Am I at the point of “hitting a dead horse to the ground” in the GROWING Law? This is, Regular readers will remember, a law that authorizes now before Congress that will allow multi-employer pension plans to offer “joint” plans, a pension plan in which risks are shared among participants and not solely borne by employers’ sponsors. Congress is now back in the session, and has little time ahead to complete, behind closed doors, the “second stimulus bill” is expected to include additional assistance (further stimulus checks? extended unemployment benefit bonuses? injections of state and local money?) as well as, potentially, actions on other topics such as rescue / reform bill for multi-employer pensions and, if brought from the House HEROES Act, UU GROWING.
Meanwhile, I have stressed that this kind of retirement plan does not just emerge but follows models in other countries, specifically the “DC Collective (Determined Contribution)” plan in the Netherlands. And today, Britain is taking the next step to implement its own version of the Collective DC plan in their country, in this case, not only for multi-employer plans (which does exist but has the same funding rules as all the other plans) but as an option for all employer-sponsored pension plans. As the Financial Times reporter Josephine Cumbo reports this morning (via twitter):
“The DC collective pension scheme will be given a legal standing from April 2021, under the steps outlined by the Ministry of Finance today.
“The law will be introduced in the Finance Bill 2020-21 to allow the new collective money purchase pension scheme to operate as a registered pension scheme in the UK.
“The Pension Scheme bill has introduced new laws to enable collective DC #pension scheme to operate in the UK.
“Changes in tax legislation are needed to allow the collective scheme to operate as a UK registered pension scheme. The measurements outlined today allow this. “
Cumbo Link to UK Revenue & Customs policy paper published today which reports that future changes are related to possible laws which allow these plans to qualify for tax deferral in the same manner as traditional defined benefits or defined contribution plans.
Because this plan had been developed in England for some time, Cumbo also wrote explanation articles in the Financial Times as far as 2018, where he explained that the plan would produce a value for the contribution that was similar to the defined contribution plan but that
“The collective DC scheme is an arrangement in which savers put their money into one fund, instead of saving it into their own personal accounts. In this way, the risks of investing and paying for a lifetime pension – known as the risk of longevity – are shared by all members of the scheme, and are not borne by an individual alone. “
At retirement, the plan will pay for a lifetime pension, but that income can go up or down over time.
As The Society for Human Resource Management reports, Royal Mail, which works with unions, requests authorization to implement the CDC plan for its own employees in 2018; but some government officials are already interested in this new type of plan. A The Commons Research Briefing began in early July reported that “In March 2019, the Government said its priority was to enact a law to allow Royal Mail to create a scheme, but to do it in a way that could quickly accommodate other CDC models if it is suitable in the future.”
And the research briefing explains that the English version of the CDC plan looks more like a “DC” plan in terms of building accounts with employer and employee contributions, rather than a fixed benefit formula like typical traditional pensions, with accruals. based on salary and years of service. However, the plan will provide for the integration of longevity, such as pensions or annuities, and is expected to provide greater and more stable investment returns than individual retirement accounts.
Now, of course, Britain has not implemented any of these plans, and all guarantees of effectiveness are only the result of mathematical models based on past economic conditions. But they are is moving forward, and this is the time for the US to do the same.
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