The financial industry has engaged in significant lobbying on legislation that would revamp the U.S. retirement system, and it’s now sounding delighted about the bills that are making their way through Congress.
Bipartisan bills in the House and Senate — dubbed the SECURE Act and the Retirement Enhancement and Savings Act, or RESA, respectively — would bring a range of changes, from boosting the use of annuities to helping small employers team up to improve their plans.
A list of the companies who lobbied on RESA last year reads a bit like a who’s-who for the retirement world. Prudential Financial Inc. PRU, -0.36% , American International Group Inc. AIG, -0.09% , TIAA, State Street Corp. STT, -0.09% , Voya Financial , Vanguard Group, Charles Schwab Corp. SCHW, -0.22% , LPL Financial and BlackRock Inc. BLK, -0.36% all weighed in, according to an OpenSecrets.org tally, which found 73 organizations registered to lobby on that bill.
In addition, the bills’ sponsors have received significant support from the financial sector in recent years.
The SECURE Act, which was approved April 2 by the House Ways and Means Committee, has been rolled out by Massachusetts Democratic Rep. Richard Neal, who chairs that committee, as well as Texas Republican Rep. Kevin Brady, Wisconsin Democratic Rep. Ron Kind and Pennsylvania GOP Rep. Mike Kelly.
Neal’s campaign committee and leadership PAC have received about $749,000 from sources in the securities and investment industry and the insurance sector in the past two years, according to data from OpenSecrets.org, which is a website tracking money in politics that’s run by the nonpartisan Center for Responsive Politics. Brady, the House panel’s ranking member and former chairman, drew $955,000 from those sources over that period for his committees, while Kind got $479,000 and Kelly, $322,000.
RESA has been introduced by Iowa Republican Sen. Chuck Grassley, the Senate Finance Committee’s chairman, and Oregon Democratic Sen. Ron Wyden, the ranking member. Grassley’s campaign committee and leadership PAC have received about $1.1 million from sources in the securities and investment industry and the insurance sector in the past five years, according to OpenSecrets.org data. Wyden got $1.9 million from those sources over that period for his committees.
What the bills’ sponsors in Congress are saying
Spokespersons for the SECURE Act and RESA’s sponsors in Congress said the lawmakers hadn’t been influenced by any campaign contributions.
“Political donations have no bearing on how Chairman Grassley runs the Finance Committee,” said spokesman Michael Zona, adding that RESA is the result of many years of bipartisan work. “As he has done his entire career, Sen. Grassley acts in the interest of taxpayers, Iowans and all Americans.”
A spokesman for Kelly said the five-term Pennsylvania congressman has co-sponsored the SECURE Act because of his longtime interest in improving the retirement system.
“Congressman Kelly has been a proponent of strengthening Americans’ retirement security since he was first elected, and remains so today. He is a founder of the House Retirement Security Caucus,” said the spokesman, Andrew Eisenberger. “Congressman Kelly does not take his cues from campaign donors, and to suggest that his work to help Americans save more of their hard-earned dollars to prepare for retirement results from donations from the financial industry is cynicism at its worst.”
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A spokesman for the House Ways and Means Committee’s Republicans, a group that Brady leads, didn’t comment on the campaign contributions, but also emphasized the bipartisan support for the House bill. Rob Damschen, the spokesman, said: “With paychecks for working families growing at the fastest pace in over a decade after the GOP tax cuts, Republicans and Democrats on the Ways and Means Committee agree now is the perfect time to help workers save more and earlier for retirement, which is why the SECURE Act unanimously passed the committee earlier this month.”
Wyden spokeswoman Ashley Schapitl said RESA is “unquestionably pro-worker, which is why it has been endorsed by AARP and secured unanimous support in the Finance Committee.”
Neal and Kind’s offices didn’t respond to requests for comment.
What big financial firms are saying
When asked about AIG’s message to lawmakers when it lobbied last year on RESA, the company’s president for its individual retirement business, Todd Solash, said: “The headline for us is we see a lot of value in continuing to incent retirement savings.”
Improving aspects of the retirement system is also important, he added. More could be done to expand access to retirement plans and increase incentives, but first it’s better to “get one done and over the line,” Solash told MarketWatch. The AIG executive also said: “These are valuable steps forward, and we’re excited to see a bipartisan solution emerging and — knock on wood — going through and getting enacted.”
AIG spent $1.4 million overall on lobbying last year, with disclosures showing that retirement legislation was its top focus.
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There is public support for these types of bills, a Prudential Financial exec noted.
“It’s not just industry that wants this legislation. It is Americans who want this legislation,” said Ann Kappler, Prudential’s head of external affairs and deputy general counsel. “When we did a survey, we found that 77% of the folks that we surveyed said that Congress should do more to expand access to retirement plans.”
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The provisions in the bills that Prudential views as important are those that would increase the use of multiple employer plans, or MEPs, among small employers, as well as those that would support greater use of annuities and require that 401(k) statements show the monthly income that employees can expect from their savings, according to Kappler.
“When you look at both the SECURE Act and RESA, they really would represent the most significant and meaningful enhancements to the private-sector retirement system since the 2006 Pension Protection Act. So we’re very excited about it and think it’s a very positive step forward,” she said.
Prudential spent $6.1 million overall on lobbying last year, with filings indicating that retirement bills were its No. 1 focus.
All parts of the bills “have a pretty good chance” of becoming law, Kappler added. “There are some little things that need to get worked out, like what the minimum age for withdrawals is — is it 72, is it 70 ½.” The House bill — whose full name is the Setting Every Community Up for Retirement Enhancement Act — differs from the Senate measure in seeking to raise the age for mandatory distributions from retirement plans to 72 from 70½. An EY analysis of the two measures notes that the differences also include the House letting parents take up to $5,000 from retirement accounts without penalty to cover costs for a birth or adoption.
Other companies praising Washington’s push include Fidelity Investments, which said it appreciates and applauds the efforts in the House and Senate. Robo adviser Betterment has chimed in as well, saying the SECURE Act is “taking a big step forward in the right direction.”
The changes proposed in the bills are “generally positive for life insurers and brokers,” but are “not a game changer,” said Keefe, Bruyette & Woods analysts Brian Gardner and Michael Michaud in a recent note. The prospects for the legislation are good, with Congress likely to pass a retirement measure this year, the analysts added.
Prudential Financial’s stock has climbed 27% this year, AIG is up 17%, and State Street has gained 11%, while Schwab is higher by 9% and BlackRock has tacked on 18%. The S&P 500 SPX, +0.10% has risen 16%.