Dataset for Final Policy Paper

The subject area for my paper is retirement policy since I worked with retirement plans in two different compliance roles for ten years. For my PAF 505 class, my paper was on the Financial Security of Americans. Some provisions of the Pension Protection Act (PPA) of 2006 do improve financial security, but it is limited to those individuals covered in an employer sponsored retirement plan(s) along with the employer sponsoring the plans.

Financial security for most Americans is the ability to save and invest for the future and still meet one's basic needs. Obtaining financial security can lead to upward economic mobility for many Americans.

From some of my other posts, you many know I am also interested in health care. The American employee benefits market is in crisis. One big reason for this problem is rising health care costs. Health care and retirement expenditures are interrelated; so personal retirement savings decrease as health care expenses go up. In the United States, an enormous strain is also being placed on various government entitlement programs, such as Medicare, Medicaid and Social Security.

Population aging, the retirement of the baby boom generation, and immigration amongst other demographic and workforce trends are greatly impacting the financial security of Americans. Since the ability to save is the key to financial security at every stage in one's life, the United States needs to establish sensible savings policies that allow all Americans to save, invest, and own at every stage of life.

To restore confidence in employee benefits, we need to increase individuals financial literacy, increase the number of worker's participating in employer sponsored retirement plans, and increase the personal savings rate in America. Educating people about finances and giving all Americans access to financial advise seems the best way to address this problem.

My area of interest is in financial literacy and the automatic enrollment features of retirement plans. The PPA made it easier for employers to provide financial advice to their employees without worrying about the potential fiduciary liability if employer's investments do not perform well. One way to accomplish this goal of increasing plan participant and contribution rates is with the automatic enrollment feature. The PPA increased plan sponsor's ability to offer automatic enrollment by preempting state garnishment laws.

My original research questions are:

• Did the improvements to the rules made by the PPA relating to the financial literacy of retirement plan participants improve or increase plan participation?
• Since the barriers to setting up the automatic deferral option have been removed, have plan participant rates increased?

The answer to both questions seems to be yes from my review of information today. In addition, it may be too soon to obtain data on the impacts of the PPA since it was just enacted in 2006, some provisions start dates were delayed, and data may not be available yet. So, I evidently need to generalize my research parameters. Any suggestions on what you would be interested in learning more about these two topics would be appreciated. Since my job was focused on the very technical aspects of retirement plans and federal pension laws, thinking about the topic more generally is harder for me.

Some datasets that will work for my topic are:

1) The Survey of Consumer Finance. This is a triennial survey of the balance sheet, pension, income, and other demographic characteristics of U.S. families. The survey also gathers information on the use of financial institutions. As mentioned, the survey is conducted every three years to provide detailed information on the finances of U.S. families. The study is sponsored by the Federal Reserve Board in cooperation with the Department of the Treasury. Since 1992, data have been collected by the National Organization for Research at the University of Chicago. The last survey was done in 2007.

http://www.federalreserve.gov/pubs/oss/oss2/2007/scf2007data.html

2) The National Compensation Survey. This survey is produced by the Bureau of Labor Statistics (BLS) in the United States Department of Labor. The National Compensation Survey (NCS) provides comprehensive measures of occupational earnings; compensation cost trends, benefit incidence, and detailed plan provisions. Detailed occupational earnings are available for metropolitan and non-metropolitan areas, broad geographic regions, on a national basis.

My research will be limited to the Employee Benefits Survey portion of the NCS. The Employee Benefits survey produces comprehensive data on the incidence (the percentage of workers with access to and participation in employer provided benefit plans) and provisions of selected employee benefit plans. The survey separates groups into civilian:, private, and state and local government. I may look at both the private and civilian category. It will be specific to defined contribution plans as these are the plans where automatic enrollment (i.e. 401(k) plans) and financial planning skills are most relevant.

http://www.bls.gov/ncs/ebs/

The Employee Benefit Research Institute (EBRI) produces a lot of information and research on topics related to retirement plans. The Retirement Confidence Survey and EBRI Databook on Employee Benefits are great sources of information. The data is not easily downloaded and is mostly reported annually in pdf files. The website does have data about automatic enrollment programs and participant/contributions.

http://www.ebri.org/surveys/rcs/

Questions:

1. Does your employer use automatic enrollment for your 401(k) plan for new employees?
2. Does your employer offer financial education or financial planning services?
3. Are you currently participating in your 401(k) plan?
4. Are you putting in enough money to receive the full employer matching contribution if offered?
5. Does your employer offer a traditional pension plan (i.e. defined benefit plan)?
6. Do you think you are saving enough for retirement?
7. Do you feel comfortable making investment decisions?

(Note: You can find information to answer the plan related questions in your Summary Plan Description. If you are not familiar with this document, its a good idea to review these documents for all of your employee benefit plans.)

Assignment 3

2) Lowi outlines three major types of public policies in his chapter. Find an interesting newspaper article that outlines a policy that seems to fall into one of these categories. It's ok if the policy has some components of all types, but it must represent one of the three policy types for the most part.


The following article talks about the new lending regulations and the creation of a new agency to oversee the financial services industry. The new agency would oversee mortgages and other consumer loans along with monitoring financial institutions compliance with all relevant laws. This one agency will be the sole bank regulator.

http://www.chicagotribune.com/business/all-lazarus.7027416sep20,0,6025816.story

This article talks about the reforms in a little more detail.
http://www.chicagotribune.com/topic/kstu-obama-seeks-new-financial-rules,0,7693519.story?page=1&obref=obinsite

The regulation intends to tighten oversight, limit risk-taking at the largest firms and introduce higher capital requirements. Critics believe Obama is working on the right issues, but the proposed changes will not prevent another crisis. The changes required to prevent another crisis would face strong political opposition.

These reform measures are a regulatory policy. Clearly, this legislation will regulate the behavior of banks and other financial institutions handling consumer loans and mortgages. The law also introduces consumer protection measures, which may reduce or expand the alternatives of private individuals. The articles do not provide a lot of details regarding the actual proposals in the reform bill; although I did not go to the Thomas.gov website to review the bill. The reform will likely raise the cost of doing business for those in the financial services industry. The proposed legislation will likely include stricter penalties for non-compliance.

This is a broad law that applies to all businesses participating in the banking and mortgage industries and all individuals are impacted by the bill in the same way. Interest groups (e.g. the United States Chamber of Commerce Center for Capital Markets Competitiveness) are majorly involved and trying to kill this legislation. The legislation impacts the financial services sector of the economy.

Just wanted to point out that the financial services industry is hardly unregulated. Bank activities are regulated, but obviously those leading to the crash and continued distress caused the problem. Insurance companies also have stricter requirements and must meet higher standards compared to other financial services companies. Usually, an insurance company that fails goes into a type of receivership overseen by the applicable state insurance department. Other insurance companies would take over the liabilities of the failed insurance company. This ensures the promises made to afford coverage are still kept.

Part 2 Assignment 3

1) Lindbloom describes the concepts of incrementalism for policy making. Briefly describe a policy issue or area that you believe can be described largely by incrementalism. In other words, the policy issue that you describe should have progressed over time in an incremental fashion that is similar to the process Lindbloom describes.

One important issue to many American's is protecting their financial security in retirement. One way to help foster financial security is for individuals to invest in retirement plans through their employer. Many people hope to retire and live in the same manner as they did while they were working. Retirement policy has changed over time mostly in a series of small steps. The policies are built out from the current situation and changes are made by degrees. Many changes to retirement policy comes from what the existing market is like and responding to the current situation. In the existing market, 401(k) plans are the focus and in the past the focus was on defined benefit pension plans (i.e. traditional pension plan).

The PWBA, IRS, and PBGC are the federal governmental agencies primarily responsible for overseeing the employee benefits market. They are constantly monitoring the market, making corrections and enforcing the law to make sure the financial security of Americans is protected. Retirement policy has at times involved sweeping reforms, like when ERISA was introduced. But, by and large, changes to current laws and regulations are made slowly. Some believed the changes to retirement policy made by the Pension Protection Act of 2006 (PPA) were sweeping reforms. If you look at the pieces of the legislation individually, they were really just reactions or improvements to already existing laws and policies. However, the PPA also involved a very comprehensive change, so it also has some pieces of the rational-comprehensive model.

EGTRRA increased how much you could contribute to 401(k) plans and allowed for greater portability between benefit plans. Many of these changes were made permanent by the PPA. Changes made by the PPA to encourgage participant education and the changes regarding the rules relating to the provision of investment advice to participants strengthened already existing laws. The PPA also introduced new, stricter funding requirements for defined benefit plans in response to failures by employers to meet the minimum funding rules.

The following measures were added to increase retirement savings: improvements to automatic enrollment, allowing direct rollovers from retirement plans to ROTH IRAs, other portability measures, tax refunds to IRAs, savers credit, increased contribution and benefit limits (started by EGTTRA), and age 50 catch-up and contributions (also started by EGTTRA). The industry had created cash balance plans (a special kind of defined benefit plan) and the PPA legitimized this plan arrangement. The PPA also introduced a DB(K) plan (combines benefits of 401 (K) and pension plan) for small empolyers, which is something the industry studied for a couple of years before the law was enacted. Many of these changes represent changes to the status quo and respresent small changes to improve the already existing system.

Part 2 Week 3 Articles

Shulock Article
A) Briefly describe the two views of policy-making that Shulock outlines in her article.
The two views are the traditional and interpretive (AKA alternative) view. Under the traditional approach, the policy analysis is used to give advice to a specific client regarding the eventual decision or action the policymaker (i.e. client) should take to solve policy problems. Experts trained in proper analytical techniques examine a particular situation and advise clients on the best outcome after the detailed analysis is complete. Decision makers are goal oriented and seek the best option through a systematic process. The information is objective and a useful problem-solving tool that relates policies to outcomes. Analysts learn and measure the impact policy decisions will have on citizens. The traditional approach uses a state based approach and may support incremental changes in policy.

Under the interpretive approach, policy analysis is used: 1) as part of the democratic process; 2) by policy makers, interest groups and citizens to interpret issues; 3) to discover public interest; and 4) to justify actions taken. The information provided by the analysis is part of the decision making process and frames people's understandings of problems. The debate and discourse regarding issues can lead to learning which may change the outcome. Decisions are not about projecting results or consequences, but about the process and organizational legitimacy. Policy analysis is used to rationalize legislative action. Citizens are attentive and marshal popular support for the way issues are framed. Policy makers pay attention to citizen viewpoints.

B) In your opinion, which of these views of policy-making is most accurate? Why?
I'm a little conflicted regarding which viewpoint is most accurate. There is a place for client based analysis that is specifically determining which policy or program should ultimately be selected. Some people still need expert advice when choosing between particular options defined to solve a specific problem. So, a demand for this type of analysis exists. Since analysts are measuring and determining the impact policy has on citizens, it doesn't really give citizens their own voice. This is a little troubling since citizens are usually the beneficiaries of most types of policy decisions.

Shulock's interpretive approach really seems to address how policy analysis could best be used and is used as part of the actual decision making process. It also gives citizens their own voice in the process and the ability to impact the final decisions as active participants in the discussion and debate. When developing policies or legislation, the interpretive process really allows the policy analysis to frame people's understanding of an issue hopefully resulting in a better policy or outcome. Assuming the analysis is accurate, unbiased, and reliable, policies that are more responsive to the public interests is a desirable outcome. In reality, a synthesis of the two approaches would result in the best policies and decisions. However, the interpretive approach is better for promoting a strong democratic process upon which our government is based. Of the two, I like the interpretive approach the best.

http://www.foxnews.com/politics/2009/08/17/obama-open-insurance-cooperatives-alternative-government-run-program/

This article does a good job explaining the insurance cooperative idea that is being discussed as a possible alternative to a government run health care program. Policy analysis is used to teach people what an insurance cooperative is along with providing some historical insight into health cooperatives that existed in the past. This guidance can increase people's understanding of this particular piece of health care reform policy. It also helps frame the debate by bringing up additional questions that need to be addressed regarding this option. Policy players insights
regarding this particular aspect of the reform efforts are also included.

Although this assignment required only finding one article, this editorial did a pretty good job explaining the decision making environment surrounding health care reform. Plus, I spent a lot of time today trying to find an article that worked for this question. http://www.nytimes.com/2009/09/12/opinion/12herbert.html?em

Hird Article
A) What does Hird conclude about the use of policy analysis in decision-making?
Hird compares the influence of non-partisan policy research organizations (NPROs) on state legislators in 19 states. The literature on NPROs questions whether they can remain neutral and contribute in a meaningful way to policy making. Earlier studies on knowledge utilization found a modest and/or indirect impact of policy research on making policy. This study finds NPROs have a significant impact on legislators evaluations of their access to information and of the quality and capabilities of their NPROs.

NPROs are generally perceived as a very important source of high quality information. However, legislators do not perceive NPROs have substantial influence on policy making in comparison with other interests. NPROs are good at providing information, but the provision of information does not translate into policy making influence. However, larger, more analytical NPROs have significantly more influence than smaller, more descriptive NPROs. Legislators from states with large NPRO's that provide more analytical analysis value their work more than legislators from states with smaller NPRO's that focus on more descriptive and short-term analysis. Trust, proximity, and the type of organization is important in determining policy making influence.

B) Are you convinced by his research and his argument? Why or Why not?
I agree that legislators are listening to policy research coming from NPROs and rely heavily on their staffs to provide data and information. It makes a lot of sense that analysis with a short term and descriptive focus is not as beneficial as research with a more analytical emphasis and a longer term focus. Because of the type of information provided, it makes sense for it be used in the process rather than the actual policy decision. If the analysis is perceived to provide background information to help legislators understand issues and possible remedies, it seems likely the research would be less influential in the actual decision making process.

While I like his findings and conclusions, the research itself could have been better. A 25% return rate is not very high. I also wonder why only 19 states were surveyed. Is this because all states do not have NPROs? The definition of what organizations constitutes a NPRO is a little vague to me. I hate to admit the actual NPRO terminology was new to me. Some organizations who claim to be non-partisan seem to have an agenda or aren't really what they claim to be. If we are going to make an argument that NPROs are less influential in the policy process, shouldn't we be comparing these groups to other groups that also provide information and analysis to the decision making process?