Legislative Spotlight

August 2013 • Vol. 5, Issue 8

PURPOSE OF LEGISLATIVE SPOTLIGHT
LEGISLATIVE SPOTLIGHT is produced by NAIFA and is supplied to the Society of Financial Service Professionals as a collaborative effort that seeks to raise federal and state regulatory awareness for financial service professionals. The essential purpose is to facilitate understanding and a more fruitful dialogue with constituents and/or clients with regard to these important issues.

Speaking as one, we can and will make a difference.

Comments on Legislative Spotlight: Contact Ron Panneton with comments or suggestions concerning this newsletter.


NAIFA Again Backs Potential Rules on Showing Lifetime Income

On August 7, NAIFA submitted comments to the Department of Labor (DOL) supporting a proposal to list information about lifetime income in retirement statements to help workers link the contribution and distribution phases of their retirement saving.

NAIFA’s comments support the goal of providing the kind of financial information that will allow plan participants to determine whether they are on track for saving enough to fund a financially secure retirement. NAIFA also encouraged DOL to make sure that any rules it issues are very clear and simple enough to avoid confusion among plan participants. NAIFA cautioned that there must be a robust liability protection standard to avoid the potential for lawsuits if and when projected lifetime benefits fall short of projection. NAIFA recommended minimizing the use of variable assumptions, and providing information on where plan participants can go (DOL and service provider website calculators, for example) to obtain information more specific to their unique situations.

The potential for such a requirement is relatively high. Legislation to require such notices is pending in the Senate, along with the DOL rulemaking initiative. NAIFA believes the information must be clear to plan participants and any firm requirement just contain strong liability protection for plan sponsors and service providers.

Why It Matters: This proposal will give American workers a much better picture of the assets they need to put away to achieve a particular level of savings and retirement spending.

To Learn More: Contact Judy Carsrud at Jcarsrud@naifa.org.


Social Security/Medicare Reform Ideas Sought by House Committee

The U.S. House Ways and Means Committee issued an invitation to the public July 29 asking for input, feedback and new ideas on proposals to shore up the financial condition of the Social Security retirement system and Medicare.

The invitation states that, if Congress take snot action, Medicare is expected to be “bankrupt” by 2026. By 2033, Social Security retirement beneficiaries will be subject to a 23% reduction in benefits. Recommendations for changes to address funding shortfalls in both programs have come from the Administration and two high level commissions and these recommendations formed the basis for Ways and Means Subcommittee hearings in April.

The Ways and Means Committee is seeking feedback and fresh ideas on the following specific proposals:

  • Using the Chained Consumer Price Index (CCPI) to determine Social Security cost-of-living adjustments and benefit increases instead of the current CPI index. The CCPI accounts for changes in buying choices of beneficiaries that reflect real world prices.
  • Proposed changes would reflect increases in life expectancy and benefit increases for long career low lifetime earners.
  • Reform the Post-Acute Care (PAC) program that delivers care after hospitalization.
  • Modernizing beneficiary cost-sharing by (1) reducing premium subsidies for wealthier seniors in Medicare Parts B & D; (2) increasing the annual Medicare Part B deductible; and (3) establishing a home health benefits co-pay.

Whether or not the Ways and Means Committee’s outreach produces much in the way of useful ideas from the public, the path to enactment of any of the proposals culled from the Obama Administration’s budget proposals or the two “blue ribbon” commissions is uncertain at best. The Ways and Means outreach is an attempt to garner public support for some tough decisions lying ahead.

Why It Matters: A bankrupt Medicare system or a 23% reduction in Social Security benefits in the next 15-20 years does not seem like a situation that should be tolerated by our country or elected leaders.

To Learn More: Contact Diane Boyle at dboyle@naifa.org.


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