July 8, 2024 • 40 mins
The bipartisan nature of retirement plan legislation is key to its success. American Benefits Council President Jim Klein, the “OG” of retirement plan policy, joins Brian Graff for an in-depth discussion of retirement saving, healthcare and how ERISA—which turns 50 this year—has impacted both.
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Speaker 1 (00:00):
It is a remarkable achievement right.
I mean, you know, when youthink about the vast majority of
Americans who get their youknow health care, financial
security.
You know, through this employersponsored system, their
retirement income securitythrough this employer sponsored
system, and you know, and howit's how it's grown.
Speaker 2 (00:27):
DC Pension Geeks brings you exclusive
conversations with topretirement policymakers and
regulators in and aroundWashington DC, hosted by Brian
Graff, an attorney, accountant,former Capitol Hill staffer and
CEO of the American RetirementAssociation.
If you're looking for aninsider's view of all the twists
and turns that Washington takeson the road to ensuring a
secure retirement for millionsof Americans, you're in the
(00:48):
right place.
Welcome to DC Pension Geeks.
Speaker 3 (00:51):
Hello everybody, brian Graff here for another
installment of DC Pension Geeks.
I have with me the presidentand CEO of the American Benefits
Council, jim Klein, otherwiseknown as one of the OGs in
retirement policy, withoutquestion.
In fact, jim was in hisposition when I was a little pup
(01:16):
working on Capitol Hill wayback when, when I'd like to
describe it a period of timewhen there wasn't that many
people working on retirementpolicy.
It was a lot smaller community,the 401k was pretty much in its
infancy during that period oftime, but Jim was one of the
(01:40):
leaders that sort of had thevision of trying to team up on a
bipartisan basis with membersof Congress to see if we could
kind of like change thenarrative about retirement.
And there had been a lot ofwhat we would describe as pretty
lousy legislation passed andJim was really at the forefront
(02:01):
in turning that around.
So, jim, thanks for being withus today and you know I think
everyone liked you know, tell usabout your background when you
know how did you end up becominga pension geek?
Speaker 1 (02:16):
Well, first of all, thank you for that extremely
generous introduction and Iwould just say I return those
sentiments to you in fullmeasure.
You know you mentioned that youwere just what a pension pup or
something like that on CapitolHill, and you know, and look now
, what you've far surpassed therest of us here and in terms of
your leadership in this role.
But it's always been a pleasureto work with you both.
(02:37):
You know, both when you were ingovernment and also in the
private sector, and kudos to youon the extraordinary career
that you've had and what you'veaccomplished.
So how did I get into it?
Well, it's funny.
I worked at Capitol Hill as wellwhile I was in law school and
you know, labor related issueswere part of the portfolio that
(02:59):
I had for the member of Congressfor whom I worked.
And then, you know, I graduatedlaw school, I started applying
to law firms and you know,serendipity right, I mean, I
ended up going to work for afirm, very unusual firm.
Half the firm did ERISA work,primarily multi-employer work,
and the other half of the firmdid toxic tort litigation
(03:22):
defense work.
So it was a very unusualmixture, not surprising the firm
you know doesn't exist work.
So it was a very unusualmixture, not surprising the firm
doesn't exist anymore.
But it was a terrific firm withterrific lawyers and that's
really how I got.
Well.
Speaker 3 (03:34):
I mean I started at the Groom what's now the Groom
Law Group and people don'trealize that they actually had a
similar history.
They did this strange I mean itwas a little bit closer, but
they did ERISA and internationaltax.
Yeah yeah, and you know, Ithink at that time people just
(03:55):
didn't see the ERISA practicequite the same as they do now.
It was, you know, the breadthof it, the opportunity from a
legal perspective.
So but that, yeah, that's apretty interesting combination.
Speaker 1 (04:07):
Yeah, it sure was, and just sort of you know kind
of fast forward on it.
So you know I was doing that,but I really had come to
Washington DC because I lovedpublic policy and so I said you
know what?
Speaker 2 (04:22):
I don't think I really want to be necessarily a
full time ERISA attorney.
Speaker 1 (04:26):
So I got a job with the US Chamber of Commerce,
originally not doing anythingrelated to benefits, and about
six months later you mayremember Mike Romig who is at
the US Chamber and for those oldtimers who are listening in on
this podcast, they'll rememberMike who then also went on to
the American Council of LifeInsurers and he left to go to
(04:50):
the ACLI and they kind of lookedat me and it was like that old
life serial commercial.
Like you know, let's get Mikey,he'll try anything, and it was
like Jim you know, he knows howto spell Arisa.
So I became, you know, thepension lobbyist for the US
Chamber of Commerce, and acouple of years into that, the
person who did health care left,and for the grand sum of an
(05:10):
additional $2,000 a year.
I also got to do his job andanyway.
So it was great and hadwonderful opportunities there,
given a lot of responsibility,and through that I came in
contact with the organizationfor which I now work, which at
the time was called theAssociation of Private Pension
and Welfare Plans APPWP and Istarted out as the deputy
(05:34):
director and then, four yearslater, my predecessor boss.
He moved on and I've stayed, soI've been there now 36 years
and so it's been just a great,great career.
Speaker 3 (05:47):
So you know, talk a little bit about you know it's
funny, you know I remember APPWPand of course ASPA was ARA.
Predecessor was the AmericanSociety of Pension Professionals
and Actuaries, which is one ofour sister organizations, which
is also an acronym with kind ofa mouthful.
We love our acronyms, arisageeks love their acronyms, how
(06:12):
you know, you kind of reallytook APPWP, kind of
re-envisioned this as theAmerican Benefits Council, both
doing health care policy andretirement policy.
But I think early on I thinkthere's some recognition that if
we're going to make this workfrom a policy standpoint it had
(06:35):
to be bipartisan.
So talk to me a little bitabout you know what your role
was in terms of trying to getCongress moving and the
regulators kind of moving in theright direction, that we're not
going to have this you knowantagonistic position between
(07:00):
the plans and the plan sponsorsand the regulators and Congress.
Speaker 1 (07:07):
Yeah Well, first of all, thanks for that nice
comment.
I wouldn't take full credit forthat, I think certainly it was
kind of imbued in the culture ofthe organization before I got
there.
But I'm glad to have been ableto, and one of the reasons I
wanted to stay because I thinkour leadership, our members, are
very pragmatic and interestedin solutions and not so much
(07:28):
ideology, and so that leadsitself to bipartisanship.
I mean, as you know so well, itwas an era in which
bipartisanship was an easierthing to accomplish perhaps than
it is today, which isn't to saythat there weren't.
You know strong, you knowdifferent viewpoints, you know.
(07:49):
I think you raise a really goodpoint in terms of that tension
between, you know, theregulators and the regulated
community.
But I think that you know whatwe've tried to do is to say hey
look, you know our members, bydefinition, you know they are
sponsors of plans, generousplans they're trying to do right
(08:12):
by their employees and retirees, employees, family members, and
you know so we try to look forpragmatic solutions, pragmatic
solutions and I think, to alarge degree, I think that has
been appreciated by theregulators because ultimately,
(08:33):
you know they have kind of adifficult job too, and at the
end of the day they have towrite the regs, and so you know
I think they look to groups likeARA and our group and others
for a roadmap to get them there.
Speaker 3 (08:50):
So you know, ERISA is turning 50th.
We're going to have moreinformation coming out about
who's going to be speaking andthe kind of topics that we're
going to be covering, butcertainly there's going to be a
(09:12):
lot of it's going to be aretrospective and, importantly
for our listeners, it's not justgoing to be retirement.
There's a healthcare componentto this too, because obviously
ERISA has played an incrediblyimportant part on the health
care side.
And so, yeah, let me pausethere and ask a little bit about
what ABC does from a healthcare policy perspective in
(09:34):
general.
Speaker 1 (09:35):
Sure, and again, thank you and your team, will
Hansen and Victoria and Aaron,just because you're the one who
really inspired the idea ofbringing together the entire
benefits community, bothretirement and health, to work
on this joint event, which Ithink will be you know both
really informative and hopefullya lot of fun as well.
(09:56):
So you know, in terms of thehealth care area, I guess you
know it would have been- reallynice if the authors of ERISA had
somehow worked the word healthinto the name of the healthcare
area.
I guess you know it would havebeen really nice if the authors
of ERISA had somehow worked theword health into the name of the
law, because for the firstseveral years you know, I think
we all spent a lot of time, youknow, reminding policymakers in
the media and others that youknow, no, it wasn't an accident
(10:19):
that ERISA also was regulatinghealth benefits.
It was very much a deliberatedecision.
And, you know, it has beeninteresting in the sense that,
for all the if I can just skip,jump ahead for a second you know
, for all the partisanship thatwe see every day being played
(10:41):
out in the world of employee,benefits they're not on every
issue, to be sure, but on anumber of issues there actually
is a fair amount ofbipartisanship.
Certainly, the secure and secure2.2 are sort of classic
examples of that.
I think healthcare hastypically been a lot more
(11:05):
partisan, so it's been a tougherroad to hoe road to hoe.
But you know, even there, youknow, house representatives,
less than a year ago, by a 320to 71 margin, passed the Lower
Cost, more Transparency Act,transparency- Act.
It may still be seen whether itgets over the finish line this
(11:27):
year, but there are selectedissues even in the health arena
where there is a coming together.
Speaker 2 (11:32):
So it's a little bit harder to control.
Speaker 1 (11:33):
There maybe are some more moving pieces in the area
of health, but the truth of thematter is I've always felt that
one of the biggest challenges toensure that people have
retirement income security isour ability to get control of
health care costs, because itchews up so much of people's you
(11:58):
know available resources inretirement, and so the two
really are Absolutely.
Speaker 3 (12:04):
They really intertwined, couldn't agree more
.
And you know one of the thingsthat you know as an observer on
health care policy I worked onhealth care policy when I was on
the Hill.
It is frustrating, that youknow.
(12:29):
The Health Security Actobviously really did, you know
is primarily a coverage bill andyou know there are some
attempts to, particularly on thepharmaceutical side, to address
the cost issue, but really nota lot.
And we continue to spend anincreasing percentage of our GDP
on health care and it certainlydoesn't seem to be going.
(12:51):
It will continue to go in thatin the up direction, and it
raises pressure on theretirement system.
You know there's most of thecriticism around retirement is
over.
You know adequacy, particularlyfor lower-income people, but we
don't really ever talk aboutthe spending side and that's, as
(13:14):
you are indicating, a huge partof the challenge.
There is actually a lot ofinterest among the listeners on
the health side, but inparticular the CAA legislation,
jim, I know that you're probablyfamiliar with that seems to be
imputing.
(13:34):
You know fiduciary kind ofconcepts on plan sponsors with
respect to health care costs aswell, as you know transparency
issues.
Obviously, the Johnsonlitigation is a big deal that a
lot of our members are actuallyfollowing because, as planned
fiduciaries, there's obviously aconnection between the two.
(13:58):
You talk about how ABC isinvolved in that and you know
what's your thoughts on thatissue other than that and you
know what's your thoughts onthat issue.
Speaker 1 (14:10):
Yeah, really, really complex issue in this
Lewandowski versus JohnsonJohnson case could really be,
you know, a turning point or amilestone.
You know, I think thatfiduciary responsibilities
obviously do apply in thehealthcare context.
I think you know the law isevolving, the decisions aren't
(14:30):
exactly the same.
Maybe there are some moreopportunities.
You know.
You know to in both retirementand health.
You know to to sort of go forplaintiffs to go back with 2020
vision.
You know and say you know, well, you know there were three
(14:51):
other choices on the retirementsin that mid-cap class that
performed better.
Therefore, it was important ofthe plan sponsor to choose the
particular fund.
They did, and a lot of thatkind of thinking translates over
, I think, potentially on thehealth care side as well, and
sort of the notion that employerplan sponsors you know that at
(15:17):
the heart of this Lewandowskicase is this notion.
you know that they're spendingtoo much.
Well, I mean, is there anyemployer plan sponsor that would
you know unnecessarily bewasting money in this area,
either for themselves or theiremployees?
That's kind of a hard notion tograsp and yet you know in large
part that's a central theme ofthis and other litigation.
Speaker 3 (15:40):
Yeah, and it is very reminiscent, jim, of the of, you
know, going back 20-ish yearswhen you saw the developing
trend among trial lawyers to,you know, go after a risk of
retirement plans for fees thatthey were arguing were excessive
(16:04):
relative to the market.
Those early cases, once you gotyour first settlement, once you
got your first win, then theysort of proliferated.
One of the big issues since inthe 50 years of ERISA, really
(16:26):
without question has to be thedevelopment of, or the
environment that has beencreated around, litigation.
You know, erisa as a federallaw, if not the most litigated,
(16:52):
has got to be in the top threeof most litigated statutes in
terms of lawsuits againstemployers and plant sponsors.
What you know what, what hasthat done, both positively and
negatively, to the system inyour view?
Speaker 1 (17:09):
Well, look, I mean, where there have been outlier,
you know behaviors, thenobviously any kind of litigation
that's, you know, justified andyou know well served, you know,
makes people whole and that's,and that's a good thing, that
(17:36):
represents large employer plansponsors as well as sort of all
of the other service providersyou know, in this industry of
ours, you know it's hard to findmuch.
You know much good in a lot ofthis litigation, because we know
how hard plan sponsors andtheir advisors work to do the
right thing in an area that'sextraordinarily, as we all know
(18:00):
heavily regulated and it is soeasy, quote unquote, for
plaintiffs, lawyers, to sort ofcome back, as I said earlier,
with 20-20 vision about shouldhave done this or should have
done that.
There's a lot of money at stakehere, which makes it, you know,
also very attractive andlucrative if they can succeed.
(18:24):
And you know, to me it isreally amazing and a real
tribute to employer plansponsors that they remain as
committed as they do to thissystem in the face of, you know,
the enormous downside risks andexposure that they can have to
(18:51):
a lot of these suits where, youknow, even when it's unjustified
, it's so time and moneyconsuming to fight it.
You know that they often feelcompelled to settle just to get
rid of it.
And so I think that you know Ihate to be a Debbie Downer about
(19:13):
it, but the litigation reallyis kind of the bane of existence
, I think, for a lot of folks inthis arena the overwhelming
(19:50):
predominant desire and effort onthe part of the argument that
you described them as outliers.
Speaker 3 (19:58):
Yes, I think there were plans that were probably in
many cases because fiduciaryprocesses were not as developed
early on.
In the case of 401k, plans werepaying more than they probably
should have in terms of certainfees.
(20:19):
That's really been rooted outof the system in many respects
by particularly transparencyrules that the Department of
Labor have put in place that,for the most part, I think, do a
good job of of providinginformation to plan sponsors.
I think the problem at thispoint uh, kind of following up
(20:44):
on what you're saying is that,you know, I think my concern is
is the stifling effect it has interms of innovation.
You know, you know, but a goodcurrent example is Lifetime
Income Solutions.
A lot of plant sponsors, whenyou talk to the HR folks,
they're really interested in theidea of trying to figure out
(21:04):
how do we, you know, for someonewho's got $250,000, $300,000 in
their 401k account that gets aretirement, they've got Social
Security but they also, you know, also like a little bit more
regular income.
We've got lots of people whoare encroaching retirement age.
There are only about 250,000advisors out there.
(21:27):
There's not enough advisors forall these people who are going
to be retiring, and havingin-plan solutions would make a
lot of sense, but there's such aconcern.
I mean, I've talked to, like youdo, very large employer-planned
sponsors and their number onejob is not to get sued.
And I guess my question in thisregard is we've spent a lot of
(21:55):
time over the last 30, you and Ihave spent a lot of time over
the last 30 years tinkering withERISA right, and we've made
some great changes secure, youknow, pension Protection Act.
Secure one, secure two Is theissue of ERISA litigation really
(22:21):
the next frontier?
Do we really, if we really needto make some reforms to ERISA,
does it really need to focus onthis litigation issue that seems
, in many cases, to be out ofcontrol?
Speaker 1 (22:37):
Yeah, I think that's a really, really interesting
observation and I think I wouldagree with you.
And you know I do sometimes tryto remove myself from my world
of benefits and see like is thisso much different than the rest
of?
Society and of course we havebecome such a litigious society
overall.
But you're right, there's beenwhat appears to be a
(22:58):
disproportionate amount in ourarea.
And you know you kind of seethat frankly, in terms of the
number of cases even that theSupreme Court takes, yeah,
marissa focused.
So yeah, I think this, this isan area, I think that.
(23:38):
So yeah, I think this is an area.
I think that right now, thoughand this certainly arises in the
litigation sphere, butunfortunately, what seems to be
the biggest arena of activitythese days is the steady efforts
to erode what I consider andwhat certainly the authors of
ERISA considered to be thecentral element of the law,
which was ERISA federalpreemption.
And you know, when the lawpassed, one of the true authors
of the law, Congressman JohnDent, said at the time that the
federal preemption feature ofthe law was the crowning
(24:00):
achievement because it's whatenabled management and labor to
come together in support ofpassage of this.
You know enormous landmarklegislation and we see the
states chipping away at it.
We see an amicus friend of thecourt brief from the Department
of Labor a year ago in a 10thCircuit Court of Appeals case
(24:22):
that seemed to have an extremelynarrow reading of ERISA
preemption, and some effortsthus far not successful at the
federal legislative level toperhaps do a little bit of an
end or run around preemption aswell.
And if that should happen andagain, this is being heavily
(24:46):
litigated, particularly as itrelates to pharmacy benefit.
Yeah, yeah, that will have aspillover effect on the
protections that federalpreemption provides for
retirement plans as well, youknow, for it's not just even a
matter for, like my members,large multistate employers who
want to have some you knowbetter efforts and you know
(25:10):
administration of their plans.
It's also a matter of equity totheir employees that if you're
an employee, you know, workingfor a particular employer, your
ability to get the same benefitas somebody else who's doing the
exact same job as you are butliving in a different state.
And so you know, your questionwas and I'm sorry for sort of
(25:34):
rambling on here you know, islitigation sort of the next
frontier?
You know it is, and I do worrythat, in addition to all of the
fees and the fiduciary and allof that stuff that's been
burgeoning in terms oflitigation, fiduciary and all of
(25:55):
that stuff that's beenburgeoning in terms of
litigation, we've now got thisnew tranche.
That is something else for usto kind of have to look over our
shoulders about.
And something that we thoughtfor many years was a
well-established notion that wassupported by labor and
management alike.
Certainly it is still bymanagement, by Democrats and
Republicans alike.
(26:15):
And last point I'll just makeabout that is that, for
completely different reasons,there has been a bit of a
weakening in the resolved andsupportive of a risk of
preemption on the part ofRepublicans and Democrats.
From the Republican perspective, of course, it's sort of the
philosophical favorabledisposition toward more local
(26:37):
control and therefore notwanting to sort of step on the
prerogatives of the states.
From the Democratic side, Ithink there's been a frustration
that at the federal level morehasn't been done in terms of
providing more health andretirement security and da da,
da.
So they've been OK with thestates taking the lead in that
(26:57):
area, and a lot of this, ofcourse, is all very, very, very
well-intentioned and there's alot to be done that really can
help boost coverage and adequacyand all the rest of that.
It's some of the inadvertentimplications that sort of is
making life more challenging.
Speaker 3 (27:18):
Yeah, certainly Arisa .
The preemption issue and Ithink you know hopefully
there'll be some discussionabout that in the symposium
that's attached to the eventcelebrating Arisa's 50th is
foundational.
It's a cornerstone of thelegislation and to a large
degree it was innovative at thetime, this notion of creating a
(27:46):
common set of rules thatcompanies and both management
and labor could rely on.
And yeah, you're seeing somechipping away at that for the
reasons that you've articulated.
And I think, in addition tothis, most of the preemption
attacks seem to behealthcare-focused in general.
(28:09):
But now, if you potentially addthe let's call it another
transtion around the CAAlegislation, the Johnson Johnson
case that could be derived fromthat legislation, we could see
(28:29):
this even larger believe it ornot proliferation of litigation
in the ERISA area.
I think that really warrantsexamination.
Speaker 1 (28:43):
You articulated it better than I could.
You're 100% right.
You're 100% right.
You know, for all as I'mreflecting back on a lot of my
comments here the last 20minutes or so you know, for all
of these challenges anddifficulties, you know it is
valuable for us and, of course,we all in the industry and the
people who are listening to thispodcast, you know kind of
(29:03):
intuitively understand it.
You know it is a remarkableachievement, right?
I mean, you know, when youthink about the vast majority of
Americans who get their youknow health care, financial
security.
You know, through this employersponsored system, their
retirement income securitythrough this employer sponsored
(29:25):
system.
And you know, and how it's, howit's grown, is it you know?
Does it have flaws?
Yes, are there areas forimprovement?
Yes, but you know it's grown,is it you know?
Does it have flaws?
Yes, are there areas forimprovement?
Yes, but you know, it's reallyquite an achievement that
everybody should you know shouldpartake in, and one of the
(29:47):
other things that I think isterribly underappreciated is
what a tremendous bargain it isfrom the taxpayers' perspective
and federal government'sperspective.
And this is going to beimportant for all of us, I think
, to remember next year, whenthe 2017 tax law are expiring
(30:08):
and Congress is going to belooking, needing to find sources
of revenue in order to extendthose provisions and maybe do
other tax policy initiatives.
And there's no question thatthe tax expenditure, that is to
say, the provision of the taxcode responsible for the largest
(30:29):
quote unquote foregone revenueto the federal government is the
one attributable toemployer-sponsored health
coverage, estimated by thefederal government to be $3.1
trillion with a T over the next10 years.
The second largest is the taxexpenditure for
employer-sponsored retirementplans $2.6 trillion over the
(30:49):
next 10 years, far, farexceeding the amount of lost
revenue related to mortgageinterest deduction, charitable
contributions, state and localtax deduction, all of those, all
of those.
And that makes our world ofbenefits, retirement and health,
you know, extraordinarilyvulnerable.
Now, as you know, happy to getinto it too.
(31:12):
You know the way in which theOffice of Management and Budget
or the Joint Committee onTaxation or the other agencies
sort of calculate that revenueloss is flawed.
But you know, even assumingthat it's not flawed, that the
assumptions underlying it arenot flawed, for every dollar of
(31:35):
foregone revenue to the federalgovernment related to.
You know, employer-sponsoredhealth care employers are
spending $5.36 on health carebenefits for their employees and
their family members In theretirement arena.
As you know, it's even greaterfor every dollar of foregone
revenue and, as we know, it'sreally just deferred right, I
(31:56):
mean it's not deferred, it's onthe order of $8.11.
Speaker 2 (32:01):
That is a huge bargain.
Speaker 1 (32:03):
It would cost us so much more as a nation to provide
that same level of health andretirement security if we had to
do it, let's say, through justexpanded federal programs.
So you know, this is theconstant mission I think that
all of us collectively have isto remind our policymakers of
what is able to be accomplishedthrough these tax incentives to
(32:26):
enable employers to provide.
And of course it's not reallythe employer who would be
affected by some of these capseither.
It's the individual, so that Ithink is sort of could be very,
very prominent next year.
Speaker 3 (32:42):
Oh, you could not be more right.
Speaker 1 (32:45):
You know you and I've been doing this for so long to
get to my point.
Speaker 3 (32:48):
Yeah, no, no, no, not at all.
It's an incredibly importantpoint and you know you and I
have been doing this for so long.
We know that every time there'sa global tax policy debate,
because of the fact that we arenumber one and number two in
terms of tax expendituresnotwithstanding the fact that
(33:13):
those numbers are wrong we'relooked at as a pot of money to
pay for perceived otherpriorities, be they, you know,
on Republican side, state taxexclusion, corporate tax rates,
on the Democratic side, childtax credits, earned income
credit.
You pick it, credit, you pickit.
(33:43):
And you know we're going toreboot the study that we've done
that shows that the retirementtax expenditure is actually the
real economic cost to theTreasury is 70% less than what
it's scored at, because it's adeferral, not a deduction.
But also, you know this argumentthat's increasingly prevalent,
jim, particularly in the media,which doesn't seem to be
(34:08):
interested in hearing the otherside's, our side's, perspective.
They're just, they like to justdo a story about what the
academic critics think that youknow the 401k is only for the
wealthy and only you knowwealthy people have any
meaningful amounts in theirretirement plans, and that you
(34:32):
know, and that the taxincentives are backwards because
they're based on, you know,marginal rates.
You know you raised a verycritical point to that, because
what they ignore is thatemployers are making
contributions for these workersto matching profit sharing
contributions.
Obviously, if it's a definedbenefit plan, you know even more
(34:55):
valuable contributions and theyjust completely ignore those.
And the truth of the matter is,as you're alluding to,
particularly on the retirementside, the tax incentives are
incredibly efficient.
Most of the tax benefits,because of the
(35:16):
non-discrimination rules,because of the matching and
other contributions that go onbehalf of workers, you know the
lion's share of the tax benefitsactually go to people making
less than $100,000 a year.
And yes, we've got to.
You know we've got to emphasizethat story because you know
that's why you know we're aconstant target.
(35:41):
We've been a constant target,you know, since ERISA passed.
If you go back to the 80s, whenwas the last time Congress was
focused on deficit reductionTEFRA, defra and REIA?
We were, you know, we werewhacked all the time and I think
it's going to be critical thatwe all work together to try to
(36:03):
prevent that.
I mean, let's just add to thata little bit.
This is very different than thelast time we did a tax bill
that you mentioned in 2016 and17.
We did a tax bill that youmentioned in 2016 and 17.
There's a lot more attention todeficit reduction or the
(36:27):
deficit in general.
Speaker 1 (36:34):
How do you think that's going to change the
drivers around policymaking?
Speaker 3 (36:52):
I don't know if I necessarily believe that there's
been more attention in thesense that we've kind of had a
steady stream of laws.
That's, you know, right nowthere's been this bill to extend
the corporate tax, theseso-called corporate tax
extenders that are a lot ofcorporate tax credits or other
incentives that have beenexpired for several years that
(37:15):
you know the larger companiesreally want.
The child tax credit's beenexpired, democrats want that and
you know basically Republicanshave been resistant because it's
not quote paid for.
Speaker 1 (37:27):
In principle, yeah, yeah, I mean.
So, on the one hand, it's, youknow, a good thing when there is
a sensitivity on either side ofthe aisle for the burgeoning
national debt which grows as.
Speaker 3 (37:48):
We're encroaching $35 trillion in national debt In
each year.
Speaker 1 (37:54):
What is it now?
Latest estimate $1.7, 1.9trillion for this year.
Yeah, yeah, so.
So that part's good the the our.
Our mission, I guess, is tomake sure that in addressing it
(38:14):
if they are going to be seriousabout addressing it, that you
know that they make the rightkind of decisions and you know,
yeah, we live in this world andwe love benefits and we
recognize it, and other peoplewho are in the you know other
parts of the economic world, youknow, have their own sort of
cherished.
(38:34):
You know tax preferences and soon, but really understanding
sort of which ones are the rightinvestments to make, and I
think that's why, sort of like,the numbers that you and I were
talking about earlier are sorelevant here.
It's tough because you knowgosh, you and I have both seen
how.
You know, at two in the morning, you know, when they're housing
(38:57):
the senator negotiating andthey're coming up you know $3
billion short, they say, well,you know let's, you know let's
do this with PBGC premiums inorder to pay for the highway
funding bill.
You know, as if that's to dowith highways.
Speaker 3 (39:13):
So so we are attempting target and that's
that's why you know so we areattempting target, and that's
(39:34):
why just making the case forwhat this contributes in terms
of economic security for thevast majority of Americans is so
central to make sure that thisdoesn't end up on the chopping
block just because it's close onthat.
We are grateful for your role,for ABC's continued role in
being vigilant to protect thesystem, to improve the system,
and look forward to continueworking with you, as well as
everyone else at ABC, to makesure that, as I often say, our
(39:58):
job is to make sure that thegovernment doesn't mess up the
good stuff that they actuallyhave spent a long time trying to
create.
Speaker 1 (40:07):
Brian, thank you so much for that, for this
opportunity and just for theongoing work that you and
everybody at ARA is doing andthe leadership that you have in
this industry and this systemthat we all believe in so
strongly.
Speaker 3 (40:21):
Thanks, Jim.
Speaker 1 (40:22):
Be well, thank you.
It is a remarkable achievement right.
I mean, you know, when youthink about the vast majority of
Americans who get their youknow health care, financial
security.
You know, through this employersponsored system, their
retirement income securitythrough this employer sponsored
system, and you know, and howit's how it's grown.
Speaker 2 (00:27):
DC Pension Geeks brings you exclusive
conversations with topretirement policymakers and
regulators in and aroundWashington DC, hosted by Brian
Graff, an attorney, accountant,former Capitol Hill staffer and
CEO of the American RetirementAssociation.
If you're looking for aninsider's view of all the twists
and turns that Washington takeson the road to ensuring a
secure retirement for millionsof Americans, you're in the
(00:48):
right place.
Welcome to DC Pension Geeks.
Speaker 3 (00:51):
Hello everybody, brian Graff here for another
installment of DC Pension Geeks.
I have with me the presidentand CEO of the American Benefits
Council, jim Klein, otherwiseknown as one of the OGs in
retirement policy, withoutquestion.
In fact, jim was in hisposition when I was a little pup
(01:16):
working on Capitol Hill wayback when, when I'd like to
describe it a period of timewhen there wasn't that many
people working on retirementpolicy.
It was a lot smaller community,the 401k was pretty much in its
infancy during that period oftime, but Jim was one of the
(01:40):
leaders that sort of had thevision of trying to team up on a
bipartisan basis with membersof Congress to see if we could
kind of like change thenarrative about retirement.
And there had been a lot ofwhat we would describe as pretty
lousy legislation passed andJim was really at the forefront
(02:01):
in turning that around.
So, jim, thanks for being withus today and you know I think
everyone liked you know, tell usabout your background when you
know how did you end up becominga pension geek?
Speaker 1 (02:16):
Well, first of all, thank you for that extremely
generous introduction and Iwould just say I return those
sentiments to you in fullmeasure.
You know you mentioned that youwere just what a pension pup or
something like that on CapitolHill, and you know, and look now
, what you've far surpassed therest of us here and in terms of
your leadership in this role.
But it's always been a pleasureto work with you both.
(02:37):
You know, both when you were ingovernment and also in the
private sector, and kudos to youon the extraordinary career
that you've had and what you'veaccomplished.
So how did I get into it?
Well, it's funny.
I worked at Capitol Hill as wellwhile I was in law school and
you know, labor related issueswere part of the portfolio that
(02:59):
I had for the member of Congressfor whom I worked.
And then, you know, I graduatedlaw school, I started applying
to law firms and you know,serendipity right, I mean, I
ended up going to work for afirm, very unusual firm.
Half the firm did ERISA work,primarily multi-employer work,
and the other half of the firmdid toxic tort litigation
(03:22):
defense work.
So it was a very unusualmixture, not surprising the firm
you know doesn't exist work.
So it was a very unusualmixture, not surprising the firm
doesn't exist anymore.
But it was a terrific firm withterrific lawyers and that's
really how I got.
Well.
Speaker 3 (03:34):
I mean I started at the Groom what's now the Groom
Law Group and people don'trealize that they actually had a
similar history.
They did this strange I mean itwas a little bit closer, but
they did ERISA and internationaltax.
Yeah yeah, and you know, Ithink at that time people just
(03:55):
didn't see the ERISA practicequite the same as they do now.
It was, you know, the breadthof it, the opportunity from a
legal perspective.
So but that, yeah, that's apretty interesting combination.
Speaker 1 (04:07):
Yeah, it sure was, and just sort of you know kind
of fast forward on it.
So you know I was doing that,but I really had come to
Washington DC because I lovedpublic policy and so I said you
know what?
Speaker 2 (04:22):
I don't think I really want to be necessarily a
full time ERISA attorney.
Speaker 1 (04:26):
So I got a job with the US Chamber of Commerce,
originally not doing anythingrelated to benefits, and about
six months later you mayremember Mike Romig who is at
the US Chamber and for those oldtimers who are listening in on
this podcast, they'll rememberMike who then also went on to
the American Council of LifeInsurers and he left to go to
(04:50):
the ACLI and they kind of lookedat me and it was like that old
life serial commercial.
Like you know, let's get Mikey,he'll try anything, and it was
like Jim you know, he knows howto spell Arisa.
So I became, you know, thepension lobbyist for the US
Chamber of Commerce, and acouple of years into that, the
person who did health care left,and for the grand sum of an
(05:10):
additional $2,000 a year.
I also got to do his job andanyway.
So it was great and hadwonderful opportunities there,
given a lot of responsibility,and through that I came in
contact with the organizationfor which I now work, which at
the time was called theAssociation of Private Pension
and Welfare Plans APPWP and Istarted out as the deputy
(05:34):
director and then, four yearslater, my predecessor boss.
He moved on and I've stayed, soI've been there now 36 years
and so it's been just a great,great career.
Speaker 3 (05:47):
So you know, talk a little bit about you know it's
funny, you know I remember APPWPand of course ASPA was ARA.
Predecessor was the AmericanSociety of Pension Professionals
and Actuaries, which is one ofour sister organizations, which
is also an acronym with kind ofa mouthful.
We love our acronyms, arisageeks love their acronyms, how
(06:12):
you know, you kind of reallytook APPWP, kind of
re-envisioned this as theAmerican Benefits Council, both
doing health care policy andretirement policy.
But I think early on I thinkthere's some recognition that if
we're going to make this workfrom a policy standpoint it had
(06:35):
to be bipartisan.
So talk to me a little bitabout you know what your role
was in terms of trying to getCongress moving and the
regulators kind of moving in theright direction, that we're not
going to have this you knowantagonistic position between
(07:00):
the plans and the plan sponsorsand the regulators and Congress.
Speaker 1 (07:07):
Yeah Well, first of all, thanks for that nice
comment.
I wouldn't take full credit forthat, I think certainly it was
kind of imbued in the culture ofthe organization before I got
there.
But I'm glad to have been ableto, and one of the reasons I
wanted to stay because I thinkour leadership, our members, are
very pragmatic and interestedin solutions and not so much
(07:28):
ideology, and so that leadsitself to bipartisanship.
I mean, as you know so well, itwas an era in which
bipartisanship was an easierthing to accomplish perhaps than
it is today, which isn't to saythat there weren't.
You know strong, you knowdifferent viewpoints, you know.
(07:49):
I think you raise a really goodpoint in terms of that tension
between, you know, theregulators and the regulated
community.
But I think that you know whatwe've tried to do is to say hey
look, you know our members, bydefinition, you know they are
sponsors of plans, generousplans they're trying to do right
(08:12):
by their employees and retirees, employees, family members, and
you know so we try to look forpragmatic solutions, pragmatic
solutions and I think, to alarge degree, I think that has
been appreciated by theregulators because ultimately,
(08:33):
you know they have kind of adifficult job too, and at the
end of the day they have towrite the regs, and so you know
I think they look to groups likeARA and our group and others
for a roadmap to get them there.
Speaker 3 (08:50):
So you know, ERISA is turning 50th.
We're going to have moreinformation coming out about
who's going to be speaking andthe kind of topics that we're
going to be covering, butcertainly there's going to be a
(09:12):
lot of it's going to be aretrospective and, importantly
for our listeners, it's not justgoing to be retirement.
There's a healthcare componentto this too, because obviously
ERISA has played an incrediblyimportant part on the health
care side.
And so, yeah, let me pausethere and ask a little bit about
what ABC does from a healthcare policy perspective in
(09:34):
general.
Speaker 1 (09:35):
Sure, and again, thank you and your team, will
Hansen and Victoria and Aaron,just because you're the one who
really inspired the idea ofbringing together the entire
benefits community, bothretirement and health, to work
on this joint event, which Ithink will be you know both
really informative and hopefullya lot of fun as well.
(09:56):
So you know, in terms of thehealth care area, I guess you
know it would have been- reallynice if the authors of ERISA had
somehow worked the word healthinto the name of the healthcare
area.
I guess you know it would havebeen really nice if the authors
of ERISA had somehow worked theword health into the name of the
law, because for the firstseveral years you know, I think
we all spent a lot of time, youknow, reminding policymakers in
the media and others that youknow, no, it wasn't an accident
(10:19):
that ERISA also was regulatinghealth benefits.
It was very much a deliberatedecision.
And, you know, it has beeninteresting in the sense that,
for all the if I can just skip,jump ahead for a second you know
, for all the partisanship thatwe see every day being played
(10:41):
out in the world of employee,benefits they're not on every
issue, to be sure, but on anumber of issues there actually
is a fair amount ofbipartisanship.
Certainly, the secure and secure2.2 are sort of classic
examples of that.
I think healthcare hastypically been a lot more
(11:05):
partisan, so it's been a tougherroad to hoe road to hoe.
But you know, even there, youknow, house representatives,
less than a year ago, by a 320to 71 margin, passed the Lower
Cost, more Transparency Act,transparency- Act.
It may still be seen whether itgets over the finish line this
(11:27):
year, but there are selectedissues even in the health arena
where there is a coming together.
Speaker 2 (11:32):
So it's a little bit harder to control.
Speaker 1 (11:33):
There maybe are some more moving pieces in the area
of health, but the truth of thematter is I've always felt that
one of the biggest challenges toensure that people have
retirement income security isour ability to get control of
health care costs, because itchews up so much of people's you
(11:58):
know available resources inretirement, and so the two
really are Absolutely.
Speaker 3 (12:04):
They really intertwined, couldn't agree more
.
And you know one of the thingsthat you know as an observer on
health care policy I worked onhealth care policy when I was on
the Hill.
It is frustrating, that youknow.
(12:29):
The Health Security Actobviously really did, you know
is primarily a coverage bill andyou know there are some
attempts to, particularly on thepharmaceutical side, to address
the cost issue, but really nota lot.
And we continue to spend anincreasing percentage of our GDP
on health care and it certainlydoesn't seem to be going.
(12:51):
It will continue to go in thatin the up direction, and it
raises pressure on theretirement system.
You know there's most of thecriticism around retirement is
over.
You know adequacy, particularlyfor lower-income people, but we
don't really ever talk aboutthe spending side and that's, as
(13:14):
you are indicating, a huge partof the challenge.
There is actually a lot ofinterest among the listeners on
the health side, but inparticular the CAA legislation,
jim, I know that you're probablyfamiliar with that seems to be
imputing.
(13:34):
You know fiduciary kind ofconcepts on plan sponsors with
respect to health care costs aswell, as you know transparency
issues.
Obviously, the Johnsonlitigation is a big deal that a
lot of our members are actuallyfollowing because, as planned
fiduciaries, there's obviously aconnection between the two.
(13:58):
You talk about how ABC isinvolved in that and you know
what's your thoughts on thatissue other than that and you
know what's your thoughts onthat issue.
Speaker 1 (14:10):
Yeah, really, really complex issue in this
Lewandowski versus JohnsonJohnson case could really be,
you know, a turning point or amilestone.
You know, I think thatfiduciary responsibilities
obviously do apply in thehealthcare context.
I think you know the law isevolving, the decisions aren't
(14:30):
exactly the same.
Maybe there are some moreopportunities.
You know.
You know to in both retirementand health.
You know to to sort of go forplaintiffs to go back with 2020
vision.
You know and say you know, well, you know there were three
(14:51):
other choices on the retirementsin that mid-cap class that
performed better.
Therefore, it was important ofthe plan sponsor to choose the
particular fund.
They did, and a lot of thatkind of thinking translates over
, I think, potentially on thehealth care side as well, and
sort of the notion that employerplan sponsors you know that at
(15:17):
the heart of this Lewandowskicase is this notion.
you know that they're spendingtoo much.
Well, I mean, is there anyemployer plan sponsor that would
you know unnecessarily bewasting money in this area,
either for themselves or theiremployees?
That's kind of a hard notion tograsp and yet you know in large
part that's a central theme ofthis and other litigation.
Speaker 3 (15:40):
Yeah, and it is very reminiscent, jim, of the of, you
know, going back 20-ish yearswhen you saw the developing
trend among trial lawyers to,you know, go after a risk of
retirement plans for fees thatthey were arguing were excessive
(16:04):
relative to the market.
Those early cases, once you gotyour first settlement, once you
got your first win, then theysort of proliferated.
One of the big issues since inthe 50 years of ERISA, really
(16:26):
without question has to be thedevelopment of, or the
environment that has beencreated around, litigation.
You know, erisa as a federallaw, if not the most litigated,
(16:52):
has got to be in the top threeof most litigated statutes in
terms of lawsuits againstemployers and plant sponsors.
What you know what, what hasthat done, both positively and
negatively, to the system inyour view?
Speaker 1 (17:09):
Well, look, I mean, where there have been outlier,
you know behaviors, thenobviously any kind of litigation
that's, you know, justified andyou know well served, you know,
makes people whole and that's,and that's a good thing, that
(17:36):
represents large employer plansponsors as well as sort of all
of the other service providersyou know, in this industry of
ours, you know it's hard to findmuch.
You know much good in a lot ofthis litigation, because we know
how hard plan sponsors andtheir advisors work to do the
right thing in an area that'sextraordinarily, as we all know
(18:00):
heavily regulated and it is soeasy, quote unquote, for
plaintiffs, lawyers, to sort ofcome back, as I said earlier,
with 20-20 vision about shouldhave done this or should have
done that.
There's a lot of money at stakehere, which makes it, you know,
also very attractive andlucrative if they can succeed.
(18:24):
And you know, to me it isreally amazing and a real
tribute to employer plansponsors that they remain as
committed as they do to thissystem in the face of, you know,
the enormous downside risks andexposure that they can have to
(18:51):
a lot of these suits where, youknow, even when it's unjustified
, it's so time and moneyconsuming to fight it.
You know that they often feelcompelled to settle just to get
rid of it.
And so I think that you know Ihate to be a Debbie Downer about
(19:13):
it, but the litigation reallyis kind of the bane of existence
, I think, for a lot of folks inthis arena the overwhelming
(19:50):
predominant desire and effort onthe part of the argument that
you described them as outliers.
Speaker 3 (19:58):
Yes, I think there were plans that were probably in
many cases because fiduciaryprocesses were not as developed
early on.
In the case of 401k, plans werepaying more than they probably
should have in terms of certainfees.
(20:19):
That's really been rooted outof the system in many respects
by particularly transparencyrules that the Department of
Labor have put in place that,for the most part, I think, do a
good job of of providinginformation to plan sponsors.
I think the problem at thispoint uh, kind of following up
(20:44):
on what you're saying is that,you know, I think my concern is
is the stifling effect it has interms of innovation.
You know, you know, but a goodcurrent example is Lifetime
Income Solutions.
A lot of plant sponsors, whenyou talk to the HR folks,
they're really interested in theidea of trying to figure out
(21:04):
how do we, you know, for someonewho's got $250,000, $300,000 in
their 401k account that gets aretirement, they've got Social
Security but they also, you know, also like a little bit more
regular income.
We've got lots of people whoare encroaching retirement age.
There are only about 250,000advisors out there.
(21:27):
There's not enough advisors forall these people who are going
to be retiring, and havingin-plan solutions would make a
lot of sense, but there's such aconcern.
I mean, I've talked to, like youdo, very large employer-planned
sponsors and their number onejob is not to get sued.
And I guess my question in thisregard is we've spent a lot of
(21:55):
time over the last 30, you and Ihave spent a lot of time over
the last 30 years tinkering withERISA right, and we've made
some great changes secure, youknow, pension Protection Act.
Secure one, secure two Is theissue of ERISA litigation really
(22:21):
the next frontier?
Do we really, if we really needto make some reforms to ERISA,
does it really need to focus onthis litigation issue that seems
, in many cases, to be out ofcontrol?
Speaker 1 (22:37):
Yeah, I think that's a really, really interesting
observation and I think I wouldagree with you.
And you know I do sometimes tryto remove myself from my world
of benefits and see like is thisso much different than the rest
of?
Society and of course we havebecome such a litigious society
overall.
But you're right, there's beenwhat appears to be a
(22:58):
disproportionate amount in ourarea.
And you know you kind of seethat frankly, in terms of the
number of cases even that theSupreme Court takes, yeah,
marissa focused.
So yeah, I think this, this isan area, I think that.
(23:38):
So yeah, I think this is an area.
I think that right now, thoughand this certainly arises in the
litigation sphere, butunfortunately, what seems to be
the biggest arena of activitythese days is the steady efforts
to erode what I consider andwhat certainly the authors of
ERISA considered to be thecentral element of the law,
which was ERISA federalpreemption.
And you know, when the lawpassed, one of the true authors
of the law, Congressman JohnDent, said at the time that the
federal preemption feature ofthe law was the crowning
(24:00):
achievement because it's whatenabled management and labor to
come together in support ofpassage of this.
You know enormous landmarklegislation and we see the
states chipping away at it.
We see an amicus friend of thecourt brief from the Department
of Labor a year ago in a 10thCircuit Court of Appeals case
(24:22):
that seemed to have an extremelynarrow reading of ERISA
preemption, and some effortsthus far not successful at the
federal legislative level toperhaps do a little bit of an
end or run around preemption aswell.
And if that should happen andagain, this is being heavily
(24:46):
litigated, particularly as itrelates to pharmacy benefit.
Yeah, yeah, that will have aspillover effect on the
protections that federalpreemption provides for
retirement plans as well, youknow, for it's not just even a
matter for, like my members,large multistate employers who
want to have some you knowbetter efforts and you know
(25:10):
administration of their plans.
It's also a matter of equity totheir employees that if you're
an employee, you know, workingfor a particular employer, your
ability to get the same benefitas somebody else who's doing the
exact same job as you are butliving in a different state.
And so you know, your questionwas and I'm sorry for sort of
(25:34):
rambling on here you know, islitigation sort of the next
frontier?
You know it is, and I do worrythat, in addition to all of the
fees and the fiduciary and allof that stuff that's been
burgeoning in terms oflitigation, fiduciary and all of
(25:55):
that stuff that's beenburgeoning in terms of
litigation, we've now got thisnew tranche.
That is something else for usto kind of have to look over our
shoulders about.
And something that we thoughtfor many years was a
well-established notion that wassupported by labor and
management alike.
Certainly it is still bymanagement, by Democrats and
Republicans alike.
(26:15):
And last point I'll just makeabout that is that, for
completely different reasons,there has been a bit of a
weakening in the resolved andsupportive of a risk of
preemption on the part ofRepublicans and Democrats.
From the Republican perspective, of course, it's sort of the
philosophical favorabledisposition toward more local
(26:37):
control and therefore notwanting to sort of step on the
prerogatives of the states.
From the Democratic side, Ithink there's been a frustration
that at the federal level morehasn't been done in terms of
providing more health andretirement security and da da,
da.
So they've been OK with thestates taking the lead in that
(26:57):
area, and a lot of this, ofcourse, is all very, very, very
well-intentioned and there's alot to be done that really can
help boost coverage and adequacyand all the rest of that.
It's some of the inadvertentimplications that sort of is
making life more challenging.
Speaker 3 (27:18):
Yeah, certainly Arisa .
The preemption issue and Ithink you know hopefully
there'll be some discussionabout that in the symposium
that's attached to the eventcelebrating Arisa's 50th is
foundational.
It's a cornerstone of thelegislation and to a large
degree it was innovative at thetime, this notion of creating a
(27:46):
common set of rules thatcompanies and both management
and labor could rely on.
And yeah, you're seeing somechipping away at that for the
reasons that you've articulated.
And I think, in addition tothis, most of the preemption
attacks seem to behealthcare-focused in general.
(28:09):
But now, if you potentially addthe let's call it another
transtion around the CAAlegislation, the Johnson Johnson
case that could be derived fromthat legislation, we could see
(28:29):
this even larger believe it ornot proliferation of litigation
in the ERISA area.
I think that really warrantsexamination.
Speaker 1 (28:43):
You articulated it better than I could.
You're 100% right.
You're 100% right.
You know, for all as I'mreflecting back on a lot of my
comments here the last 20minutes or so you know, for all
of these challenges anddifficulties, you know it is
valuable for us and, of course,we all in the industry and the
people who are listening to thispodcast, you know kind of
(29:03):
intuitively understand it.
You know it is a remarkableachievement, right?
I mean, you know, when youthink about the vast majority of
Americans who get their youknow health care, financial
security.
You know, through this employersponsored system, their
retirement income securitythrough this employer sponsored
(29:25):
system.
And you know, and how it's, howit's grown, is it you know?
Does it have flaws?
Yes, are there areas forimprovement?
Yes, but you know it's grown,is it you know?
Does it have flaws?
Yes, are there areas forimprovement?
Yes, but you know, it's reallyquite an achievement that
everybody should you know shouldpartake in, and one of the
(29:47):
other things that I think isterribly underappreciated is
what a tremendous bargain it isfrom the taxpayers' perspective
and federal government'sperspective.
And this is going to beimportant for all of us, I think
, to remember next year, whenthe 2017 tax law are expiring
(30:08):
and Congress is going to belooking, needing to find sources
of revenue in order to extendthose provisions and maybe do
other tax policy initiatives.
And there's no question thatthe tax expenditure, that is to
say, the provision of the taxcode responsible for the largest
(30:29):
quote unquote foregone revenueto the federal government is the
one attributable toemployer-sponsored health
coverage, estimated by thefederal government to be $3.1
trillion with a T over the next10 years.
The second largest is the taxexpenditure for
employer-sponsored retirementplans $2.6 trillion over the
(30:49):
next 10 years, far, farexceeding the amount of lost
revenue related to mortgageinterest deduction, charitable
contributions, state and localtax deduction, all of those, all
of those.
And that makes our world ofbenefits, retirement and health,
you know, extraordinarilyvulnerable.
Now, as you know, happy to getinto it too.
(31:12):
You know the way in which theOffice of Management and Budget
or the Joint Committee onTaxation or the other agencies
sort of calculate that revenueloss is flawed.
But you know, even assumingthat it's not flawed, that the
assumptions underlying it arenot flawed, for every dollar of
(31:35):
foregone revenue to the federalgovernment related to.
You know, employer-sponsoredhealth care employers are
spending $5.36 on health carebenefits for their employees and
their family members In theretirement arena.
As you know, it's even greaterfor every dollar of foregone
revenue and, as we know, it'sreally just deferred right, I
(31:56):
mean it's not deferred, it's onthe order of $8.11.
Speaker 2 (32:01):
That is a huge bargain.
Speaker 1 (32:03):
It would cost us so much more as a nation to provide
that same level of health andretirement security if we had to
do it, let's say, through justexpanded federal programs.
So you know, this is theconstant mission I think that
all of us collectively have isto remind our policymakers of
what is able to be accomplishedthrough these tax incentives to
(32:26):
enable employers to provide.
And of course it's not reallythe employer who would be
affected by some of these capseither.
It's the individual, so that Ithink is sort of could be very,
very prominent next year.
Speaker 3 (32:42):
Oh, you could not be more right.
Speaker 1 (32:45):
You know you and I've been doing this for so long to
get to my point.
Speaker 3 (32:48):
Yeah, no, no, no, not at all.
It's an incredibly importantpoint and you know you and I
have been doing this for so long.
We know that every time there'sa global tax policy debate,
because of the fact that we arenumber one and number two in
terms of tax expendituresnotwithstanding the fact that
(33:13):
those numbers are wrong we'relooked at as a pot of money to
pay for perceived otherpriorities, be they, you know,
on Republican side, state taxexclusion, corporate tax rates,
on the Democratic side, childtax credits, earned income
credit.
You pick it, credit, you pickit.
(33:43):
And you know we're going toreboot the study that we've done
that shows that the retirementtax expenditure is actually the
real economic cost to theTreasury is 70% less than what
it's scored at, because it's adeferral, not a deduction.
But also, you know this argumentthat's increasingly prevalent,
jim, particularly in the media,which doesn't seem to be
(34:08):
interested in hearing the otherside's, our side's, perspective.
They're just, they like to justdo a story about what the
academic critics think that youknow the 401k is only for the
wealthy and only you knowwealthy people have any
meaningful amounts in theirretirement plans, and that you
(34:32):
know, and that the taxincentives are backwards because
they're based on, you know,marginal rates.
You know you raised a verycritical point to that, because
what they ignore is thatemployers are making
contributions for these workersto matching profit sharing
contributions.
Obviously, if it's a definedbenefit plan, you know even more
(34:55):
valuable contributions and theyjust completely ignore those.
And the truth of the matter is,as you're alluding to,
particularly on the retirementside, the tax incentives are
incredibly efficient.
Most of the tax benefits,because of the
(35:16):
non-discrimination rules,because of the matching and
other contributions that go onbehalf of workers, you know the
lion's share of the tax benefitsactually go to people making
less than $100,000 a year.
And yes, we've got to.
You know we've got to emphasizethat story because you know
that's why you know we're aconstant target.
(35:41):
We've been a constant target,you know, since ERISA passed.
If you go back to the 80s, whenwas the last time Congress was
focused on deficit reductionTEFRA, defra and REIA?
We were, you know, we werewhacked all the time and I think
it's going to be critical thatwe all work together to try to
(36:03):
prevent that.
I mean, let's just add to thata little bit.
This is very different than thelast time we did a tax bill
that you mentioned in 2016 and17.
We did a tax bill that youmentioned in 2016 and 17.
There's a lot more attention todeficit reduction or the
(36:27):
deficit in general.
Speaker 1 (36:34):
How do you think that's going to change the
drivers around policymaking?
Speaker 3 (36:52):
I don't know if I necessarily believe that there's
been more attention in thesense that we've kind of had a
steady stream of laws.
That's, you know, right nowthere's been this bill to extend
the corporate tax, theseso-called corporate tax
extenders that are a lot ofcorporate tax credits or other
incentives that have beenexpired for several years that
(37:15):
you know the larger companiesreally want.
The child tax credit's beenexpired, democrats want that and
you know basically Republicanshave been resistant because it's
not quote paid for.
Speaker 1 (37:27):
In principle, yeah, yeah, I mean.
So, on the one hand, it's, youknow, a good thing when there is
a sensitivity on either side ofthe aisle for the burgeoning
national debt which grows as.
Speaker 3 (37:48):
We're encroaching $35 trillion in national debt In
each year.
Speaker 1 (37:54):
What is it now?
Latest estimate $1.7, 1.9trillion for this year.
Yeah, yeah, so.
So that part's good the the our.
Our mission, I guess, is tomake sure that in addressing it
(38:14):
if they are going to be seriousabout addressing it, that you
know that they make the rightkind of decisions and you know,
yeah, we live in this world andwe love benefits and we
recognize it, and other peoplewho are in the you know other
parts of the economic world, youknow, have their own sort of
cherished.
(38:34):
You know tax preferences and soon, but really understanding
sort of which ones are the rightinvestments to make, and I
think that's why, sort of like,the numbers that you and I were
talking about earlier are sorelevant here.
It's tough because you knowgosh, you and I have both seen
how.
You know, at two in the morning, you know, when they're housing
(38:57):
the senator negotiating andthey're coming up you know $3
billion short, they say, well,you know let's, you know let's
do this with PBGC premiums inorder to pay for the highway
funding bill.
You know, as if that's to dowith highways.
Speaker 3 (39:13):
So so we are attempting target and that's
that's why you know so we areattempting target, and that's
(39:34):
why just making the case forwhat this contributes in terms
of economic security for thevast majority of Americans is so
central to make sure that thisdoesn't end up on the chopping
block just because it's close onthat.
We are grateful for your role,for ABC's continued role in
being vigilant to protect thesystem, to improve the system,
and look forward to continueworking with you, as well as
everyone else at ABC, to makesure that, as I often say, our
(39:58):
job is to make sure that thegovernment doesn't mess up the
good stuff that they actuallyhave spent a long time trying to
create.
Speaker 1 (40:07):
Brian, thank you so much for that, for this
opportunity and just for theongoing work that you and
everybody at ARA is doing andthe leadership that you have in
this industry and this systemthat we all believe in so
strongly.
Speaker 3 (40:21):
Thanks, Jim.
Speaker 1 (40:22):
Be well, thank you.
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