Case studies in advocacy

As a leading provider of investment, advisory, and recordkeeping services for defined contribution retirement plans, Vanguard supports efforts to strengthen retirement security.

In the last Congress, we actively supported passage of the Secure 2.0 Act of 2022. This new law helps increase retirement security in a number of ways, including: 

• Requiring plans established after 2024 to initiate automatic enrollment design features beginning in 2025. Vanguard research clearly shows that automatic enrollment has proven to generate stronger outcomes for savers.

• Instructing the Department of Labor to update its regulations so that an investment in a plan that uses a mix of asset classes, such as a target-date fund, can be benchmarked against a blend of broad-based securities market indexes. This will ensure that performance benchmarks are more accurate and effective, and it will result in more suitable comparisons when selecting an investment for unique retirement goals.

• Allowing retirement plan service providers to offer employer plans automatic portability services. Auto-portability involves the automatic transfer of a participant’s accounts under $5,000 into the participant’s new employer’s retirement plan, unless the participant elects otherwise.

In the current Congress, we are working on building support for initiatives that further enhance retirement security. One of our top priorities is the Retirement Fairness for Charities and Educational Institutions Act of 2023 (H.R. 3063), which would increase fairness among retirement plan participants by allowing 403(b) plans to invest in collective investment trusts, a low-cost option that is currently available to all other types of retirement plans, such as 401(k)s.

Vanguard has a history of engaging with the Securities and Exchange Commission (SEC) to promote equity market structure reforms that serve the investors in our funds as well as the clients of our brokerage and advice businesses. In December 2022, the SEC released four rule proposals that, if adopted, would constitute the most sweeping overhaul of U.S. equity market structure since 2005. Specific aspects of the proposals include: (1) enhancing broker-dealer order execution quality disclosure, (2) amending the current one-penny quoting increment for stocks, (3) reducing the transaction fee cap charged by national securities exchanges, (4) accelerating improvements to the transparency of better-priced orders (e.g., market data), and (5) changing the routing requirements for retail orders.

In a comment letter, we suggested that the SEC sequence reforms carefully to ensure that change is enduring and to reduce the potential for unintended consequences that could harm investors. Specifically, we highlighted the value of prioritizing: (1) enhanced disclosure of broker-dealer execution quality, which would enable retail investors to make an apples-to-apples comparison of execution quality across broker-dealers and (2) accelerating the implementation of market data reforms that would make the quotes retail investors see more informative.

In addition, the letter highlights potential downsides associated with a proposal that would reduce the quoting increment for some stocks from one cent to one-tenth of a cent, because such an approach could lead to predatory trading strategies that may harm fund investors. We also urged the commission to carefully consider the costs and risks of this proposal to avoid unintended consequences.   

Vanguard has been active in modernizing the default delivery method for retirement plan notices from paper to electronic delivery (e-delivery) while preserving the right of investors to receive paper documents if they prefer. E-delivery provides for more environmentally friendly, effective, and efficient disclosure than paper documents and retains investor safeguards. Vanguard’s data show that e-delivery leads to lower costs, increased engagement through a tailored online experience, and, ultimately, stronger investment outcomes across all age ranges.

Vanguard additionally supports the Improving Disclosure for Investors Act of 2023 (H.R. 1807), bipartisan legislation that would direct the SEC to permit certain disclosures under federal securities laws to be shared with investors electronically. Investors would retain the ability to receive paper documents at any time.

Vanguard is also routinely invited to participate on policymaker panels and on various market policy advisory committees. In the United States, these include the Treasury Borrowing Authority Committee and the Commodity Futures Trading Commission Market Risk Advisory Committee. These efforts help keep policymakers informed about how markets are working, encourage the sharing of ideas and the development of industry standards, and promote best practices.

Vanguard maintains a federal political action committee (PAC), the Vanguard Committee for Responsible Government (VCRG), which is funded solely by voluntary contributions from eligible Vanguard officers. The VCRG is used to support federal candidates on a bipartisan basis, consistent with Vanguard’s giving guidelines and our mission to take a stand for all investors and give them the best chance for investment success. VCRG’s activities are subject to federal regulation, and all contributions are reported to the Federal Election Commission and are available online here. Vanguard does not use corporate funds to contribute to federal, state, or local candidates, political parties, or political committees.