THE RETIREMENT PLANNING COALITION (RPC)
The Retirement Planning Coalition (RPC) was created in 2013 to combat creation of a state-run retirement program in Maryland and to advocate on behalf of the private sector to provide retirement products to all Maryland consumers. Members of the RPC include the American Council of Life Insurers (ACLI), the Securities Industry and Financial Markets Association (SIFMA), the National Association of Insurance and Financial Advisors of Maryland (NAIFA MD), the National Association of Insurance and Financial Advisors (NAIFA), the Maryland Association of Health Underwriters, the National Federation of Independent Business (NFIB), the Maryland Chamber of Commerce.
The RPC has become the most respected advocacy vehicle to address this legislative issue, and it was successful in fighting this legislation over the past several years. This was a critically important issue for NAIFA Maryland and the Maryland Health Underwriters in 2016. Former NAIFA Maryland President Paul Dougherty chairs the RPC and provided testimony on the bill, as did JLC Co-Chair Willie Franklin.
The turning point came in April 2016, when the Department of Labor issued its final “safe harbor” rule that takes effect as of April 1, 2017. This rule allows states to enact a plan without fearing a successful ERISA challenge, as long as there were a state-wide employer mandate with an option for the employee participants to “opt out.” However, in April of 2017, President Trump signed legislation that blocks the Obama-era DOL’s safe harbor exempting states’ and municipalities’ auto-IRA programs from ERISA. While the withdrawal of the safe harbor undermines the clarity and encouragement that the Obama administration had sought to provide these programs, it won’t necessarily undo the work that has been done or stop the state-run initiatives already underway – but it just got a lot tougher.
In 2016, a new approach was taken: a “soft mandate.” Senate Bill 1007 was passed. SB 1007, the Maryland Small Business Retirement Savings Program and Trust, requires specified private-sector employers to make the program available to their employees. The RPC worked closely with Senator Doug Peters, the prime sponsor of SB1007, and his colleague Senator Andy Serafini, a financial advisor who is well respected by his fellow members of the Senate Budget and Taxation Committee.
Along with the RPC, employer organizations strongly opposed any mandated participation in this kind of program. In previous years our opposition was a significant factor in defeating the legislation. With RPC guidance, the 2016 debate shifted from establishing a top-down, state-run retirement plan to creating an IRA plan for employees, with a very light employer mandate that is intended to comply with a proposed federal regulation establishing a “safe harbor” that would survive an ERISA preemption challenge.
While we would prefer no state-run program of any description that would compete in any way with the private market, this program is scaled back considerably from previous versions. In its final form, the bill should allow a substantial number of private sector competitors to offer their IRA products. The bill is intended to work this way: Employees of a participating employer could (but would not have to) send contributions to an IRA they choose from a list of private sector providers chosen by the Board to be created under the bill. Insurance companies, for example, could offer their products subject to Board approval. In this sense, the plan is similar to the Washington State “marketplace” distribution model. Contributions would be bundled and sent to a Trust which would distribute them to various IRA providers in accordance with the instructions of the individual employee. Hopefully, this program will allow our members an additional option to serve as advisors to the individual employees of businesses that do not currently have an ERISA plan.
Furthermore, the employer “mandate” under the bill is quite modest. Basically, an employer who 1) possesses a payroll deduction capability and 2) makes it available for this purpose would be able to waive the $300 annual business license fee currently required under Maryland law. (Businesses that sponsor ERISA plans will also receive this waiver). If an employer chooses not to participate, he would not receive the waiver.
Many questions remain with respect to the implementation of this legislation. Will there be sufficient funding to establish the program? Will the Board created under the bill carry out the legislative intent completely? Will the Board stay within its appointed bounds? Will it survive an ERISA preemption challenge? What is the function of the Trust? Who will pay to build the program? If they build it, will employers and their employees come? At this point, we simply don’t know, but we will continue, through the RPC, to be actively engaged in this process. It is our hope, and our goal, that the outcome will mean an additional opportunity for our members, additional revenue to be earned, and additional services that we can provide our clients.