The Best Offense Is a Great Defense
Updated: Jul 13, 2020
Did you think this article was going to be about how to protect your clients? Well, it’s not, it’s about how the retirement plan profession should be working together to STOP state mandated retirement plans.
Quick show of hands, who likes to be told what to do? Neither do employers. Most employers started their businesses because they got fed up with exactly that and thought it better to try it on their own. However, as owners gained years of experience operating a business, they also realized the importance of picking their battles--especially, when it comes to anything to do with government (taxes, forms, paperwork, disclosures, etc.). So, here’s the retirement plan professions challenge. How do we influence business owners who do not have a retirement plan to establish one today, before the government forces them?
As the American Retirement Association (ARA) shared, there is a savings coverage problem. Only 70% of Americans have access to a workplace retirement plan. Surprisingly, that coverage percentage hasn’t changed much in over 40 years, which means (according to government think tanks) that the retirement plan is a market failure. Read that again, market failure. What?! Which is why the government has self-selected to create and superimpose their own regulations.
What can we do? Glad you asked.
You can talk to every single business owner who doesn’t have a plan and find out why. Then partner with a TPA to discuss an appropriate plan design. We have a feeling that one of the biggest reasons that business owners never setup a plan is because they don’t understand the flexibility they could establish. No one ever sat down and explained how to mathematically allocate company census data to align with the business owner’s goals. Try it.
It’s about coverage, and while we realize that start-up plans are small revenue accounts, here is one idea: charge a flat fee and have the business owner pay it directly out of company assets.
What if we do nothing? Worst case scenario is 50 different state-run retirement plan programs – and dangerous idea: they might all have slightly different rules. Oh, that sounds like a headache.
What if we improve coverage? For the time being, we stop the bleeding. We stand up and prove to Washington that the 401(k) plan is working and this should buy us more time to prove it.
Is it too late? Definitely not.
What are you doing July 25 – 27th? Come to the NAPA Fly-In. Talk directly to your Congressional leaders about the great work you are doing. Tell them about the conversations you are having with their small business owner voters. Share your passion for why the 401(k) retirement plan system is working for thousands of employee voters. Promote the benefits and how your Congress representative can save the 401(k), while increasing voter support.
Can’t make the Fly-In, no worries, join the Political Action Committee and get involved. Your voice, experience, and expertise matter. Congress needs to hear what you know and stop meddling with retirement plans.
As they say, the best offense is a great defense, and right now – retirement plan advisors of America – we need all of you to play defense. We need to prove to Washington that the 401(k) plan is working. We can do this by speaking with our existing network of business owners and encouraging them to set up a voluntary 401(k) before they are mandated.
Right now, the majority of states offer/are thinking about creating a state-sponsored retirement plan. The ball is in our court, so how are we going to play it?
Thanks for reading and look forward to seeing you at the NAPA Fly-In!
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 Bureau of Labor Statistics "Employee Benefits in the United States." March 2017.