Several leading financial services associations praised an executive order by President Donald Trump that will make it easier for small businesses to offer employee retirement plans.
The executive order directs the U.S. Department of Labor to remove a regulatory barrier which restricts the types of small businesses who can participate in Associated Retirement Plans (ARPs) or Multiple Employer Plans (MEPs). These are plans that allow multiple businesses to join together to offer a plan for employees.
“President Trump’s executive order is a significant step forward and removes one of the most substantial obstacles for small business employers to offer employees opportunities to gain access to a workplace retirement savings plan,” Cathy Weatherford, president and CEO of the Insured Retirement Institute, said. “We appreciate the President’s leadership today that will help address a compelling need to help Americans increase retirement savings.”
The executive order also instructs the U.S. Treasury Department to review rules on required minimum distributions (RMDs) for withdrawing funds from 401(k) plans and other retirement saving accounts. Currently, the age for RMDs is 70.5. The idea would be to provide more flexibility to allow people to make withdrawals after they reach 70.5 years of age.
“Forcing retirees to make minimum withdrawals from retirement accounts even if they don’t need the money denies older Americans the ability to continue to grow their savings,” Weatherford said. “As Americans are living longer, their retirement years are increasing, which will require more savings.”
IRI is encouraging Congress to enact the “Retirement Enhancement and Savings Act of 2018” (H.R.5282/S.2526), which also includes several measures to help Americans save for retirement.
Paul Schott Stevens, president and CEO of the Investment Company Institute, said that the retirement system will best be improved by building on its strengths and that he believes that Trump’s executive order will do just that.
“ICI, along with a bipartisan coalition in Congress, has long supported legislative and regulatory changes that would allow for open multiple employer plans,” Stevens said. “These plans would help employers, particularly small businesses, reduce the burdens of starting and providing retirement plans for their employees.”
Steven said ICI also welcomes the idea of updating the calculations for required minimum distributions (RMDs) to reflect longer life expectancy.
The American Council of Life Insurers (ACLI) endorses the executive order, calling it “the right action at the right time.” ACLI is also encouraging Congress to pass the Retirement Enhancement and Savings Act, (RESA).
“Among many things, RESA includes a provision aimed at improving retirement plan participants’ access to annuities, the only product in the private marketplace that can guarantee lifetime income,” Alane Dent, acting senior vice president, federal affairs at ACLI, said. “RESA would also remove barriers preventing greater use of multiple employer plans. Another key provision would ensure that an illustration will be provided in retirement plan statements for all private-sector workers that will show how savings translates into guaranteed monthly income for life.”
The executive order has also received praise from the National Home Builders Association (NAHB).
“NAHB commends President Trump for making retirement security an important national priority. This need is particularly acute in the residential construction sector, where most home building firms are small businesses with less than 10 employees,” NAHB CEO Jerry Howard said. “The executive order removes needless regulatory barriers that will help more trade groups and small businesses to provide workplace retirement plans for their employees.”