The ERISA Advisory Board released a 72-page summary report offering recommendations for closing retirement savings gaps based on race, ethnicity and gender.
As part of its 2021 study topics, the Council examined the underlying causes of gaps in retirement security for people of color, ethnic minorities and women, and considered the challenges these groups face. faced in achieving retirement security and the steps that could be taken to improve their situation. .
In his report to Secretary of Labor Marty Walsh, the Council made specific recommendations that the Department of Labor could follow to reduce these retirement savings gaps. The Council, which consists of 15 members representing employee organizations, employers, the public and industry representatives, provides support and advice to the DOL’s EBSA. Although not always the case, their recommendations, in various cases, can help form the basis for DOL action.
The Commission notes that it received over 50 recommendations from over 25 witnesses. In discussing the impact on retirement security, the report notes that the testimony and recommendations of some of the witnesses went beyond the scope of the EBSAs and the scope of the Council’s problem statement. As such, he reviewed and considered 25 that he believed to be within the scope.
“The Board heard testimony from numerous witnesses who presented ideas, diverse perspectives and investigative findings that all confirmed that there are gaps in retirement security for people of color, ethnic minorities and women, and identified several underlying reasons and causes,” the report observes. As such, based on the Board’s key observations and the recommendations of numerous witnesses, it recommends that the DOL examine all facets of its authority and influence to fill the gaps.
Since some of the recommendations were similar, the Board grouped the recommendations into 16 recommendations organized into five main categories, described below.
Improve coverage: The DOL should expand on previous guidance (EBSA Interpretive Bulletin 2015-02) to facilitate and encourage the development of ERISA retirement plans, such as MEPs, PEPs, and sponsored Defined Contribution/401(k) Master and Prototype Plans. government to increase access to pension plans. to underserved groups, with a path for plan creation and administration that simplifies the process for employers, including sharing fiduciary responsibility with sophisticated professional entities.
Address fragmentation: The Board also suggests that the DOL work with other federal agencies to establish an interagency task force to coordinate a federal approach to retirement policy among disparate agencies dealing with retirement issues of underserved populations. The report also recommends exploring the feasibility of a national portability system to encourage and facilitate account consolidation and preservation of retirement savings for people with small account balances in multiple plans.
In addition, the recommendations call for working with Treasury and the IRS to:
- review penalties on small involuntary payments, hardship withdrawals and ease the tax penalty for early distributions of small amounts; and
- encourage employer matching on employee contributions (pre-tax, after-tax, and Roth) and allow matching on contributions to emergency funds and student debt repayment.
Improve education and awareness: The DOL should update Interpretation Bulletin EBSA 96-1 and clarify the line between counseling and education so that the goal of providing meaningful financial and retirement education to participants to achieve wellness financial is not lost. The Council also recommends leveraging and amplifying EBSA advocacy education, tools and efforts (including outreach and partnerships with underserved communities and advocacy groups) on financial well-being and retirement security.
Closing the Retirement Security Gaps for Women: The DOL should also leverage its resources to address QDRO issues by working with state bar associations and family courts and educating them about the importance of QDROs to women’s retirement security and reducing barriers to obtaining QDRO. The Council also proposes:
- the development of simplified models of QDRO models for defined contribution plans in order to reduce the cost of interaction with the legal system;
- address gaps in spousal rights to disclosure, protection and access to information in defined contribution plans; and
- encourage plan sponsors to treat absences of up to 12 weeks for caregiving as continuous service to avoid a break in service.
Update regulations, technical bulletins and rules: Finally, the Board recommends reviewing safe harbors and providing guidance for enhancements, including auto-enrollment, re-enrollment, escalation features, non-discrimination testing, and QDIAs. Additionally, he suggests:
- update existing regulations to reflect the current workforce by specifically updating the Year of Service/Hours of Service regulations under Section 202(a)(3)(B) of ERISA to provide plan eligibility for part-time, seasonal and casual workers; and
- provide guidance that promotes diversity, equity and inclusion (DEI) initiatives is not inconsistent with ERISA’s fiduciary responsibilities and that recognizes the need for plan sponsors to be in able to identify service providers that include DEI elements to provide underserved populations with relatable retirement professionals.
“The voluntary approach built into ERISA has not moved the needle to encourage employers of half the U.S. workforce to sponsor a retirement plan for their employees. Our recommendations attempt to find ways , within the existing voluntary system, to extend coverage and participation in pension schemes”, concludes the Council.