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Exclusive Interview: Congressman Tom Marino says “Young Working Americans Can Get Excited About” Child IRA

Exclusive Interview: Congressman Tom Marino says “Young Working Americans Can Get Excited About” Child IRA
August 18
00:02 2015

In a first for FiduciaryNews.com, we have the rare privilege to interview a sitting Federal elected official. Congressman Tom Marino represents Pennsylvania’s 10th Congressional District. Elected in 2010 after unseating a two-term incumbent, he Marino-1530_300now serves as a member of several House Committees (you’ll see them mentioned in the questions below) and chairs a subcommittee on regulatory reform. He’s got a common-sense “middle America” background that’s not unusual to find among the citizens of his district. We think that means he more than likely speaks for the masses of folks who reside in “flyover” country rather than their big-city cousins. As such, his finger may be better positioned to judge the pulse of the typical voter and might also offer a hint at things to come as we approach the 2016 presidential election.

FN: Congressman Marino, our readers are always interested in learning how our interview subjects ended up where they are. Tell us a little bit about your background and how it led you to where you are today.
Marino: Well, I am a baker by trade. I started working in a factory at a very young age and learned the value of a dollar and how to stretch a buck. I also learned the importance of a quality education; and I learned it the hard way because I was passed up for a promotion. So I decided to go to law school. My wife worked full-time and I worked while not studying and going to class. Those were not times of great abundance but we learned a great deal and got through it together. Shortly thereafter receiving my law degree, I went to work and eventually became a U.S. Attorney. Every day I felt I was doing good work and protecting the people of my communities but something was a missing. That something was a healthy and prosperous America. It was led by a deeply misguided federal government and our country was headed in a dangerous direction. So I ran for Congress on a vow to be a part of new ideas and solutions to problems that have been ailing us for some time. Today, I am proud to say that has largely come true but I can also say there is still so much to be done. 

FN: You serve as a member of the House Foreign Affairs Committee. The global economy has been in the news a lot lately, notably with the Greece default and the collapse of the Chinese markets. How might this impact the America economy and, in particular, the securities markets many retirement assets are invested in?
Marino: Things are undoubtedly interconnected in the world economy and more so than ever before. That interconnectivity is largely based on trust and an understanding that joint economic benefit among nations should be honest and fair. The system we currently have rarely operates that way. We see nations like China and Russia game the system by fudging the numbers and cheating to gain advantages over honest and economically ambitious nations like America. Greece is a different story of course but the overarching point is that we cannot afford to risk extreme volatility in the securities markets because some countries refuse to control their spending and debts. The solution may be as simple as strong leadership; calling out these nations in a respectful but strong and blunt way. We need to call it like we see it and refuse to placate and enable behavior that endangers investors in our country who are looking to make gains, play by the rules, and secure their futures. But the real question is: Where is that leadership? 

FN: As a member of the Committee on Judiciary, you serve as Chairman of the Subcommittee on Regulatory Reform, Commercial and Antitrust Law. What are some of the more significant issues you find yourself discussing there?
Marino: Let me just say that I am pleased to be working in the regulatory reform environment. I think excessive regulation by the federal government is the biggest self-imposed threat to our economic security and prosperity. Whether it is duplicative regulations or agency programs, we do nothing but hold ourselves back. That said, my subcommittee handles some really significant issues from bankruptcy to agency rule-making. We have broad oversight into many facets of the federal government. In other words, where there’s regulation, my committee will be there to ensure things are being done right and in a pro-business, pro-growth, and pro-jobs way. 

FN: There’s been much discussion about a so-called “retirement crisis.” Despite the documented problems they have maintaining their own public employee retirement funds, the “crisis” atmosphere has prompted some states to try to offer state-sponsored retirement plans to private employees. What are some potential ERISA issues with individual states doing this? What do you see as some of the advantages and disadvantages of individual state-sponsored retirement plans for private employees?
Marino: I saw a poll today that said 51% of American non-retirees do not believe they will draw Social Security benefits after they retire. What is worse is that 64% of 18 to 29 year-olds believe the same. This points to a few things but the first is reliance on government to save for them and provide for them the nice life they deserve in retirement. At this juncture I am hard-pressed to come up with a promise that government has kept or a program it runs well and efficiently. These numbers are alarming. Every American citizen must take their retirement into their own hands and save. They must protect themselves and prepare now. They must build a robust nest egg that will give them a comfortable life in retirement. As for the states seeking to take on state-sponsored plans for private individuals, I generally prefer that states take issues head-on and be those laboratories of democracy as Justice Brandeis once put it. However, I believe in the rule of law and if the states attempt to provide programs, they must do so in full adherence of the law. Even more important, states should never force their citizens into programs they do not wish to participate in. We have seen how that has gone on the federal level, not well.

FN: While the DOL has been directed to address the “problem” of too few small companies offering retirement plans by re-interpreting ERISA to allow states to offer their own state-sponsored retirement plans, some industry veterans feel the DOL has added to the problem by placing undue constraints on 401k MEP plans – vehicles designed for small companies to come together to offer a shared 401k plan that can take advantage of the same economies of scale as larger plans. In response to the DOL’s foot dragging on this issue, Orin Hatch has talked about passing reform in the Senate that would circumvent the DOL on this. How is this solution better than individual state-sponsored retirement plans for private employees and are you aware of any movement on this issue in the House?
Marino: This is a perfect example of what I was talking about earlier. Government is notorious for passing laws then “reinterpreting” them years later in order to suit its own purposes. That has got to stop. Government agencies like the DOL ought to remember they work for the people, not for the mission or culture of their bureaucracy. The DOL must remember their primary mission is to make sure, in this regard, that the climate for retirement savings is a fair one that encourages competition. I have not talked to Senator Hatch about the details of his plan but a solution in the Senate which bypasses an agency full of unelected bureaucrats is probably for the better because it puts the burden on Congress to make sure we stay atop these issues. 

FN: One of the advantages of the state-sponsored efforts – at least in a few of the states – is that they may be paving the way for privatizing Social Security or improving the private 401k. In other words, they would permit (or require) payroll deduction directly from the employer to the employee’s IRA. This is akin to direct deposit into a savings account, only it would go into a tax-deferred retirement account. More broadly, this might be a possible future for the 401k plan, with employee contributions – and any employer matching – going directly into an individual retirement plan instead of a corporate plan. This offers the advantage to the employer of both removing a significant unit of work (some companies even hire specific personnel to handle their retirement plan) as well as removing nearly all the plan sponsor’s fiduciary liability when it comes to managing the retirement plan (since each individual employee will now have the responsibility for maintaining their own retirement account). In addition, there are advantages to employees, who now can have a single retirement plan no matter how many companies they work for. In addition, by making it a personal retirement plan instead of a corporate retirement plan, employees benefit from reduced fees (since so many intermediaries have been eliminated). What would it take for retirement reform along these lines to be passed in Congress and would this be something the President would sign onto?
Marino: First off, more choice for the individual investor is better. It allows them to take control of their future and employ a strategy that will allow them to live comfortably in retirement. The modern American economy should demand a retirement investment system that accounts for their speed by which employees can switch companies or careers. People need to be able to take their plans with them. When it is all said and done, when the employee retires, it is their money. We should make it easier for them to keep as much of it as possible. However, what you described in your question is largely the result of poor decisions in government which have allowed the growth of so many intermediaries. Layering by confusion, expediency and political agendas is a favorite tactic of the left and one we have seen invade the retirement space for too long. As for the passage of retirement reforms in Congress, I say we start with striking excessive and duplicative regulations. If we start there, we may get a better idea of what more may be needed. Lastly, let me say this, Congress needs to hear more about retirement issues. We need to be better educated on the issues and emboldened to make meaningful and fair changes. Right now, the voices of reform are largely silent. What is more ominous are the silent issues within our retirement climate which are only getting larger. 

FN: Regarding Social Security, it’s clear it will eventually run out of money before it reaches its 100th birthday. How might Congress begin to rethink the purpose and delivery of Social Security without jeopardizing the benefits for those over 50 years old? Focusing only on the “retirement” (as opposed to the disability) portion of Social Security, it is obvious society has changed dramatically since the pre-WWII founding of Social Security. We now see two income households as the norm rather than the exception. How does this theoretically reduce the need for Social Security to include spousal benefits? In addition, many Millennials assume Social Security won’t be around when they retire. Ironically, many baby boomers felt the same way in the 1980’s, yet the reform that took place then missed the opportunity to take advantage of this. Do you think we might miss out on a similar rare opportunity today (remember, millennials now make up the greatest segment of the workforce)?
Marino: I am glad you separated the retirement aspect with the disability portion. That does not always happen when typical politicians debate these things. My position on Social Security is and has been clear. But I am interested in those millennials we talked about earlier. What is their future? They pay into a system they believe will not be there for them. I think that is alarming because they are our future parents, innovators, educators and leaders. When I talk to these young people, I see so much ambition and creativity. In many regards it inspires me. Their energy and drive reinforces the idea that new ideas are needed for their generations. We need new systems for them and new ways to help save for retirement. Much of that starts with financial education. New ideas should include components of customization and incentives to save while making it easier for them to progress throughout their working lives without onerous regulatory frameworks or outdated systems that make the process of saving and strategizing needlessly hard. 

FN: Lastly, what are your thoughts on a “Child IRA” ( in a nutshell, a tax-deferred savings account that would allow any new born to be gifted up to $1,000 a year until their 19th birthday). Such a savings vehicle, maxed out and invested at a return that is only 80% of the average long-term return of the markets, would yield the child $2.25 million when they retire at age 70, and that doesn’t include any of the money they would save on their own during their working years! – talk about solving the Social Security dilemma!
Marino: The Child IRA is a common sense solution and should be part of the bigger approach to fixing our retirement system. Congress must consider this and work out the tax structure aspect so future generations have money, sustainable for retirement. These are the kinds of ideas that I think young working Americans can get excited about. It helps them be “for” something rather than worry about something they inherently feel will not be there for them when they reach retirement age. I think there is still much to be worked out with the Child IRA idea but it is a start and I fully endorse new solutions to America’s retirement crisis, not the same old, same old. 

FN: Let’s talk about the DOL’s proposed Fiduciary Rule. Leaving aside the “he-said/she-said” arguments between the DOL and the industry, the issue has always been about asymmetrical regulation. On one hand, RIAs must follow the fiduciary standard, while, one the other hand, brokers do not. That’s all fine and dandy as long as RIA are the only entities that offer investment advice and brokers limited themselves to agency relationships (i.e., being brokers). But since the SEC began allowing dual registration during the Clinton administration, the investing public has gotten confused as brokers now also offer investment advice. It’s obviously not fair for one type of business to be regulated more strictly than another type of business when both types of businesses are providing the same services in the same industry. What do you think is the best way to level the playing field in a way that’s fair to everyone?
Marino: Chris, you hit the nail on the head again! We need regulatory reform and we need it now more than ever. Government’s rule-making process should not favor one group or another and maintain a system of favoritism among competitors by confusing consumers. That is exactly how things become entrenched and nothing gets done. Regulations should regulate evenly. They should be smart, favor only efficiency and encourage competition. What is the best way to do that? I am sure there are many answers from the experts, but in my experience, when you sit folks down in a room and hash things out, the common ground emerges rather quickly. I think it is time Congress gets involved and begins a serious discussion about the best first step to take. Even if it is small. We ought to stop farming out these important reforms to bureaucrats. 

FN: Are there any other thoughts, ideas, or comments you would like to share with our readers?
Marino: Regulatory reform is vital in the retirement sector (and so many others). Congress can lead in passing meaningful reforms but we need your involvement to navigate what are the next best steps.

FN: Wow! Each answer could write its own headline! Congressman Marino, thank you so much for sharing your thoughts, ideas, and suggestions with our readers.

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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