D.C. Pension Geeks
Preston Rutledge - ERISA’s Massive Impact on the Retirement Plan Space
ERISA turns 50 on Labor Day. It’s older, wiser, and still looks great. What has been its most significant impact on the ability of America’s workers to save?
Preston Rutledge joins American Retirement Association CEO Brian Graff for a comprehensive look back and ahead. Rutledge, founder and principal of Rutledge Policy Group, knows the subject well. Prior to founding Rutledge Policy Group, Preston was the Assistant Secretary of Labor for the Employee Benefits Security Administration (EBSA led the US Delegation on private pension policy at the Organization for Economic Co-operation and Development (OECD) in Paris, France, and led oversight of the Federal Thrift Savings Plan, the world’s largest defined contribution plan.
ERISA turns 50 on Labor Day. It’s older, wiser, and still looks great. What has been its most significant impact on the ability of America’s workers to save?
Preston Rutledge joins American Retirement Association CEO Brian Graff for a comprehensive look back and ahead. Rutledge, founder and principal of Rutledge Policy Group, knows the subject well. Prior to founding Rutledge Policy Group, Preston was the Assistant Secretary of Labor for the Employee Benefits Security Administration (EBSA led the US Delegation on private pension policy at the Organization for Economic Co-operation and Development (OECD) in Paris, France, and led oversight of the Federal Thrift Savings Plan, the world’s largest defined contribution plan.
The criticisms, I think, are actually unfair in a lot of ways. They cherry pick their criticisms. They cherry pick their data on. You know who's covered, who's not. What are the account balances?
Speaker 2:DC Pension Geeks brings you exclusive conversations with top retirement policymakers and regulators in and around Washington DC, hosted by Brian Graff, an attorney, accountant, former Capitol Hill staffer and CEO of the American Retirement Association. If you're looking for an insider's view of all the twists and turns that Washington takes on the road to ensuring a secure retirement for millions of Americans, you're in the right place. Welcome to DC Pension Geeks.
Speaker 3:Well, good day everyone. We're here with another episode of DC Pension Geeks, continuing kind of the roll up, if you will, towards the ERISA 50th anniversary celebration, which will be a festival, really, of events, no doubt in DC, including one that we're helping to organize on September 12th. Very fortunate today to have our guest, preston Rutledge. The Honorable Preston Rutledge, the former Assistant Secretary of Labor for the Employee Benefit Security Administration within the Department of Labor, preston's got a long pension geek resume, including stints on the Hill and the IRS. Preston, thank you for joining us today and we'd like to kick these off with a little bit of background about how you know, as a young child you dreamed of being a pension geek, or I guess you were. You also are in the Navy, so maybe during your Navy days you thought, hey, I want to work on ERISA. So, anyway, how, how did you find us?
Speaker 1:Well, thank you for the introduction. I appreciate it and it is a long tortured history and, like most people, at least in my generation, who became ERISA lawyers, they hadn't even heard about it in law school and then they stumbled into it one way or another. When they started practicing in the supply corps, I served on a destroyer and one of my jobs was payroll. I did payroll twice a month and in those days all the sailors wanted cash. So I doled out about 40 grand in cash every two weeks to about 300 sailors. But I also handled all their pay records and I do remember the first time I noticed that someone came and complained to me about how their pay had gone down and I went to their payroll record. What I realized was their Social Security taxes had gone up and but there had been no rate increase. What had happened is they had raised the amount of income subject to the FICA tax the amount of income subject to the.
Speaker 1:FICA tax. I remember thinking, yes, I just remember thinking to myself well, that was sneaky. No, no stories about the increase, an increase in the FICA tax rate. They just raised the amount subject to the tax. So that sort of I'm not going to tell you that, tell you that, that you know stuck with me forever and ever. But so years later I do leave the Navy, I go to law school here in Washington DC and I end up clerking on the fifth circuit.
Speaker 1:I actually was aiming myself toward a life of as a litigator, frankly, but early in my career at a law firm I got. I got put on a corporate project and there were someone. They needed some associate to scrutinize and dig through all the boxes of documents on their employee benefit plans, and this one in particular had a retiree medical plan. So I'm digging into all of that and I found it fascinating and somehow I made the mistake of telling the partner when it was all done that I had enjoyed that project. What happens when you do that in my era as a junior lawyer? Suddenly word gets around oh, there's a lawyer that just said they like ERISA. Suddenly all the ERISA projects. But I enjoyed it. So again, I stumbled into it. I just got assigned to something but I found that I liked it. So I again I stumbled into it. I just got assigned to something but I found that I liked it and I ended up actually becoming uh, uh, after working on a lot of merge, a lot of uh corporate deals which was mergers, acquisitions, lending and stuff like that, I ended up, um, having a kind of a, my first big client, a big break actually, early in my career as an ERISA litigator I ended up representing executive life and then the executive life of state during the crisis in the early 90s which got me involved with PBGC plan terminations, group annuity contracts and all of that.
Speaker 1:One thing leads to another. I spent quite a bit of my time after that on doing a risk litigation, multi-employer plan, coal miner projects. But then life change. I go get an LLM in tax and I decide I'm going to shift over and I get an opportunity to go to the IRS office of chief counsel and the qualified plans branch and I jumped at it because I knew the kind of work they did. I thought it was fascinating and I could afford to do it. I had young kids at home and made a lot of sense, the stars were aligned. I walk in my first week there. About a week before I arrived, enron declared bankruptcy and they had a large defined benefit plan and a large 401k plan that were both implicated. So suddenly I'm working on big projects again, only with the IRS.
Speaker 1:One thing leads to another. I do that for several years and then I have an opportunity to be detailed up to the Senate Finance Committee during TARP, when the ranking member was Senator Grassley of Iowa. I just thoroughly enjoyed that year and a half up there. And then, after the 2010 election cycle, senator Hatch the late Senator Hatch became the ranking member and I had an opportunity to to be a permanent staffer on the Senate Finance Committee, handling the retirement, in fact all of the employee benefits, as well as nonprofits and 501C and insurance products, and I jumped at that. You don't get those chances very often.
Speaker 1:So from 2011 until the end of 2017, I was the senior benefits counsel and then I was nominated to be the assistant secretary of labor and in 2018, I began my service at the Department of Labor. I began my service at the Department of Labor and I left in the middle of 2020, in the middle of the COVID, and I've been consulting and doing kind of running my own, my own shop here since then and it's been wonderful, coming up on, I guess, four years of doing that sort of thing, and I've been able to stay really active in employee benefits, both for clients and speaking, and it's been very rewarding. And I am a lifer but it's because I've developed a real love for this area, really employee benefits generically, not just retirement but also health and everything else retirement, but also health and everything else.
Speaker 3:So you've been at this a little bit and, as I, you know, as we talked about you know, we're rolling into the 50th anniversary of the law we all have come to love so well Arisa. What do you think are, you know, one or two of the most dramatic or significant aspects of Arisa that have you know, impacted the employee benefit universe in totality? So are there certain developments that have occurred that have struck you as being, you know, more significant than others?
Speaker 1:Well, I think the one that I hope is obvious to everybody has been you go back 50 years to 1974, and come forward to 2024, if you take a snapshot. In 1974, the defined benefit plan reigned supreme. That was the central retirement program. There were defined contribution plans, profit sharing 401k not 401k, profit sharing money purchase plans, things like that, but the 401k hadn't even come along yet. That was 1978. The IRA was still in its infancy. I'd say the two biggest things in addition to the sort of the decline of the defined benefit plan and the rise of the defined contribution plan. But you know, the thing that has risen even faster in terms of assets, faster than the defined contribution plan, is the individual retirement account, the IRA.
Speaker 1:That has more assets than anything now. So the biggest change whether it's in a 401k, where you still have some structure and some employer screening of the kinds of investments you can make and there's a fiduciary watching over the investment platform most of our retirement assets now are in IRAs. Individuals not only have to sort out how to make their retirement money last throughout their retirement, they have to manage the investments during their working years. That would be, I'd say, the biggest thing, the biggest changes. You can point to many things, I'm sure, but those are the two that strike me as the most significant to the system to the system.
Speaker 3:The one thing I would probably add to that, Preston, is the development of litigation through ERISA and the degree of litigation that I would be surprised that the authors of the statute fully appreciate it would occur. Can you? Can you talk a little bit about that in your view, given the fact that you were a litigator?
Speaker 1:Yeah, I agree with that. The litigation that that I was involved in was really driven by the Department of Labor and government, and so they're indifferent to whether they can. You know whether they can make litigation. You know, pay, quote, unquote. Plaintiff's lawyers are like other ways they have to make a living.
Speaker 1:So originally, it didn't look like a very profitable area for plaintiff's lawyers and there were few and far between. In the early years I remember meeting one of the leading plaintiff's lawyers and he'd written a book, a very book just about everybody had, and I remember asking him once, when I had a meeting, what it was like being an ERISA plaintiff's lawyer. He says I have a very high he said I have a very high tolerance for financial insecurity. But that did change and it changed with the rise of the fee litigation for 401k plans. I guess that would be one of the biggest ones. Fiduciary breach cases.
Speaker 3:It's also starting to you know. It's now starting to transfer over to the health care side.
Speaker 1:And it's interesting because the fee litigation for 401k started when when the I guess in 2012, the fee disclosure rules for 401k and those, those were just extended to to health plans in the last year or so and it's, you know, the requirement to disclose the fees, anti-disclosure. But that creates data that folks can use if they want to allege that there are excessive fees being paid. So you're right, the new frontier of fee litigation is health plans.
Speaker 3:And I think that the concern that I feel certainly it's had this effect on the retirement side. I would imagine it could have this effect on the health side is the stifling of innovation, the chilling effect it has on plan sponsors and their willingness to try new things out of fear of being sued, and that the whole advent of class action litigation around ERISA plans you know was really could not possibly have been anticipated by the authors 50 years ago. And the amount of cost that is added to the system and ultimately to employers and participants as a result of it. I mean, if it's not the number one litigated federal statute, it's probably certainly in the top three top three, and that became a little bit evident early on too.
Speaker 2:So many cases started to go up to the Supreme.
Speaker 1:Court. It was like a drumbeat. There seemed like there was an ERISA case almost every term for several years and the court had taken a very expansive view of ERISA preemption, which they finally, I think, dialed back a little bit because they were just getting. The federal courts were getting so inundated because ERISA, you know, preempted everything, so to speak. Some people joke that it created, preempted the Magna Carta. At one point it had gotten so broad and used so much to defend against those cases.
Speaker 1:But I agree, another reason, I think, is there's also been a steady drumbeat of congressional action. You know, congress really seems to not be able to keep its hands off of the area either. I think there have been great improvements, particularly in the last couple of years with Secure and Secure 2.0. And there are new proposals already being introduced that might look forward to another retirement-oriented bill here in the near future. But if you look at the way Congress constantly revisits this area in both health and retirement, that always creates maybe new opportunities for folks to not only adopt changes to their plans and practices but also maybe litigation by the outside.
Speaker 1:One thing I will say that's been impressed upon me as I've practiced over the years and I would not have expected this. If you think of the things employers worry about their tax rates, their regulatory burdens and their exposure to litigation Exposure to litigation is off the charts, their biggest fear. As much as we in Washington like to focus on making the regulations more, less burdensome, more more, more more commonsensical, having the right level of taxation so we're not driving people you know out of the American economy and overseas. We focus a lot on that. But the absolute, absolute dislike of having to deal with lawsuits is, I think, one of the things that creates so much of a conservative approach to 401k plant management, and it's understandable.
Speaker 3:So you know you mentioned a couple of things I want to dig into. Let's start given because one thing you haven't spent a lot of time talking about is your experience. Irs did litigation, you worked at the department of labor as secretary, but you also happen to essentially be the the you know the senior retirement policy staff on Capitol Hill. So you you worked on, you know your on, although I don't think anything quite got enacted under your watch. There was a whole bunch of stuff that you worked on that ultimately became secure 1.0. Correct. And you mentioned something that I do think is worth discussing. And you mentioned something that I do think is worth discussing. Erisa is a law that seems to constantly get amended. You know I've described it as a science experiment that Congress continually tinkers with. Why is that? And is this? Is it a good thing?
Speaker 1:It's kind of a mystery a little bit, because it's also considered by most members of Congress to be a very boring area. It's not exciting. It's very technical very technical kind of boring. I remember leaving a hearing once and and uh, I guess I can reveal this I'm walking down the hall leaving the hearing. It was a really excellent hearing on on retirement plans and, um, senator Hatch looked at me and said Preston, I that was. I was surprised. That was a very, very interesting hearing, but you know, retirement policy is just so boring.
Speaker 3:But that hearing was really exciting and for listeners. Senator Hatch was the chairman of the Finance Committee at the time and you were working for him.
Speaker 1:Yes, this might have been when he was still a ranking member. He was a ranking member for the first four years I worked for him and then the chairman after that. But on the other hand, it does get visited a lot and I think that's because members see where IRAs 401ks that's really where the rubber meets the road with their voters, their constituents.
Speaker 1:It is how the middle class saves, and it is bipartisan. And, despite all the rhetoric to the side, I always thought I always found that members of Congress really look for opportunities to do something bipartisan. Most of them do, and these have always been bipartisan bills. It might also be the industry has been very active in trying to improve the system and stays constantly engaged. That might be part of it too.
Speaker 3:Yeah, I mean there's been some articles about people lobbying in the retirement industry that one or two one or two that I might, that I might've been involved with. So, in all seriousness, but you didn't ask answer the other part of the question, which is has has it gone too far? Maybe do we need to give it a bit of a rest, or do you think that the tinkering is healthy?
Speaker 1:I think it wouldn't hurt to give it a rest and let the things that have been enacted in recent years to take hold, because it does take time and many of them have delayed effective dates. You don't even have.
Speaker 3:Some of those effective dates haven't even arrived yet.
Speaker 1:Let the system take hold the favors match, which is not yes, yes, I think that, yeah, it wouldn't hurt to let things settle and sink in and not make major changes. I think one of the reasons that some of the changes have been made it's occurred a little more frequently than otherwise. A lot of the changes over the years have been voluntary. There have been things that employers are allowed to do but aren't mandated to do. The mandatory aspect of things always creates an additional hurdle, but we did add some mandatory provisions in Secure 2.0 that was highly bipartisan. And, by the way, you mentioned Secure 1.0, which passed after I left the Senate and I was at the DOL.
Speaker 1:I will say the Senate version of Secure 1.0 did pass the Senate under my watch, which was well. It passed the Senate Finance Committee in September of 2016. Which is interesting because that's how long it took for it to finally become enacted and signed into law from September of 2016 until December of 2019, which tells you something else about this kind of legislation the retirement legislation A lot of it has a long, very long incubation period. The fact that something doesn't get enacted in a particular Congress doesn't mean it won't be back and you'll get it enacted in another one. The startup, I'm sorry, the starter 401k. You may remember that Senator Hatch introduced that in 2013.
Speaker 3:Yeah, no, I mean the incubation period for a lot of these ideas is very long. I mean the Savers match. The refundable Savers match was first suggested in 2001.
Speaker 1:So, it only took 22 years. We could have a Q&A section on what's the provision in SCURE 2.0 with the longest incubation period and what was the year. If you really want to have a super geeky Jeopardy kind of kind of question.
Speaker 3:That would be a very small group of people. That.
Speaker 1:Yes.
Speaker 3:Yeah, two of them are on this podcast. So you mentioned bipartisan and I think you know there's been a lot of folks here in town, yours truly included, that have strived really hard to keep it bipartisan. As a congressional staffer, as a lobbyist, you know you've certainly been a key proponent of making sure that it remains bipartisan and we've had a pretty good run of bipartisanship for, I'd say, 30 years. But it sort of feels that the wheels are coming off and I'm interested to know I think our listeners would be interested to know why do you think all of a sudden? Because you know, if we go back just a few years ago, 401ks are great. We just you know we need to make some improvements. It's wonderful, everything's wonderful, and now it's.
Speaker 3:You know the 401ks are worthless, they're terrible, they are a complete failure according to Bernie Sanders. You know the New York Times came out with another article yesterday about how, you know, the 401k system needs to get reworked. It's almost a daily occurrence you see some article or academic study trashing the 401k. What is going on, in your view?
Speaker 1:I think the structural element to this is that our defined contribution system, our retirement system, employer-based retirement system, it's a voluntary system. It's voluntary for the employers to set it up and it's voluntary for the employee to enroll and if they're automatically enrolled, they have the right to opt out, given the which I think is a strength I think being. I think voluntary is good. You'll never get everybody to, for folks that want everybody to be covered, that will probably never completely happen, because people have choice and and, and people, at different times in their life, have other priorities. As much as we love and promote retirement savings, there's a point in your life where it's a lot more important to save money for a down payment, a lot more important to think about, you know, getting your kids through school, trade school, college, whatever school, paying off your student loans, which has been a problem that they're starting to address with retirement policy. Retirement policy Folks, when we have a voluntary retirement system, you're going to have some folks that just don't get covered.
Speaker 3:Hold on a second Time out, time, out, time out. We don't have a voluntary retirement system. We have a mandatory retirement system. You're talking about Social Security.
Speaker 1:Yes, I said employer-based. I don't think of Social Security as employer-based. Pay it out of your paycheck. It's employer and employee funded. Okay, right, yeah, it's managed by the Social Security Administration. But we're such pension geeks I didn't realize I had to make state the obvious. All right, I'll stake the obvious. We have one mandatory defined benefit system in this country. We don't have a voluntary. We don't have a mandatory private defined benefit system or or any kind of mandatory defined contribution system. Some countries do.
Speaker 3:That's not the route we've gone, and Well, but most countries don't have the dual system that we. In fact, I don't think there's any country that has the dual system that we have. I think most countries that have a mandatory system. It's like Australia. That's a defined contribution system, correct. There's no social security, defined benefit. If we want to call social security a defined benefit program, let's just use that as a moniker. People have no savings when in fact they have a very effective retirement program, social Security, which is critically foundational to retirement policy in this country. For some reason, we don't really think of this holistically.
Speaker 1:We don't think of it holistically. We don't think of what are all the sources of retirement income a person will ask themselves about when they sit down and think about it.
Speaker 1:There will be social security. There will be. Have you paid off your home? In other words, have you paid off your mortgage? That's a form of retirement savings in a way. If your mortgage is paid off, what kind of regular savings do you have paid off? What kind of regular savings do you have? What does your spouse have? Because it is a unit, if it's a married couple, you're looking at it from that perspective. We don't look at it holistically. We don't have good data holistically.
Speaker 1:So I guess what I was trying to say was the criticism of the 401k system. I hadn't gotten to this point yet, but the point I was trying to say was the criticism of the 401k system. I hadn't gotten to this point yet, but the point I was going to make is the criticisms I think are actually unfair in a lot of ways. They cherry pick their criticisms. They cherry pick their data on. You know who's covered, who's not. What are the account balances? You know median account balances, average account balances. They tend to ignore social security. They also ignore a lot of other governmental transfer payments that are available to people. So you know, it's almost. The arguments are based around statistics and it brings to mind the. It's a cliche, but it's a cliche because it's true what Mark Twain said about statistics. You know there's, there's, there's lies, damn lies and statistics. So it it's, it's. It's a fat target and it's hard to defend because it's complicated but it's also you know it's easier to attack because it's complicated.
Speaker 3:Focusing on is the, what someone else described as the.
Speaker 3:We don't have a retirement crisis.
Speaker 3:We have a retirement data crisis, and the crisis is that most of the critics rely on the Census Bureau's consumer data surveys current population survey and um and that survey um, actually asks for retirement income, and they use the phraseology regular retirement income to mean essentially what is akin to social security or a pension.
Speaker 3:So when you take money intermittently from an IRA or DC plan, it doesn't get reported, so that when you actually compare the survey data to IRS data, it's like 95% wrong. But somehow we're relying on this incredibly wrong data to make generalized conclusions about the success or failure of the system, which is very dangerous from a policy standpoint because it leads to these, you know, absurd um obsuptions that the system you know, the, the, the, the thing is just completely not working. Um, and so I think you know we're going to be focusing this fall quite a bit on trying to put out information to make it clearer exactly what is going on here, as opposed to the false rhetoric that academia seems to be relying on. So I think having good information is really important, and I'm not sure institutionally, from a governmental standpoint, we've done a very good job. I don't think the industry has done a good job, but I don't think the government's done a good job either.
Speaker 1:No, and when you overlay and I've seen charts in the past by folks that have dug into the data more broadly and you see an overlay of the income replacement rates for Social Security across, say, the five income, if you want to split the income groups up into five, from lowest to highest, and you know the income replacement rates for Social Security are quite high for the lowest income groups and they go, they go down, they replace less and less income as people have higher and higher income, which is appropriate. It's a progressive income replacement system and if you take the fund contribution system and you overlay that with it, you'll find that it's lower at the low income levels which is where the criticism of it comes in and it goes up as you get into the higher income groups. When you lay them across each other, like one on top of the other, you find incredibly high income replacement rates across the board. And it's interesting, the lower your income is, the more you get from Social Security. You top that off with some more from the foreign contribution system and the income replacement rates are extremely high for the lowest income cohorts and that gets ignored For the higher income folks. They have similar income replacement rates on the charts.
Speaker 1:I've seen Much more of it has to come from their own savings, which strikes me as a fair thing to demand. Because they make more money, they can save more of their own money. When I first saw some of that data when I was working for the Senate Finance Committee, I thought, wow, for all the complaints, our system has actually landed in a very rational place and a successful place, I thought. Sometimes I do think there are folks that just want to just, I don't know, keep churning the pot for some reason, or you know, want to constantly tear the building down.
Speaker 3:So you have some real experience working on tax legislation. Yes, and we're about to embark on another round of tax reform, tax, whatever. They're calling this round of it, armageddon.
Speaker 1:Yeah it, armageddon.
Speaker 3:Yeah, tax Armageddon, what seems to be the every five or 10 year tax free for all exercise that Congress engages in. Obviously, a lot will depend on the election, but the one thing that doesn't seem to be dependent on the election is the fact that we will have a tax policy debate one way or the other, shape of which obviously will change depending on who the president is and who controls Congress.
Speaker 3:Talk a little bit. I mean, there's always been this frustration by people in our industry about the fact that retirement always seems to be a piggy bank that gets rated to pay for other stuff. There was the you know the proposal, the ratification proposal which, you know, due to a tweet by President Trump got kind of shot down, but it was definitely in play for a while. But historically it's been this way, going back, frankly, 50 years, yeah, and you know what's your thinking on that?
Speaker 1:Why is it? Why is this constantly a battle? Well, one of the reasons retirement gets looked at is it is the. I think it might be the largest single tax exclusion in the in the Internal Revenue Code.
Speaker 3:So there's a lot of money involved, but I think it's the fiscal versus the health care premium. Yeah, that fight over who's number one.
Speaker 1:Yes, but they both. You put them together. That's employee benefits and that's the world of the IRS and Department of Labor. It's interesting We've used retirement as a piggy bank. Occasionally it gets talked about a lot, but when it actually happens it tends to be within to pay for other retirement policy. So I'll give you a couple of examples.
Speaker 3:Of recent vendors, you go back into the 80s though it had nothing to do with retirement policy, it was just a piggy bank.
Speaker 1:And I was not referring to the 80s, I was referring to more recent times. The most recent tax reform bill that we're revisiting next year the TCJA from 2017, really had virtually no retirement policy in it.
Speaker 3:There were some things, but again, the proposal of ratification was to reduce corporate taxes.
Speaker 1:The proposal was made and it failed. It failed, dramatically failed. I will tell you that, after it failed, there was another one more attempt at using Roth policy to raise revenue. There was a proposal that was scored to Rothify all the catch-up contributions and it was killed, only to be revived later. Only to be revived later in a slightly different form and a more difficult way to implement, but Again, but used what Used for other retirement policy, not used for tax reform. Now, in 2017, it was all Republicans, so they were using a reconciliation bill, which meant they didn't need any Democrat votes. Still, they ended up not using retirement as a pay for for more general tax reform.
Speaker 1:In the end yes, in the end In the Build Back Better, which was the all-Democrat era of a couple of years ago 2021, 2022, when the Democrats had the ability to do reconciliation bills. There was some retirement policy in Build Back Better, but again, and it would have raised revenue, but again it fell out. And even within that, the revenue raisers were meant to offset some additional pro-retirement policy, but it fell out. And even within that, the revenue raisers were meant to offset some additional retirement pro-retirement policy, but it fell out Again. It would have been maybe a very it would have been the first example of, in recent times, of a purely partisan retirement bill because Bill Bettebatter had no Republican support, but it did not succeed.
Speaker 1:So the retirement bills Secure 1.0, secure 2.0, they've still been, they've been passed and they've been bipartisan. So they've not been part of either of the Democrat-only reconciliation tax bills or the Republican-only reconciliation tax bills. So, looking ahead to next year, you say that a lot will depend on the election. That's an understatement. So if we have an all Republican situation in 2025, or an all Democrat situation in 2025, I think the odds are that the retirement policy will stay on the sidelines awaiting a bipartisan bill. You can't be sure things change, but that would be my expectation.
Speaker 3:So you're telling me that you don't think, given the enormous hunger for revenue because the Tax Cut and Jobs Act will cost four and a half trillion dollars stand, that you're not even remotely worried that retirement won't be used in some way to pay for stuff.
Speaker 1:You put some words in my mouth that I did not, that I did not speak.
Speaker 3:It's my expectation, that's what I wanted you to clarify.
Speaker 1:It's my expectation. That's what I wanted you to clarify. It's my expectation. It would be my expectation, based on the past, that that that retirement policy won't be used to raise revenue for non-retirement tax reductions, but it's clearly. Nobody can be sure, and this 2025 might be the year when this all changes the other possibility is we have divided government.
Speaker 1:We have a, you know, one party has the house, one party has the senate, a different party has the house or the senate or the white house, so you end up having to have a bipartisan tax armageddon bill. Um, my guess is in that case it'll be much more about gridlock and maybe even maybe frankly, with gridlock, maybe even a lesser chance of there being a retirement bill. I do think there'll be a retirement bill at some point in the next Congress.
Speaker 3:You mean a secure 3.0?
Speaker 1:There may be, at least. I mean mean the beginnings of it are already forming. There's already three or four bills that have been introduced, and this is how it started with secure and secure 2.0. You get several programs, several policy ideas bubble up. They get introduced. You know there's a number of policy ideas out there. I know you're aware of some of them and it's starting to bubble up Now. Is it going to happen in 2025? I think that'd be pretty rapid and probably way too soon. But I think at some point again it's like in the past, these ideas bubble around and people like these ideas, I mean ranking member, neil, has reintroduced his auto IRA bill.
Speaker 1:There's an age 18 minimum participation rule bill out there. Auto re-enrollment is a policy people have been talking about for a while. One of the ones that I think would fit well with the current state auto IRA system, even if there is no federal auto IRA system, is the proposal I know you're aware of to allow Roth IRA rollovers into an employer-sponsored plan. If an employee is in one of these state auto IRA programs and then changes their job and goes to a new employer and that employer has a 401k, it would be a great policy to allow them to take whatever they may have saved at that earlier job in an auto Roth auto IRA and roll it into their 401k. I mean little things, these are things around the edges, but these are ideas that are already bubbling up and there's a bill, a lot of these are bills that we've proposed, as you know, and have gotten some of them introduced, including tax credits for nonprofit employers, startup plans.
Speaker 1:And that's how it happened in Secure. They started bubbling up in 2013.
Speaker 3:I guess, I would say clearly, we're already doing meetings on Secure 3.0. Already doing meetings on Secure 3.0. I agree with you that Secure 3.0 won't generally be I mean, most of it. There might be a few things, but most of it won't be part of a broader tax policy debate. The 3.0 stuff would be more of a separate bipartisan exercise, like it's always been. I'm not sure we squeeze it into this Congress. To be perfectly honest with you, I think it might wait until 2027, and I'm not sure that's a bad thing, given the fact that the industry is still digesting Secure 1 and Secure 2.0.
Speaker 1:I would agree with that.
Speaker 3:But the thing that I am significantly more concerned about I would agree with that going to want to write a blank check for this one and I do think that I don't think it's roughification, I think they got their hands slapped on that one but I do think the chances of little cuts, whether it be, you know, raising COLA limits, you know COLA adjustments and some limit changes. You know there are definitely things that potentially could be on the table that are going to be seen as negative by the retirement plans in the universe.
Speaker 1:You're right to be on guard. It is going to be, there's going to be a massive search, a search for paid for us, because of the massive costs involved.
Speaker 3:And this is the first time in a long time, I think either one of us have heard senators and house members talk about deficit reduction in a in a really meaningful way. It's been a very long time.
Speaker 1:It is starting to come back. Yes, it is starting to come back.
Speaker 3:So I guess we're going to find out. I'm glad that you'll be part of this debate because your voice is needed and your expertise is needed and your expertise is needed. And the one thing I over Arisa's 50th, you know 50 years. I think the one thing we can definitely agree on is it's never been boring. It has never been boring, despite what Senator Hatch said.
Speaker 1:I probably should not have revealed that private conversation. He said it with a smile on his face as he did most things and a twinkle in his eye because he was just saying how interesting that hearing was. So I think it surprises people sometimes just how fascinating this area is when they get into it in a meaningful way.
Speaker 3:Thank you so much, Preston. Preston really enjoyed it and I appreciate you willing to take the time to speak to our audience today.
Speaker 1:Well, I'm very honored that you asked me and I appreciate the opportunity to talk with you.