Health care reform gets all the press. All the love. All the hate. All the controversy.
But what's been overlooked by most is that the politicians and regulators began the painful process of reforming retirement years before the Patient Protection and Affordable Care Act was even a gleam in President Obama's eye. Advisors have been adapting to a new way of life for a while now, while brokers still struggle with “life after reform.”
At any rate, narrowing our scope to the last decade, three pivotal events emerge as milestones of retirement reform, reshaping the landscape for brokers involved in the worksite retirement market. They are, in chronological order:
Then-President George W. Bush signed the Pension Protection Act into law in August of 2006. The law:
- Makes the limits established by the Bush tax cuts back in 2001 permanent. These include those set up for individual elective 401(k) contributions, so-called catch up contributions, annual max contributions, etc.
- Paved the way for auto enrollment in 401(k) plans.
- Allowed defined benefits plan distribution to a still-employed 62-year-old.
- Additionally, and in more simple terms, this legislation increased investor (employee) control over their retirement assets.
President Obama signed the Dodd–Frank Wall Street Reform and Consumer Protection Act in July 2010. This controversial—and still largely unimplemented—legislation sprang up in the wake of the financial crisis of 2009 (we'll get to that later). This vast law, the largest of its kindest since the Great Depression, was drafted to “to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end “too big to fail”, to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.”
In short, it reboots the existing regulatory structure, creating several new agencies (while shutting down and/or consolidating others) to streamline the regulatory process, increases oversight across the board while attempting to expand transparcency.
What it actually did, more than anything else, was heighten anxiety and uncertainty in a market still reeling from the market's fall.
Then there are the plan disclosure rule changes that finished rolling out late last year. The Department of Labor's 408(b) transparency crusade not only forced advisors to disclose fees to plan sponsors, but compelled employers to pass those disclosures along to plan participants.
Now if only we could get some kind of tax reform…but, then again, the feds would probably screw that one up, too.
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