Retirement savings legislation ‘cool,’ NAIFA members told

By Susan Rupe

WASHINGTON - The SECURE Act, passed by Congress and signed into law in December 2019, was “the most impactful retirement legislation in a decade,” said Wayne Chopus, CEO of the Insured Retirement Institute. A follow-up bill, dubbed SECURE 2.0, sailed through the House of Representatives in April, with only five members of Congress voting against it.

So why is SECURE 2.0 stalled in the Senate? A panel of industry leaders discussed the future of SECURE 2.0 during the National Association of Insurance and Financial Advisors’ Congressional Conference on Monday. NAIFA members will visit the Capitol for meetings with their senators and representatives today.

“We were concerned about the retirement savings crisis before the pandemic. Now those needs are even more acute,” said Susan Neely, CEO of the American Council of Life Insurers. “Who could be against this? No one’s really against it. So why can this get held up? Someone told me it’s because it’s too popular. You want to do the right thing for your constituents but lacks the partisan edge of other legislation.”

Neely asked NAIFA members to tell their Senators, “Your constituents need this. Here is the reality of what’s happening out there.”

She said a congressman once told her, “You’re making retirement cool!”

“Hammer home that the time to pass this is now,” she told the attendees.

The “coolness” of retirement saving legislation also was mentioned by George Nichols, president and CEO of The American College. Nichols told the attendees that a recent college survey showed that 71% of respondents believe not outliving their savings is the most important thing to them regarding their retirement.

“Tell your Senators that this has always been cool to their constituents,” he added.

SECURE 2.0 includes 49 provisions aimed at simplifying and further encouraging the establishment of retirement savings plans. The bill includes:

An automatic enrollment requirement for 401(k) and 403(b) plans.
A phased-in increase in the age when the required minimum distributions begin, from the current age of 72 to age 75 by 2033.
An increase in catch-up contribution limits for people ages 62-64.
The ability to count student loan payments as plan contributions eligible for the employer match.

Although SECURE 2.0 gives consumers more tools to help them save for retirement, Neely said one thing that’s missing is a plan that would require businesses with five or more workers to offer their employees something for retirement saving.

“The word ‘require’ makes people anxious but it could be offering a payroll deduction for an individual retirement account. Businesses could band together to offer a 401(k),” she said. “A SECURE 3.0 would take us up to 30 million more people having access to retirement savings tools.”

Other topics that NAIFA members will discuss with their congressional representatives today include:

Standard of care

The Department of Labor is developing additional rulemaking that is expected to seek a fiduciary-only standard to retirement planning advice.

NAIFA’s position is to encourage regulators to support a best interest standard to enhance consumer protection without making financial advice inaccessible for working-class Americans. The best interest standard requires an advisor to act in the client’s best interest, without placing the professional’s interest ahead of that of the client. Nearly half of the states already have adopted rules or laws patterned after a best interest model developed by the National Association of Insurance Commissioners.

Worker classification

The traditional independent contractor model used by independent financial professionals has been challenged on federal and state levels by efforts to redefine who is considered an employee.

Reclassifying advisors as employees would, in many cases, inhibit their ability to provide clients with diverse options, complicate their tax filing status, and disrupt their business models and relationships with clients. Many advisors have relationships with multiple insurance companies and financial institution, which could make classifying advisors as “employees” problematic.

NAIFA opposes the reclassification of insurance professionals and believes any proposal to redefine independent contractors should exempt insurance and financial professionals. The association cited a recent member survey that showed:

About 90% of members receive income reported on a Form 1099.
94% do not want to be treated as an employee for union organizing.
95% of those who operate as an independent contractor want to remain so.

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected]. Follow her on Twitter @INNsusan.