Data and Research September 21, 2018

Auto-Portability, Universal Coverage Would Reduce Retirement Shortfall

EBRI says that if the Automatic Retirement Plan Act of 2017 was combined with auto-portability, the retirement savings shortfall of $4.13 trillion would be reduced by $932 billion, or 22.6%.

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In June, the Employee Benefit Research Institute (EBRI) issued a report saying that if the Automatic Retirement Plan Act of 2017 were passed, it would reduce the $4.13 trillion retirement savings shortfall for U.S. households headed by those between the ages of 35 and 63 by $645 billion, or 15.6%.

The act would require all but the smallest employers to offer a retirement plan to all employees age 21 and older. It would automatically enroll participants at a 6% deferral rate and conduct reenrollments every three years. It would also include automatic escalation of 1% every year up to a 10% cap.

EBRI has now considered how auto-portability of retirement plans from one company to another would eliminate cashouts, which are particularly common for plans with low balances. If this were combined with the Automatic Retirement Plan Act of 2017, it would reduce the retirement savings shortfall by an additional $287 billion for a total reduction of $932 billion, or 22.6% of the total deficit.

“In other words, the analysis shows that while policy to expand retirement plan coverage can significantly impact aggregate savings shortfalls, initiatives to reduce plan leakage can materially augment such efforts,” EBRI says.

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Compliance September 21, 2018

Protecting the Rights of Alternate QDRO Payees, When it Comes to Divorce

Senator Patty Murray (D-WA) sent a letter to Government Accountability Office (GAO) requesting a study on the QDRO process.

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Senator Patty Murray (D-WA), Ranking Member of the Senate Health, Education, Labor and Pensions (HELP) Committee, sent a letter to Government Accountability Office (GAO) Comptroller General Gene Dodaro requesting a study on the process for obtaining a Qualified Domestic Relations Order (QDRO), which allows for pensions or retirement accounts to be divided following a divorce or legal separation.

The Senator’s letter includes data from a GAO study which found that women’s household income and assets, on average, fell by 41% with divorce, with the income decline being almost twice the size of the decline that men experienced. One protection available to women is the QDRO, which creates or recognizes the existence of a right to receive a share of retirement benefits. She says in her letter, “The DOL issued interim regulations governing QDROs in 2007, with final regulations issued in 2010. Since that time, there have been concerns that the current QDRA process has not been wholly effective in protecting the rights of alternate payees, especially women.”

Murray asks that this study looks at the process for dividing retirement assets that looks at the timeline, costs, barriers, opportunities for improvement, and impacts on various segments of the population.  In efforts to address retirement gap, Senator Murray has introduced legislation  focused on challenges that disproportionately affect women and legislation to enhance Social Security benefits for divorcees and widows.

This action is the latest in Senator Murray’s ongoing efforts to address the retirement gap women face as they prepare for their financial futures. Earlier this month, Senator Murray reintroduced the Women’s Pension Protection Act (WWPA), a package of solutions to help strengthen women’s retirement security by addressing some of the challenges that disproportionately affect women. She also introduced the Stronger Safety Net Act (SSN) earlier this year, legislation that included provisions to enhance Social Security benefits for divorcees and windows.

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