Some Top of Mind Thoughts on President Trump's Retirement Executive Order
On August 31st, the Friday before Labor Day (why do these things ALWAYS happen on a Friday?); President Donald Trump signed an executive order; that if fully carried out, could provide for some significant changes to retirement plans. The three areas addressed in the executive order are the following:
- Open Multiple Employer Plans (MEPs)—The order directs the Departments of Labor and Treasury to make it easier for unaffiliated employers to band together and form what it calls “association retirement plans” more commonly known as MEPs.
- Minimum Required Distribution (MRDs)—The order directs Treasury to review the rules on required minimum distributions from retirement plans to see if retirees could keep more money in 401(k)s and individual retirement accounts (IRAs) for a longer period of time.
- Paper Elimination—The order directs the Departments of Labor and Treasury to consider ways to improve notice requirements to reduce paperwork and administrative burdens.
My preliminary reaction to all of this is a big fat “Hooray!” as these recommended changes are all long overdue, in my opinion. However, all we have is an executive order at this point. As always, the “devil is in the details” in terms of the actual changes to retirement plans that will occur because of the order. Having said that, here is my wish list of what I would like to see happen:
- Open MEPs—Retirement plan coverage for people who work for small businesses is currently terrible-- so bad that states such as Oregon have stepped in with auto-IRA coverage for such employees. In addition to the open MEP concept, I would like to see the government be friendlier to all methods of covering such employees in retirement plans, including state efforts (to which the current administration has NOT been so friendly).
- Minimum Required Distributions (MRDs)—Forget about the review; I can tell you what to do with MRDs right now—GET RID OF THEM! As far as I can see, they only benefit the IRS; participants don’t understand them, and therefore often do not take them. They are a tremendous administrative burden on plan sponsors, and I am certain recordkeepers hate them as well. Let people keep their money in a retirement plan or IRA for as long as they wish; if they die, their beneficiaries will have to pay taxes on the money anyway, so it is not as if this is some huge revenue loss for Treasury. (Note: there is proposed legislation that would eliminate minimum required distributions, but only for those with total retirement account balances that are less than $50,000).
- Paper Elimination—The next piece of actual paper I receive in relation to my retirement plan should be the last. ‘Nuff said.
Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Opinions expressed are those of the author, and do not necessarily represent the opinions of Cammack Retirement Group.
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