By Paula Aven Gladych
Sen. Tom Harkin, D-Iowa, unveiled new legislation this week that would help tackle the retirement crisis in America and shore up the private pension system
. Industry reaction to the bill was mixed; some cheered while others thought it too complex.
Called the Universal, Secure and Adaptable (USA) Retirement Funds Act of 2014, the legislation, if passed, would give the 75 million individuals in the country who don’t have access to a retirement plan at work a way to earn a safe, portable and secure pension benefit for life.
His legislation would create a new type of privately run retirement plan that combines the advantages of traditional pensions, including lifetime income benefits and pooled, professional management, with the portability and ease for employers of a 401(k)
“USA Retirement Funds would be 21st century retirement plans, run entirely by the private sector, that drastically reduce costs through professional management and risk sharing. Simply put, giving people without access to a quality employer-provided plan the opportunity to earn a retirement benefit would help ensure every American enjoys their golden years with the dignity and financial independence they deserve,” Harkin said in a statement.
The National Conference on Public Employee Retirement Systems, the largest trade association for public sector pension funds, said that it fully supports the Harkin legislation.
“We applaud Sen. Harkin for focusing national attention on America’s retirement security crisis and the vital role defined pension benefits must play if we are to effectively address that crisis. His bold proposal for establishing USA Retirement Funds would help restore defined benefit pensions to the private sector, which is facing a retirement savings deficit in the trillions of dollars,” NCPERS said in a statement. “His legislation would also make it far easier for private sector employers – especially small businesses – to offer retirement
savings plans for their workers, since it would eliminate the investment risks and substantial administrative burdens involved with establishing those plans.
Other, however, like The Onlike 401(k), had problems with the bill, believing its approach wasn't simple enough.
Harkin’s bill is “one of the most complicated approaches I’ve ever seen,” said Chad Parks, founder and CEO of The Online 401(k). “The way they are approaching this is one of the more complicated. The point was to get more people to save, to increase savings rates. Basically they were trying to combine a defined benefit with a 401(k), with pooled investment risk, with annuitization pension-type payouts and with deferral limits relative with time to retirement.”
Parks pointed out that the investments would be pooled, not individually directed. They would go into a professionally managed portfolio and the cash flow in and out would be managed like a DB plan. They also would need to figure out who will draw out the money when and would have to calculate that on a plan basis.
Making it like a multiemployer plan adds another layer of complication, he said.
Originally published on BenefitsPro.com