By Pension and Benefits Editorial Staff
On August 31, 2018, President Donald Trump issued an executive order (EO) declaring it the policy of the federal government “to expand access to workplace retirement plans for American workers.” The EO directs a review of current ERISA and IRS regulations to determine where new rulemaking and/or guidance may further that policy, particularly concerning multiple employer plans (MEPs). The EO also directs a review of actions that could reduce the cost of furnishing plan disclosures and of life expectancy and distribution tables in regulations on required minimum plan distributions.
Regulatory burdens and complexity can be costly and can discourage employers—especially small businesses—from offering workplace retirement plans to their employees, according to the EO. “Businesses are sensitive to the overall expense of setting up such plans.”
Retirement plan benefits. Bureau of Labor Statistics data indicate that 23% of all private-sector, full-time workers lack access to a workplace retirement plan, a percentage that increases to 34% when part-time workers are taken into account, the EO observed. Small businesses are less likely to offer retirement benefits. In 2017, the data show that about 89% of workers at private-sector establishments with 500 or more workers were offered a retirement plan compared to only 53% of workers at private-sector establishments with fewer than 100 workers.
High costs underscored. Pointing to a survey by Pew Charitable Trusts, the EO underscored that 71% of small- and medium-sized businesses that do not offer retirement plans were deterred from doing so by high costs, with 37% citing high costs as their main reason for not offering such a plan. Thus, federal agencies should revise or eliminate rules and regulations that impose unnecessary costs and burdens on businesses, especially small businesses, and that hinder formation of workplace retirement plans, according to the Trump Administration.
Suggested expanded access to MEPs. According to the EO, expanding access to MEPs, under which employees of different private-sector employers may participate in a single retirement plan, is an efficient way to reduce administrative costs of retirement plan establishment. It would also encourage more plan formation and broader availability of workplace retirement plans, especially among small employers.
Reducing disclosures. Reducing the number and complexity of employee benefit plan notices and disclosures currently required would also ease regulatory burdens, the EO contends. “The costs and potential liabilities for employers and plan fiduciaries of complying with existing disclosure requirements may discourage plan formation or maintenance,” according to the EO. “Improving the effectiveness of required notices and disclosures and reducing their cost to employers promote retirement security by expanding access to workplace retirement plans,” the EO asserts.
Updating distribution requirements. Moreover, outdated distribution mandates may also reduce plan effectiveness by forcing retirees to make excessively large withdrawals from their accounts, potentially leaving them with insufficient savings in their later years, according to the White House.
Directives. For all of these reasons, the EO declares that it is the policy of the federal government to address these problems and promote retirement security for America’s workers. The EO specifically directs the Secretaries of Labor and Treasury to take certain actions to further the EO’s declared policy.
Expanding access to MEPs and other retirement plan options. The Secretary of Labor is directed to examine policies that would:
- Clarify and expand the circumstances under which U.S. employers, especially small and mid-sized businesses, may sponsor or adopt MEPs as a workplace retirement option for their employees, subject to appropriate safeguards; and
- Increase retirement security for part-time workers, sole proprietors, working owners, and other entrepreneurial workers with non-traditional employer-employee relationships by expanding their access to workplace retirement plans, including MEPs.
Definition of “employer.” Within 180 days of the EO’s date, the Labor Secretary must consider, consistent with applicable law and the policy set forth in the EO, whether to issue a notice of proposed rulemaking and/or other guidance that would clarify when a group or association of employers or other appropriate business or organization could be an “employer” within the meaning of ERISA Sec. 3(5).
MEP qualification requirements. Within 180 days, the Secretary of the Treasury must consider proposing amendments to regulations or other guidance, consistent with applicable law and the EO’s policy, on the circumstances under which a MEP may satisfy the tax qualification requirements set forth in the Code, including the consequences if one or more employers that sponsored or adopted the plan fails to take one or more actions necessary to meet those requirements. The Treasury Secretary is required to consult with the Labor Secretary in advance of issuing any such proposed guidance. The Labor Secretary is directed to take steps to facilitate the implementation of any guidance.
Required notices and disclosures. Within one year, the Labor Secretary, also in consultation with the Treasury Secretary, must complete a review of actions that could be taken through regulation and/or other guidance to make retirement plan disclosures required under ERISA and the Code “more understandable and useful for participants and beneficiaries, while also reducing the costs and burdens they impose on employers and other plan fiduciaries responsible for their production and distribution.” This must include “an exploration of the potential for broader use of electronic delivery as a way to improve the effectiveness of disclosures and to reduce their associated costs and burdens.” If the Labor Secretary determines that action should be taken, the Secretary must, in consultation with the Treasury Secretary, consider proposing appropriate regulations or guidance, consistent with applicable law and the EO’s policy.
Updating life expectancy and distribution period tables. The EO also directs that, within 180 days, the Treasury Secretary must, consistent with applicable law and the EO’s policy, examine the life expectancy and distribution period tables in the regulations on required minimum distributions from retirement plans (67 FR 18988) and determine whether they should be updated to reflect current mortality data, and whether such updates should be made annually or on another periodic basis.
Source: Presidential Executive Order, August 31, 2018.
Interested in submitting an article?
Submit your information to us today!Learn More