401(k) Specialist Issue 1 - 2016 - 6

A 401(k) Regulation Win (Really)
EDITOR'S LETTER
SOMETHING GOOD HAPPENED in New Jersey (that's the first time we've ever written
that sentence). Gov. Chris Christie signed a compromise bill in January that's a variation
of numerous laws in other states establishing government-run 401(k)s. If your
employer is too small-or too cheap-to offer a plan, the benevolent state in which
you reside will do it for you. If only ...
The flurry of government activity in the retirement policy space isn't in your head,
and it isn't accidental. The race is on to get something (anything) done before the
president leaves office. An increase in interest at the state level is accompanied by the
omnipresent fiduciary reform proposal from the DOL as well as new " guidance " on the
inclusion of ESG factors in the investment process for pension managers. Don't expect
it to end there.
The former, the establishment of 401(k)s (or more accurately IRAs) at the state level,
includes an ERISA safe harbor provision to avoid running afoul of reporting and discrimination
requirements. You read that right; the administration wants new regulations
to exempt the government from earlier government regulations.
Here's the kicker: while private businesses will offer the plans in theory, state governments
could potentially be on the hook for their funding. As The Wall Street Journal
recently reported, language included in California's law establishing its plan does not
guarantee employee ownership, and therefore portability, of the proceeds. Additionally,
it might end up simply acting as something akin to current state pensions, with
taxpayers guaranteeing against losses, as is the case with Illinois's plan.
The great thing about the Garden State is that it only establishes a marketplace to
encourage 401(k) expansion, rather than requiring it like other states.
While we'd normally advocate for a barrel of monkeys over incompetent politicians
when it comes to meddling with Americans' retirement, we also admit we're torn,
as Social Security (despite long-term solvency concerns) is generally successful and
incredibly popular, one of the only government programs to claim that mantle. Even
if you disagree with this pillar of the New Deal, when combined correctly it unquestionably
gives the 401(k) participant portfolio a longevity boost at a time when baby
boomers need it most.
The Jersey plan also protects the private sector and lets 401(k) advisors do what
they do best without fear of being crowded out. It's exactly the kind of plan the industry
should encourage, and all advisors get behind.
Remember, 401(k) Specialist brings you content on all things 401(k), and is the
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If there is someone in your firm who is focused on 401(k) business,
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EXTRA
John Sullivan
Editor-in-Chief, 401(k) Specialist
6 ISSUE 1 2016 | 401kSpecialistmag.com
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401(k) Specialist Issue 1 - 2016

Table of Contents for the Digital Edition of 401(k) Specialist Issue 1 - 2016
