Congress hears testimony on small-business retirement challenges

Several industry experts met on Capitol Hill Wednesday in a continued push to encourage better access to retirement plans for small businesses, championing bipartisan reforms to multiple-employer plans.

Experts from Prudential, AARP and business owners testified before a Senate Health, Education, Labor & Pensions subcommittee Wednesday, championing “open” multiple-employer plans to help tackle some of the barriers small employers say hinders them from offering retirement plans: cost, administration and fiduciary responsibilities.

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“As a business owner … I’m all too familiar with some of the hurdles [facing small businesses],” said U.S. Chamber of Commerce board member Scott Anderson, who owns Static Peak, LLC, a small company based in Wyoming. “MEPs offer an attractive and cost-efficient alternative for small businesses for which a stand-alone 401(k) plan is not feasible.”

Congress can take concrete steps to expand small-business access to retirement plans, says Jamie Kalamarides, senior vice president of institutional investment solutions at Prudential Retirement, including:

1. Allowing unaffiliated businesses with separate employee groups to pool purchasing power, removing commonality-of-interest requirements.
2. Reducing the liability of small business owners only to the decisions they make.
3. Directing the IRS and DOL to develop a model plan design that includes all the best behavioral finance best practices and eliminates discrimination testing.
4. Empowering the DOL with enforcement capabilities such as reporting and cease-and-desist powers.
5. Passing the Lifetime Income Disclosure Act and directing the DOL to reduce barriers to employers’ selection of lifetime income solutions.

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Adding to that, David Certner, legislative counsel and legislative policy director with AARP, said MEPs should also include consumer safeguards.

“What’s fundamental is we need to be clear which entity will be responsible – the employer or the MEP – and make sure DOL has enforcement authority,” he said.

The benefits of these small changes can be substantial, Kalamarides said. “Employees without access will be automatically enrolled, save through institutional investments and have the possibility of employer matches and employers will have limited ongoing costs and administrative hassle.”

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Workplace-based retirement plans are the most efficient means to save, he continued, and open MEPs with automatic enrollment and opt-out can be a way to give workers “low-cost institutional quality solutions.”