"Wonder" Land

However you feel about the results of last week’s elections, there’s little disputing that things are going to be different in Washington. Amazingly, though perhaps not surprisingly, I’m already getting invitations to presentations, or offers to send me assessments, on what all this change will mean for benefit programs generally, and retirement savings specifically.

My initial reaction was a bit like when I walked into the mall last weekend and was confronted with Christmas displays – it’s too soon for this!

I doubt that many went to the polls with pensions on their minds (even those of us who make our living supporting them), and with the ink on the Pension Protection Act of 2006 still damp, one is tempted to think that we have all the regulatory help we’ll need until after the next election – at least.

Personally, I’m not expecting much out of this Congress, certainly not on pensions (does anyone really think that the momentary comity displayed for the television cameras will last?). We can probably “thank” the airline industry’s pension funding crisis for forcing the issue this past term, but higher interest rates and new pension accounting regulations from the Financial Accounting Standards Board (FASB) will likely grease the skids with no further legislative impetus. For defined contribution plans, there’s little question that the PPA sets a lot of interesting trends in motion – and much of that can proceed without the assistance of Congress. Moreover, if the removal of EGTRRA’s sunset dates doesn’t actually create true “permanence,” it nonetheless, for the time being, removes the ability of Congress to simply allow distasteful (to some) tax breaks to expire. Advice? Well, that was one of the more controversial aspects of the PPA legislatively – and it’s pretty clear that that is one area in which controversy, and just a bit of confusion, remains. I’m not at all sure that that will be resolved in the near term, but one never knows.

Not that a little inaction from Congress would be a bad thing. Most of us will have our hands full assimilating, explaining, and implementing the new provisions of the PPA until well past the 2008 elections. In addition to the Department of Labor’s newly minted proposals on Qualified Default Investment Alternatives, we have yet to see some of the details that will be required to fulfill some new reporting obligations, including quarterly benefit statements, and things like the Roth 401(k) may have a broader appeal now that the EGTRRA sunset has been removed.

But, as we lumber toward our next Presidential election, I wouldn’t be surprised if some began to wonder aloud if automatic enrollment might not be better deployed as a mandatory enrollment – after all, why leave “bad” behaviors to chance? Nor would I be surprised to hear legislators beginning to talk not about the disappointing participation rates of the 44% of working Americans who have the chance to participate, but about why the other 56% don’t have the same opportunity. After all, all taxpayers are, in a sense, subsidizing the programs of the 44% (similar arguments have been made about employer-sponsored health-care programs already, by the way). Could you envision a sort of uber-Social Security program that mandated worker (and perhaps employer) contributions that go into a private account? Maybe not in that particular format today – but there are elements in that design that could garner bipartisan support, IMHO. What might that mean for retirement security? For your retirement business security?

It’s not too early to start wondering – after all, 2008 is just around the corner.

- Nevin E. Adams editors@plansponsor.com

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