The White House Cares about Employee Benefits Systems

Employee benefits systems should protect clients from biased advisors. They should promote financial disclosure, according to the White House.

Employee Benefits Systems and the White House

The White House Middle Class Task Force's year-end report tackles employee benefits systems.

At a White House forum sponsored by the Task Force in February 2010 and hosted by Vice President Joe Biden, the U.S. Department of Labor announced two new rules designed to support the best employee benefits systems retirement plans.

Unbiased Advice Regarding Employee Benefits Systems

The first of the two rules would ensure workers receive unbiased advice about the best 401k investments as well as the investments of their individual retirement accounts or pension plans. The rule emboldening employee benefits systems would put in place safeguards preventing investment advisors from slanting their advice for their own financial benefit. Investment advisors also would be required to disclose their fees, and computer models used to offer advice would have to be certified as objective and unbiased. The department estimates that 2 million workers and 13 million IRA holders would benefit from this rule.

Financial Disclosure to Enhance Employee Benefits Systems

The second rule establishes new guidelines on the disclosure of funding and other financial information to workers participating in multi-employer retirement plans within employee benefits systems — those collectively bargained by unions and groups of employers. It will ensure transparency and hence the best 401k investments by guaranteeing workers can better monitor the financial condition and day-to-day operations of their retirement investments. That rule went into effect in April 2010.

Department of Labor Disclosures

As a result of that rule, by October 2011, the Department of Labor had announced new rules for employee benefits systems requiring 401k providers to disclose key information to plan participants about their fees and expenses. The rules also make sure that plan providers present investment options in a clear way that will help the 72 million participants in 401k-style retirement plans make better choices.

The Department's approach is a common-sense step toward improving employee benefits systems and the retirement security of American workers, and it's one we should all be able to get behind.

Economic Recovery Advisory Board

Meanwhile, in September 2010, The President's Economic Recovery Advisory Board issued a 188-page plan to fix the nation's complicated retirement system.

The Board laid out eight ways to simplify incentives aimed at encouraging U.S. workers to save for their retirement.

Consolidate retirement accounts, e.g., 401k, 403(b), SEP-IRAs, and simplify rules
Integrate IRA and 401k contribution limits
Consolidate and segregate nonretirement savings
Improve savings incentives and expand auto-enrollment
Reduce retirement 'leakage' by requiring that when a worker leaves a job his account balance be automatically transferred to an IRA.
Simplify rules for employers sponsoring plans
Simplify disbursements
Simplify taxation of Social Security benefits

Topic: Fixing the Retirement System Subtopics: The American Retirement System • What Is Retirement Age? • Pension Retirement Plan Reform • Lifetime Annuities • 401k Annuities • 401k Annuities: A Proposal from TIAA-CREF• 401k Annuities: Popular Support • Cash Balance Accounts • White House Reform • Obama Retirement Reform • Social Security Statements as a Model • Models from Australia, New Zealand, and Canada • What the Public Wants • Multi-Employer Plans • Automatic 401k • Automatic IRA • Tom Harkin • Herb Kohl • Other Advocates of Pension Reform • Opposition to Reform