Angry Tea Partiers who want minimal government regulation? Nasty partisan sniping in Washington? Pensions can trump all that, according to Jamie Kalamarides, the senior vice president who oversees retirement investment products at Prudential.
Kalamarides, in fact, thinks the outlook is “quite good” for new legislation and regulations to bolster defined contribution and defined benefit plans in the next two years. In particular, Kalamarides is hopeful about new laws that would require Congressional statements to show how much participants will have in retirement if they continue their current savings habits – and how much they will actually need. He also sees a good chance that annuity-type products like the “income flex target” Pru sells will be approved as the default option when people are automatically enrolled in a 401(k).
There have also been proposals affecting three other areas of retirement, and here Kalamarides says the prospects are “mixed.” One idea is to encourage small businesses to establish plans by allowing them to combine in pooled “multiple small employer plans,” presumably reducing costs through economies of scale.
As well, Congress and the Obama Administration have been looking to require more disclosure about fees, target-date fund investment policies, and other issues. Kalamarides claims to support the goals but says that as written, “many of the proposed regulations may increase costs and cause confusion.”
[Video: Debating whether states should cut public pensions to balance ballooning budgets, with Kerry Korp, AFSCME director of research and Dr. Christopher Metzler, Georgetown University professor. Airtime: Wed. Jul. 14 2010 | 11:43 AM ET]
As for defined benefit plans, Congress adjourned without passing funding relief. It’s not a huge agenda, but still, legislators and the White House have plenty on their plates already, including (depending on which party’s agenda you look at), deficit reduction, immigration reform, repeal of health care reform, energy policy, the wars in Afghanistan and Iraq, Iran’s and North Korea’s nuclear programs, and likely even a fight over raising the debt ceiling.
How will they ever have time for something as unsexy as pensions? Moreover, one of the few legislators who actually cared about the topic – Congressman Earl Pomeroy of North Dakota – was defeated in November. Kalamarides points out that allowing annuity-type products as the default option and revising the proposals on disclosure could be done by the administration, without going to Congress.
As for the others, he says, “I have some optimism they will act because these are secondary issues that there tends to be bipartisan support for.” Besides, in less than two years many of them will have to go back to the voters. “Many of these representatives and senators need to say they’ve done something.” Setting up a small-business 401(k) pool is a heck of a lot easier than cutting $100 billion.
Fran Hawthorne is the author of the award-winning “Pension Dumping: The Reasons, the Wreckage, the Stakes for Wall Street” (Bloomberg Press) and “Inside the FDA: The Business and Politics behind the Drugs We Take and the Food We Eat” (John Wiley & Sons). She writes regularly about finance, health care, and business ethics.
