Bill Overview
Title: Maximize Americans' Retirement Security Act
Description: This bill revises the fiduciary duties for a retirement or employee benefit plan that is regulated under the Employee Retirement Income Security Act of 1974. The bill generally requires a fiduciary to select and maintain investments for a plan based solely on pecuniary factors. Under the bill, a pecuniary factor is a factor that is expected to have a material effect on the risk or return of an investment based on appropriate investment horizons that are consistent with the plan's investment objectives and funding policy. A fiduciary may only use nonpecuniary factors if the fiduciary is unable to distinguish between investment alternatives on the basis of pecuniary factors alone. In such a case, the fiduciary must provide specified documentation to the plan's participants and beneficiaries, including an explanation of how the chosen nonpecuniary factors are consistent with their interests.
Sponsors: Sen. Braun, Mike [R-IN]
Target Audience
Population: Individuals with retirement plans regulated by ERISA
Estimated Size: 140000000
- The Employee Retirement Income Security Act of 1974 (ERISA) covers a wide range of employee benefit programs, affecting millions of Americans relying on retirement and health plans managed by fiduciaries.
- The bill targets fiduciaries responsible for selecting and managing investment options within retirement plans, impacting how they make investment decisions.
- Since the changes focus on fiduciary duties, the bill primarily impacts those with retirement plans under ERISA, which includes a significant portion of the working and retired U.S. population.
- Approximately 140 million Americans' retirement plans are governed under ERISA, thus they are the ones who will most directly be affected by any changes in fiduciary duties.
Reasoning
- The target population covers a wide demographic range, largely focusing on the middle-aged to older working population who are close to retirement or already retired. It would impact a diverse economic background as ERISA plans are common across many employment sectors.
- The policy doesn't directly allocate funds to beneficiaries nor does it provide direct financial benefits to plan participants; rather, it adjusts the responsibilities and documentations of fiduciaries managing these plans.
- Given the size of the target population and the policy's goal, changes may have a perceived indirect impact primarily on the psychological assurance regarding the soundness of their retirement plans.
- The budget is relatively low per capita given the target size, indicating that the primary nature of the policy is regulatory oversight rather than financial distribution or investment.
Simulated Interviews
HR Manager (Chicago, IL)
Age: 42 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 15/20
Statement of Opinion:
- I feel somewhat secure about my retirement, but there's always a worry about how funds are managed.
- I like the idea that fiduciaries must focus on financial returns first.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 7 | 5 |
Factory Worker (Dallas, TX)
Age: 56 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 20.0 years
Commonness: 10/20
Statement of Opinion:
- I'm nearing retirement, so any policy affecting my plan matters a lot.
- I just hope this doesn’t complicate the investment process further.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 4 |
| Year 5 | 7 | 4 |
| Year 10 | 8 | 3 |
| Year 20 | 7 | 3 |
Software Engineer (San Francisco, CA)
Age: 35 | Gender: other
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 13/20
Statement of Opinion:
- I think it's good to focus on investments having solid returns, especially if it means better outcomes for us.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Retired Teacher (Miami, FL)
Age: 64 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 15.0 years
Commonness: 12/20
Statement of Opinion:
- I'm always concerned about my retirement funds lasting long enough.
- It's reassuring if fiduciaries must rigorously justify their choices.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 5 |
| Year 5 | 8 | 5 |
| Year 10 | 9 | 5 |
| Year 20 | 8 | 4 |
Consultant (New York, NY)
Age: 29 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 3.0 years
Commonness: 18/20
Statement of Opinion:
- As long as my returns are good, I'm not overly worried about the details.
- It seems like a cautious approach to investment management.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 7 |
| Year 3 | 9 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 9 | 7 |
University Professor (Boston, MA)
Age: 48 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 7/20
Statement of Opinion:
- This seems like a limitation if one wants to consider environmental or social factors in investments.
- Not thrilled if this limits socially responsible investments.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 6 |
| Year 2 | 5 | 6 |
| Year 3 | 5 | 6 |
| Year 5 | 5 | 6 |
| Year 10 | 6 | 7 |
| Year 20 | 6 | 7 |
Retired Accountant (Phoenix, AZ)
Age: 72 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 2.0 years
Commonness: 9/20
Statement of Opinion:
- I'm skeptical of changes to how retirement plans are run.
- Unless directly beneficial, I'd prefer the current setup over more bureaucracy.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 5 | 5 |
Self-employed Contractor (Atlanta, GA)
Age: 61 | Gender: male
Wellbeing Before Policy: 4
Duration of Impact: 0.0 years
Commonness: 14/20
Statement of Opinion:
- I'm less concerned since this won't impact my classically managed IRA.
- Seems like a reasonable regulatory adjustment for those impacted.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 4 | 4 |
| Year 2 | 4 | 4 |
| Year 3 | 4 | 4 |
| Year 5 | 4 | 4 |
| Year 10 | 4 | 4 |
| Year 20 | 4 | 4 |
Public School Administrator (Seattle, WA)
Age: 39 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 11/20
Statement of Opinion:
- Any policy aiming to ensure financial prudence is worthwhile.
- I appreciate a focus on financial factors but hope it remains balanced with long-term impacts.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 8 |
| Year 20 | 8 | 8 |
Non-profit Director (Denver, CO)
Age: 50 | Gender: other
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 5/20
Statement of Opinion:
- I'm worried this will discourage the use of non-pecuniary factors that matter to me.
- I prefer having my investments account for societal impacts too.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 6 |
| Year 2 | 5 | 6 |
| Year 3 | 4 | 7 |
| Year 5 | 4 | 7 |
| Year 10 | 5 | 8 |
| Year 20 | 6 | 7 |
Cost Estimates
Year 1: $200000000 (Low: $150000000, High: $250000000)
Year 2: $150000000 (Low: $120000000, High: $200000000)
Year 3: $120000000 (Low: $90000000, High: $150000000)
Year 5: $100000000 (Low: $70000000, High: $130000000)
Year 10: $80000000 (Low: $60000000, High: $100000000)
Year 100: $50000000 (Low: $40000000, High: $60000000)
Key Considerations
- Potential challenges in identifying and defining pecuniary vs non-pecuniary factors accurately.
- Legal and consulting industries may benefit significantly from the increased demand for compliance-related services.
- Short-term compliance costs are countered by potential long-term savings from optimized investment decisions.
- Monitoring implementation consistently to capture both pecuniary efficiency gains and legal clarity.