DCIIA Policy Priorities Take Aim at the DC Plan Coverage Gap

Lew Minsky is the president and chief executive officer of the Defined Contribution Institutional Investment Association (DCIIA), an advocacy organization that aims, among other goals, to make it simpler for defined contribution (DC) plan sponsors to implement appropriate institutional investment management approaches in DC plans focused on delivering higher returns and reduced risks.

Minsky not only leads the organization today—he was instrumental in its founding back in 2010. As Minsky tells it, the story of how DCIIA was founded offers some helpful context for understanding the state of the DC plan industry, both then and now.

“Back in 2010, we were operating in a very different environment. The first iteration of the Department of Labor (DOL) fiduciary rule was being talked about, and the Pension Protection Act (PPA) was really only starting to take hold in the defined contribution plan industry,” Minsky remembers. “As far back as 2007, these issues really started percolating. Congress was getting increasingly involved in mandated fee disclosures and just the function of retirement plans in general. At the time, much of this effort was being led by George Miller, the California Democrat, in the House.”

Prior to 2010, Minsky was working for his own independent consulting firm, after spending the first stage of his career working in the legal department for a Fortune 200 company. Minsky’s work at that company eventually started to include the management of benefits and compensation—his first real introduction into the retirement plan arena. Enjoying that work, Minsky made the move to start an independent consulting firm.

“I was then quite involved in the industry groups that represented the needs of large employers,” he explains. “Several of these employers got together and they tapped me to be a sort of speaker and a representative for all of them on these issues. That was my first taste of public policy, and I quickly realized that I was having a lot more fun doing that than doing my day job, as it were.”

Over time, Minsky’s consulting work resulted in more and more conversations with stakeholders in the retirement plan industry, leading to increased momentum around the common goal of helping plan sponsors get much more focused on employee outcomes and “actually propelling successful retirements via the DC plan pathway.

“The previous conversations we were having were all about fees and fee disclosures—and these were important, but they were somewhat myopic around that one issue,” Minsky recalls. “What was needed was a place where employers could come together and stop thinking in terms of keeping their approaches to benefits and compensation secret and claiming their successful benefits programs were a proprietary enterprise to be protected. This was one of the reasons why I first founded my own consulting firm, in an effort to drive this conversation. The entry into advocacy work wasn’t really all that ambitious—we figured we would over time find a home within an existing organization and maybe find some research funding or otherwise create a discussion around the themes that we know will lead to better outcomes.”

But Minsky eventually realized “there wasn’t really a natural place for that type of advocacy to happen.

“After banging our head against the wall for a few years, trying to find a place to do advocacy, we decided to go out and invite the product providers to get involved with us directly—rather than trying to join or reshape an existing group,” Minsky explains. “The effort quickly gained steam and it resulted in the creation of DCIIA.”

Minsky shares this background because he is proud of his success in founding DCIIA, of course, but also because the story presents some helpful context for grasping where things stand in the industry today. Frankly, he argues, there is a need for a new level of information sharing and innovative collaboration among providers, sponsors and consultants.

“Similar to the environment that drove the PPA, there seems to be, once again, a number of specific challenges and increasing agreement about solutions to these challenges, and with a lack of government action, it is up to the providers themselves to come together and take the next step forward,” Minsky says. “At DCIIA, we will continue to support them and push the industry forward.”

So what are the main challenges and policy priorities in focus right now at DCIIA?

Peg Knox, chief operating officer of DCIIA, points to both the coverage gap and retirement income adequacy as being top of mind. There is also, unsurprisingly, a strong fee litigation focus, given how near and dear this topic is to both plan sponsors and service providers as well.

Asked to zoom in on the coverage issue, Knox says it is increasingly clear, post PPA, that the industry has done a good job of getting workers who have access to the DC plan system to actually participate in the plans. Tied to this, plan sponsors have widely started to embrace the automated plan designs that the evidence clearly shows can push people towards optimal behaviors within these plans.

“This is something the industry should be proud of—this has been, and continues to be, a major point of focus for us,” Knox adds. “However, there is also a much more intractable problem facing the wide swath of Americans who do not have access to a retirement plan through their employer. There is the twin challenge of those folks who don’t even have an employer in the traditional sense—the rapidly growing number of gig workers who have no access to quality retirement plans. DCIIA is certainly also focused on this challenge.”

Knox notes that DCIIA is a strong supporter of a number of different solutions to the coverage gap, but she says the open multiple employer plan (or “open MEP”) idea is particularly exciting. “We know that the very large DC plans do so well because they can benefit from economies of scale, so why shouldn’t we try to get small businesses to benefit in the same way?” she asks.

Minsky agrees with that assessment, wholeheartedly supporting the expansion of open MEPs and voicing a little exasperation that an idea with “so much universal support” still hasn’t truly caught on.

“In our experience, there is near-universal agreement that open MEPs are a good idea, so this is an idea whose time has come,” Minsky argues. “We just need to get it done, with the support of the government or without. Legislation that would help facilitate open MEPs would certainly be welcome, but there are creative approaches and solutions that the industry could bring to bear on its own. We are actively discussing all of this with providers and we hope the industry can keep pushing this topic forward.”

Knox and Minsky suggest an “and, and, and” approach will be best here.  

“We should be considering any and all ideas that can help close the coverage gap, and we should really also be conscious that there is not going to be one silver bullet here,” Minsky concludes. “I’m not just making this point for fun. In the DC plan industry there is often this sense that the perfect is the enemy of the good. We have folks holding out for the one perfect solution or perfect regulation that will help solve the challenges we are facing today—when in fact we already have the tool set to solve these pressing problems. Again, consider the open MEP idea. In my mind there will be ample opportunities to take this idea and bolt it onto legislation that must be passed in the coming year. We don’t need to have wholesale legislation, like the PPA, to push the industry forward. Progress on the coverage gap can and will come it steps and by evolving our thinking about the current existing framework.”