The Retirement Report, Summer 2018

Summer 2018
VOL 1 | NO 2

Pension Practice Council Event Looks at U.S. Retirement System

Pension VP Josh Shapiro opens the forum
More than 50 special invitation attendees filled the room at the Pension Practice Council’s retirement policy discussion forum July 27 at the National Press Club in Washington, D.C. This unique program featured a prominent panel of both Academy and non-Academy retirement policy experts who presented to a diverse audience of retirement security thought leaders and stakeholders. The retirement forum focused the Academy’s role as a key contributor to the public debate over retirement issues facing our country. A primary objective was to stimulate thinking around meaningful, possible retirement policy concepts, and practical ideas to promote retirement security.

The forum, “Modernizing the U.S. Retirement System—Aligning Policy With Reality,” included discussion on bridging the gap between Americans’ lifetime retirement income needs and a retirement system that hasn’t kept up with demographic and economic trends, personal savings rates, and other developments in recent decades. The event was streamed live on the Academy’s Facebook page, where nearly 400 individuals watched the forum during the event. The video recording of the forum and the slide presentation are also both available via the Academy’s homepage.

“Traditional retirement policy needs to be revisited and updated with an eye toward addressing longer lives, an aging society, employer concerns over fiduciary and financial risks, increased individual responsibility for managing retirement income, and other challenges facing current and future retirees,” said Academy Vice President, Pension Josh Shapiro, who greeted forum attendees. “The Academy stands ready to contribute its expertise in an effort dedicated to helping realign public policy with today’s retirement realities.”

The forum presenters were Steve Goss, chief actuary of the Social Security Administration; J. Mark Iwry of The Brookings Institution and visiting scholar with the Wharton School, University of Pennsylvania; Steve Vernon of the Stanford Center on Longevity; Ted Goldman, the Academy’s senior pension fellow; and Lori Lucas, CEO of the Employee Benefit Research Institute. Attendees from congressional offices, government agencies, nonprofit organizations, and academia were able to have an open dialogue about the current U.S. retirement system—what’s working, what isn’t, and legislative and regulatory options to update and improve the system.

Goss, at podium, with Lucas, Iwry, Goldman, and Vernon

Goss set the stage for the forum with opening remarks framing how the current and future benefits provided by Social Security fit in the bigger retirement income picture, and describing the program’s financial condition. According to Goss, it’s important to educate the public to understand that, while changes are needed, the program continues to be strong and will likely play an integral role in delivering retirement benefits. He outlined some solutions to bring balance to the program. Lucas detailed key trends that have led to gaps between retirement policy and secure retirement income, and moderated the panel discussion and Q&A sessions.

Iwry, with his years of front-line experience as senior adviser to the secretary of the Treasury as well as serving as deputy assistant secretary, lead a discussion of employer-sponsored retirement programs. He made observations on what has worked—e.g., automatic enrollment, Qualified Default Investment Alternatives (QDIAs)—and the challenges of getting policy passed through Congress. Iwry framed the discussion from the past to the future as he identified a number of ideas that have been discussed or are under discussion, but have not yet been implemented. Some of the ideas he shared included optimizing the use of Qualifying Longevity Annuity Contracts (QLACs), adding more flexibility in choices to convert savings into lifetime income, minimizing leakage from the retirement system prior to retirement, and reassessing the required minimum distribution rules.

Goldman focused on the preparation phase of retirement—addressing access to retirement plans, saving appropriately, minimizing leakage of savings prior to retirement, investing wisely, and covered ways to optimize the effectiveness of defined contribution plans, as well as incorporating behavioral science concepts into retirement programs. An example is advancing on the success of auto-enrollment and auto-escalation features according to a personalized plan.

Each participant could be auto-enrolled at his or her specific savings rate that reflects their current age, income, savings, and retirement goals. This calculation could then be refreshed throughout an individual’s working lifetime to assure they are always on a path to a secure retirement. Personalized auto-features could also be applied to create an appropriate drawdown strategy as well. Goldman also emphasized the importance of utilizing pooling features in retirement plans. Similar to other insured risks, few individuals can readily assume all of the risks related to retirement. He presented ideas to pool longevity and investments inside employer-sponsored retirement plans through hybrid-type designs.

Finally, Goldman introduced a twist on the open multiple employer plan (MEP) concept. The open MEP that is included in several proposed bills before Congress, would allow unrelated employers to band together in a common defined contribution plan. In such an approach, a plan would cater exclusively to retirees, creating an unbiased retirement service provider to assist retirees with a broad scope of financial services.

In the program’s final segment, Vernon addressed the issues faced during retirement. He proposed a menu-driven approach that could facilitate retirement income portfolios. Employers, with the protection of a safe harbor, could offer well-constructed menus that a retiree could select upon retirement. This approach simplifies the choices at retirement and helps direct retirees in a positive direction. An example could be a default QDIA that includes a drawdown strategy. He also emphasized the importance of educating workers about the value of working longer (for those with a choice) as an important strategy to entering retirement confidently. Finally, he reinforced the importance of behavioral science. Simply renaming some of the terminology used in the Social Security program could help individuals make better decisions, he said.

Lucas summed up the day and moderated a lively Q&A period that included both those present in the room and online. She reiterated that aligning retirement policy to allow adoption of the ideas, concepts, and features that were presented could significantly move the needle with respect to retirement security.

Shapiro brought the forum to a conclusion. “Making policymakers aware of the options to bring the retirement system up to date, with careful consideration of the potential implications for retirees, taxpayers, and other stakeholders, is a priority for the Academy and could help our society better meet lifetime income needs going forward,” he said in closing. The Academy has started a hashtag on Twitter—#ModernizingRetirement—as one way to continue the important dialogue that was started at the meeting. Other plans are underway to leverage the material presented and keep retirement security as a clear priority for the Academy.

Academy Testifies Before ERISA Advisory Council

The Academy testified Aug. 15 before the U.S. Department of Labor’s (DOL) Advisory Council on Employee Welfare and Pension Benefits (the ERISA Advisory Council, or EAC) on “Lifetime Income Solutions as a Qualified Default Investment Alternative (QDIA)—Focus on Decumulation and Rollovers.” Senior Pension Fellow Ted Goldman, accompanied for Q&A by Tonya Manning, co-chairperson of the Academy’s Lifetime Income Risk Joint Task Force, presented to the council and responded to questions. The written testimony and presentation are posted on the Academy’s website.

(L-R) Goldman, Levering, and Manning at the EAC
The 2018 EAC Chair Cynthia Levering, an active Academy volunteer, is a member of the Academy’s Lifetime Income Risk Joint Task Force and the Retirement System Assessment and Policy Committee.

The testimony highlighted the Academy’s lifetime income position statement, provided insights about Qualifying Longevity Annuity Contracts (QLACs), and described an Open Retiree Multiple Employer Plan (MEP) concept. In addition, attention was brought to the full body of issue briefs and related deliverables developed by the LITF, the Actuaries Longevity Illustrator, and the Academy’s online lifetime income quiz.

The EAC’s stated objective on this issue is to focus on recommendations promoting lifetime income within defined contribution (DC) plans through providing further guidance on an annuity selection safe harbor and modifying the QDIA rule to focus on asset accumulation and decumulation issues in the context of lifetime income needs and solutions.

Citing the lifetime income position statement, the Academy presentation noted support for policy and educational initiatives that increase the availability of retirement income options within employer-sponsored DC plans, stating that “such options, based upon actuarial principles such as longevity pooling and other risk mitigation strategies, can help retirees manage their financial security over their remaining lifetime.”

The presentation noted several critical components required by this approach—education throughout the participant’s working career; income options that meet retiree needs; and new legislation and expanded guidance. In addition, employer-sponsored DC plans can provide additional benefits to the retiree, including, pricing efficiency, ease of transaction, provider and product due diligence, and guidance on retirement income planning and longevity risk management options.

The Academy testimony also offered perspective on QLACs, noting several advantages—and reasons why they have not gained popularity—while outlining steps that could be taken to improve their utilization, including through regulation or legislation, allowing variable/index-based returns, eliminating unisex pricing and allowing aggregation among DC plans; modifying annuity selection safe harbors in order to remove fiduciary concerns; and greater consumer education, including efforts by the DOL.

Pension ASOPs Exposure Draws Wide Response

July 31 was the deadline for comments on exposure drafts of proposed revisions of three pension actuarial standards of practice (ASOPs)—No. 4, Measuring Pension Obligations and Determining Pension Plan Costs or Contributions; No. 27, Selection of Economic Assumptions for Measuring Pension Obligations; and No. 35, Selection of Demographic and Other Noneconomic Assumptions for Measuring Pension Obligations.

The response to these exposure drafts was particularly robust; the Actuarial Standards Board (ASB) received about 100 comments in total for the three exposures. The ASB has always welcomed and relied upon comments received as a part of its rigorous standards-setting process when revising, approving, and adopting ASOPs. As always, comments received have been posted on the ASB website to encourage transparency for all stakeholders.

Pension Practice Council Activity in Brief

Treasury, Labor, and PBGC Meeting Notes Released

The Multiemployer Plans Committee released notes from its February meeting with officials of the Treasury and Labor departments, and the Pension Benefit Guaranty Corporation, to discuss applications by multiemployer pension plans in critical and declining status to suspend benefits or partition liabilities. This meeting supplemented the first meeting between these parties on this topic, which was held in 2017.

Social Security Issue Brief on Trustees Report

The Social Security Committee released an issue brief on the 2018 Social Security Trustees Report that examines solvency concerns with the social insurance program. The issue brief—an annual analysis of the trustees’ report—provides context for issues confronting the program for policymakers and media, and notes that the combined Old-Age, Survivors, and Disability Insurance trust fund will be depleted in just 16 years unless the system’s financial challenges are addressed. The Academy also updated its Essential Elements on the program.

Academy Submits Responses to Joint Committee

The Academy submitted written responses to questions for the record to the Joint Select Committee on Solvency of Multiemployer Pension Plans. The questions were asked by committee members subsequent to a hearing on “The History and Structure of the Multiemployer Pension System,” at which Senior Pension Fellow Ted Goldman testified in April.

Lifetime Income Risk Task Force Comments to Congress

The Lifetime Income Risk Joint Task Force submitted a comment letter to Congress on the Lifetime Income Disclosure Act.

The comments point to key ways of improving the current version of the bill with respect to lifetime income issues:

  • Provide more guidance to the Department of Labor (DOL) with respect to the lifetime income disclosure provisions;
  • Exempt small employers from providing the income disclosure statement; however, require that they furnish employees with information regarding the DOL website tool and how to access it;
  • Require that the DOL update its website to align with the legislation; and
  • Direct the DOL to create a better safe harbor that would relieve employers from fiduciary liability for providing retiree income options.

Legislative/Regulatory Update

Following is an update of key federal and state retirement- and pension-related legislation.

Federal Legislative Activities

Multiemployer pension plans continue to be a key issue for Congress. The Joint Select Committee on the Solvency of Multiemployer Pension Plans (the committee) has held a total of five hearings following its initial executive session meeting early this year. The committee is charged with publishing a report on its findings and proposed legislation by Nov. 30. The committee can only report legislation, as stipulated by statute, if a majority of members from both parties approve it. The committee is comprised of members of equal representation between the two parties and the two houses.  That solution will be guaranteed an expedited vote in the Senate, with no amendments.

State Pension Legislation

A bill passed by the California Senate and now under consideration in the Assembly, would request the University of California to establish a Pension Divestment Review Program to assess divestment proposals and to prepare written analyses with relevant data regarding the effects of such proposals on employee pension funds and public policy. The Assembly Committee on Appropriations placed the bill in its suspense file in August, where it will be held for consideration until the state budget has been prepared.

A bill was introduced in the New Jersey Assembly in June that would eliminate the income eligibility cap under which pension and retirement income may be excluded from taxable income. Under current New Jersey law, individuals ages 62 and older with annual incomes of $100,000 or less do not pay taxes on qualifying pension and retirement income.

H.B. 708, introduced in the Ohio House in June, would prevent individuals who have retired from employment and covered by one of the state’s public retirement systems from receiving a pension during any period in which they resume work as a public employee.

In the News

  • Lori Lucas, moderator at the Pension Practice Council’s July 27 retirement policy forum, “Modernizing the U.S. Retirement System—Aligning Policy With Reality,” discussed the key takeaways from the event in The Weekly Pulse podcast (11:30 mark). Lucas also discussed the importance of the forum in an Employee Benefit Research Institute blog post. The blog post was reprinted by Advisor Magazine. An Employee Benefit News article on the forum cited comments from Academy Pension Vice President Josh Shapiro and Senior Pension Fellow Ted Goldman. In an interview with the Retirement Income Journal, Goldman discussed the major themes presented at the forum, including multiple employer retirement plans.
  • A National Law Review article on recent developments of the Joint Select Committee on Solvency of Multiemployer Pension Plans cited Goldman’s testimony before the committee on “The History and Structure of the Multiemployer Pension System.”
  • A letter published by Pensions & Investments cited the Academy’ Multiemployer Plans Committee issue brief discussing the costs and risks associated with multiemployer loan programs, and the ways in which these programs could benefit troubled plans and their participants.
  • Advisor Magazine reported on the Social Security Committee’s new issue brief on the 2018 Social Security Trustees Report that examines the social insurance program’s long-term solvency issues.
  • An MPR News (Minn.) radio story on the financial challenges facing multiemployer plans in Minnesota cited the Multiemployer Plans Subcommittee’s June 2017 issue brief, Overview of Multiemployer Pension System Issues.
  • Advisor Magazine published an excerpt of the Academy’s May 2017 issue brief on women and Social Security. Business Woman also cited the issue brief.
  • Think Advisor,, Hudson Valley 360 (N.Y.), and the American Association of Individual Investors Journal cited the Actuaries Longevity Illustrator, developed jointly by the Academy and the Society of Actuaries.

2018 Annual Meeting and Public Policy Forum

Early Registration Deadline Is Sept. 7 for Annual Meeting and Public Policy Forum

Discounted registration rates are available through Friday, Sept. 7 for the Academy’s 2018 Annual Meeting and Public Policy Forum, to be held Nov. 1–2 in Washington, D.C. Breakout sessions will cover the latest developments in today’s top public policy and professionalism news, including a look at government-backed P/C insurance programs, the experiences of companies that filed PBR actuarial reports for 2017, multiemployer pension reform, and long-term care insurance experience. Other agenda highlights include an interactive game show developed by the Academy’s Committee on Professional Responsibility, a keynote address by political analyst Charlie Cook of the Cook Political Report, and an optional-participation murder mystery to test your deduction skills during our Nov. 1 dinner. Join us in November, and register today.


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