In Policy Shift, Life Insurers Back Mandatory Retirement Plans

The board of the American Council of Life Insurers voted Monday to support legislation that would require the vast majority of employers to offer a retirement plan in a major policy shift from previous industry support for voluntary participation.

The legislation, which is the former H.R. 4523, the Automatic Retirement Plan Act of 2017, introduced by House Ways and Means Committee Chairman Richard Neal, D-Mass., would increase the number of people with access to retirement plans by at least 22 million, according to the ACLI.

Neal’s bill did not pass in the last Congress when Democrats were in the minority. However, a spokeswoman for Neal told ThinkAdvisor on Tuesday that the legislation is in the pipeline and still a priority, but the committee doesn’t yet have a specific date for when it will be reintroduced.

Neal is working on getting bipartisan support now for the legislation, the spokeswoman noted.

“Newer, bolder thinking is sorely needed to help millions of Americans still struggling to prepare for long retirements,” the ACLI said in a statement explaining its endorsement of a retirement plan requirement.

The legislation as previously written would make all but the smallest businesses offer a retirement plan, although workers would have a chance to opt out.

It would exclude employers with 10 or fewer employees working a typical business day.

ACLI President & CEO Susan Neely stated in the release that the impetus for ACLI’s support is that “too many workers are nearing retirement without enough savings, and workplace plans have proven to be a key factor in developing the savings habit.” According to Neely’s statement, four out of five full-time private-sector employees participate in a retirement plan when it is offered.

If legislation passes as envisioned, the requirement to offer a plan would be enforced with a tax.

“Too many workers are ill-prepared to be financially secure in retirement,” Neely said.

Under the Neal bill, the government would impose an excise tax “on the failure of an employer to make eligible to participate in an automatic contribution plan.”

The legislation has been backed by powerful lobbying and insurance interests previously.

The Insured Retirement Institute, an advocacy group for the annuity industry, “has supported this legislation since it was first introduced in 2017 because it offers a private-sector solution to expand the availability of workplace retirement plans so more Americans will have an option through their employers to save for their retirement,” said an IRI spokesman.

In October, a consortium of groups wrote to Neal to support his legislation as a “major step forward in increasing retirement plan coverage and the benefits of those individuals covered by a plan.”

They included but were not limited to AXA Equitable Life, the IRI, Jackson National Life Insurance, State Street Global Advisors, TIAA, Transamerica and the Women’s Institute for a Secure Retirement.

They told Neal that his bill “provides a national framework that would ensure far broader coverage and enhanced benefits,” but did add it would preserve private-sector innovation.

In February, MassMutual CEO Roger Crandall in testimony before the House Ways and Means Committee called Neal’s ARPA bill “a bold and innovative solution — based entirely on a private-sector solution — to reduce the coverage gap.” Crandall said that “legislative action” is needed on ARPA and said it was his “hope that the private sector, including the small-business community, can participate constructively … to identify ways to move this bill forward in a bipartisan manner that broadens retirement plans coverage.”

The focus on a private-sector solution to the expected retirement funding crisis has long been a tenet of the industry, and a mandate that would result in a tax could prove to be a stumbling block for some legislators, although it remains to be seen when the bill is reintroduced, perhaps in early summer.