Data and Research October 28, 2015

Service Members Prefer Traditional Pension

However, many career military members are open to retirement reform for their non-career colleagues.
Reported by

Service members who expect to make a career out of the military prefer to stick with a traditional pension rather than opt for the retirement reforms recently proposed by Congress.

The latest results of the First Command Financial Behaviors Index reveal that 70% of middle-class military families (commissioned officers and senior NCOs in pay grades E-6 and above with household incomes of at least $50,000) who say they are likely to serve to full retirement want to be grandfathered into the current retirement system.  These findings are consistent with monthly survey data collected since the Military Compensation and Retirement Modernization Commission announced its proposal to restructure the traditional 20-year retirement system as a blended program that includes a reduced pension in exchange for a lump sum bonus and a new 401(k)-type plan.

Get more!  Sign up for PLANSPONSOR newsletters.

“Our career servicemembers are understandably wary of giving up their traditional pension in favor of matching funds and other elements of defined contribution plans,” says Scott Spiker, CEO of First Command Financial Services, Inc. “Defined contribution plans have not worked for middle-class Americans in building a suitable income for retirement. There is no reason to believe they will work for our middle-class military force either.”

However, the survey found many career military members are open to the idea of retirement reform for their non-career colleagues (that is, the people who would otherwise leave service without any government-sponsored retirement savings). Sixty-six percent of survey respondents are in favor of the proposed blended retirement system. When asked to explain why, those in favor of the proposed system said it will increase “the amount of people who would be eligible for benefits” and “provide more financial benefits” for service members.

“The traditional 20-year retirement system has been an important part of our nation’s commitment to ensuring lifetime retirement security for generations of our men and women in uniform. Military retirement reform is too big an issue to push through quickly. We urge caution and propose moving forward at a slow and intentional pace that reassures our service members and encourages a continued public debate,” says Spiker.

Compliance October 28, 2015

House Passes Bill Opposing Fiduciary Rule

The Retail Investor Protection Act is likely to be vetoed by the White House.
Reported by

H.R. 1090, a bill sponsored by Rep. Ann Wagner (R-Missouri) that would yank the reins on the DOL’s fiduciary rule, passed the House Tuesday afternoon after extended commentary from a long list of representatives. “I refuse to stand by and let Pres. Obama advance another regulation that takes away Americans’ ability to save,” Rep. Wagner said on Twitter on the day of the vote.

Lawmakers voted along clear party lines, with just three Democrats—David Scott (D-Georgia), Kyrsten Sinema (D-Arizona) and Brad Ashford (D-Nebraska)—voting in favor and one Republican—Walter Jones (R-North Carolina)—voting against.

Get more!  Sign up for PLANSPONSOR newsletters.

The Obama Administration has already registered its support of the DOL initiative, and the White House on Monday released a statement in advance of the vote, plainly stating that if President Obama were presented with the bill, his senior advisers would recommend a veto. It’s also still unclear what the bill’s prospects are in a Senate viewed as somewhat more friendly to the president’s policies. 

H.R. 1090 prohibits the DOL from issuing a new conflict of interest rule applying under the Employee Retirement Income Security Act (ERISA) until the Securities and Exchange Commission (SEC) moves forward on its own rulemaking that would apply more generally to brokers and advisers. 

According to the Obama Administration, “[H.R. 1019] also impinges on the SEC’s ability to move forward with its own rulemaking by requiring the SEC to take the misguided step of providing definitive findings before promulgating a rule. Further, the bill ignores the fact that significant study has already been conducted by both agencies and that Labor has had extensive engagement with the public, industry, and numerous stakeholders in its rulemaking process.”

Industry response seems to be generally positive towards H.R. 1090, with two advocacy organizations—the Investment Company Institute (ICI) and the Insured Retirement Institute (IRI)—quickly releasing statements applauding the measure and expressing concern that the the fiduciary proposal of the Department of Labor (DOL) would limit investor access to advice.

Agreeing that “financial advisers should act in the best interests of their clients at all times,” Paul Schott Stevens, president and chief executive of the ICI, registered disapproval with the fiduciary proposal in a statement, saying if it were adopted in its current form, “it would do great harm.” The sensible goal of H.R. 1090 would encourage federal agencies to adopt “a harmonized fiduciary duty for all investors,” Stevens said, without jeopardizing investor access to personalized, cost-effect investment advice. “Simply put, H.R. 1090 reflects a strong purpose … to get the fiduciary rules right,” he said.

Cathy Weatherford, president and chief executive of the IRI, said the vote emphasizes deep concern with the fiduciary proposal. “Members of Congress in both chambers, on a bipartisan basis, have written letters to the DOL expressing concern that the proposal will restrict retirement savers’ access to retirement planning advice and limit their choice on retirement products, including lifetime income strategies that help Americans ensure their savings last throughout all their retirement years,” she said in a statement.

«