Editor’s
note: Anna Rappaport is president of a Chicago-based retirement
consulting firm bearing her name and chair of the Society of Actuaries
Committee on Post-Retirement Needs and Risks. Here are eight changes
Rappaport argues should be made to U.S. retirement laws.
1. Remove barriers and offer safe harbors for continued work during retirement including rehire by former employers.
Related policy issues include bona fide termination of employment, wage
and hour rules, maybe age discrimination, and phased retirement. As an
actuary, I am very aware of changing demographics and longer life spans,
and feel that facilitating longer employment is very important.2. Adjust retirement ages as longevity improves and regularly update retirement ages. Index both Social Security and private plan required normal retirement ages (ERISA) or at least increase them. Don’t forget to update disability benefits as retirement ages are adjusted.
3. Offer a menu of default distribution options to be available to defined contribution plans. A menu of default distribution options including lifetime income alternatives would encourage more support for regular income in retirement.
4. Support lifetime income and also enable use of defined contribution funds for risk protection. Change defined contribution regulatory structure so that 401(k) funds could be a retirement risk protection account, and after retirement, balances could be used to purchase a variety of risk protection options, either through the plan or through employer offerings on a cost-effective basis. Some of the choices should include lifetime income with survivor protection, with or without inflation protection, supplemental health insurance, and long-term care benefits.
5. Unify regulation where there are multiple entities and laws affecting the same area or where not possible provide “road maps” to enable users to understand multiple regulations. Think about long term disability regulation as an example. Insurance contracts are regulated by state insurance departments and benefit plans by Federal agencies under ERISA. The Americans with Disabilities Act regulates discrimination in employment and the EEOC also enters the picture. The Social Security Administration deals with both disability and retirement benefits. Some disability is connected to worker’s compensation. It is particularly important that regulations support each other and are not inconsistent where there are multiple agencies or where there is a mix of state and federal regulations.
6. Simplify/amend retirement plan regulatory structure to enable new retirement plan design models that allow for more risk sharing. For example, new plan design models have been adopted in the Netherlands and New Brunswick, Canada. These designs provide for a combination of risk pooling and risk sharing that provides for sustainable retirement plans that are expected to do a better job for both individuals and plan sponsors.
7. Support long-term and balanced planning through public education and safe harbors for employer-sponsored education and guidance. Focus on longer-term thinking. Emphasize expected life spans and their variability. Emphasize importance of understanding multiple options and trade-offs. Balance messages about investments, leisure, and working in retirement with messages about risk, long life, and the need for retirement income.
8. Change the terminology about retirement ages. While it does not seem practical to get an entirely new term, it is suggested that the terms “normal” and “early” retirement are not helpful in 2016. Social Security would be a logical place to introduce such a change and start changing the “signals”.
Culled from MarketWatch
