investment issues and the extent of equity exposure, he said.
Mr. Delaplane anticipates greater legislative and regulatory attention on investment oversight, with particular scrutiny on target date funds.
The equity exposure varied wildly in funds with a target of 2010. Some had equity exposure as low as 8%, while others were as high as 62%.
“One 2010 fund was down 40%, and this is for someone on the doorstep of retirement,” Mr. Delaplane said. “Those statistics get lawmakers fired up.”
As for the investment advice provision in the Pension Protection Act of 2006, Mr. Delaplane said he expects that Mr. Obama will tighten regulations.
“Think about where you were pre-PPA and the constraints you had in that environment. We could be going back to pre-PPA,” Mr. Delaplane said.
“The crisis has changed the environment, raised the odds for reform on big issues and increased voter retirement anxiety, but it also opens discussion on fundamental reforms and changes the retirement policy priority list.”
