Jul 13 2021
Season 1 Episode 6 - Carrots & Sticks: The Impact of Regulations on the Retirement System
While saving for retirement has been simplified and streamlined in recent decades, with tools like auto-enrollment and target date funds, the retirement savings ecosystem is anything but simple. It’s a complex confluence of innovators, service providers, employers, workers, consultants, lawyers, and, yes, government officials. Regulators play a huge role in our industry, so understanding who they are and how they work is an important factor in the outcomes for plan sponsors and plan participants. In this episode, we speak with two former Department of Labor EBSA directors, Brad Campbell and Phyllis Borzi, about the challenges and opportunities in regulating the employee benefits space, including the enactment of the landmark Pension Protection Act of 2006. Key Takeaways: [:04] Josh opens up today’s episode with a quick recap of episode 5 which focused on the work of two innovators in the field. He opens up this part of the conversation on what made the start of Target Date Funds and automatic enrollment so very impactful, the passage of the Pension Protection Act of 2006. [2:18] Josh explores the regulatory carrots and sticks of EPSA through the eyes of two of its leaders, we begin with Bradfrod Campbell. Brad shares about how he came to shape the world of modern retirement savings as the Assistant Secretary of Labor for Employee Benefits in the United States Department of Labor. [4:18] The Pension Protection Act was passed while Brad worked as a young Republican, he speaks about his beginnings in the Government and how he found ERISA, enrolled in law school and weathered the Enron scandal. [8:15] Phyllis Borzy took over Brad’s position as the Assistant Secretary of Labor for Employee Benefits in the United States Department of Labor. She talks about how she was always drawn to law and enrolled the year ERISA passed. [11:14] Her love for ERISA was cemented after her stay in corporate law and she brought it into her career in government all the way up to what she calls the Gingrich revolution. [13:45] Brad and phyllis had similar challenges but different approaches. Brad talks about the balancing act between carrot and stick. [15:09] Josh offers a quick explanation of 404C — a pivotal part of the Accidental Plan Sponsor story as well as the Pension Protection Act. Brad weighs in on the way 404C functions. [19:14] Phyllis shares her profound hate for 404C, her multiple reasons why and what she would do differently. [22:25] The Pension Protection Act from Brad’s point of view — both pre and post Enron — and the legal implications that had to be thought over in that context. [26:15] More carrots! 404C generated a proliferation of offers without much structure for participants to direct their investment, Brad describes how they helped write the QDIA regulation and define 3 mechanisms for an appropriate default investment that would stand the test of time. [30:00] Brad shares the difficulties of putting regulations in place, from congress to burgeoning lawsuits inter-administration. Phyllis shares her take and the work she did on the regulation, get ready for some bi-partisan agreement! [34:44] Phyllis takes a moment to denounce the attacks her co-workers received from the nay-sayers. [35:54] With overwhelming bi-partisan support, the Secure Act was passed in 2019, Josh touches on some of the issues this rule attempts to address. Brad and Phyllis share their joy having worked on ERISA. [37:48] Josh thanks his guests for sharing their stories and ends with a taste of what episode 7 has to offer. Thank you for tuning in. If you liked what you heard, please subscribe and leave us a review wherever you listen to your podcasts. Links: The Accidental Plan Sponsor Mentioned in this episode: More about Bradford Campbell. More about Phyllis Borzy.