In early May 2015, U.S. Secretary of State John Kerry made a historic but little noticed visit to Somalia, a country no other U.S. secretary of state had ever visited. His trip symbolized both how far Somalia has come—from the blackest days of civil war, clan infighting, and famine in the 1990s; to the brutal rule of the jihadi group al Shabab in the late 2000s; to something getting closer to normal now—and how very far it still has to go.

The fact that a high U.S. official could enter the country at all speaks of real security improvements. During his visit, moreover, Kerry announced the reopening of a U.S. embassy in Somalia, which had been closed since 1991 when the government of long-term dictator Siad Barre collapsed. But the fact that Kerry’s visit was a brief few hours—during which he did not even leave the heavily-guarded Mogadishu airport—also points to deep and persistent security challenges. Moreover, his meeting with Somali President Hassan Sheikh Mohamoud and Prime Minister Omar Sharmarke comes at a time when the relationship between international donors and the Somali government has soured and the Somali people have grown increasingly weary of their government. The early optimism that the 2012 election of Mohamoud by appointed members of the Somali parliament would usher in badly needed changes in Somali politics, toward inclusiveness, effectiveness, and accountability, dissipated long ago.

Indeed, an observer’s bullishness about Somalia very much depends on his or her baseline. Compared to the early 1990s or 2011, when al Shabab controlled most of Mogadishu and most of central and southern Somalia, with only the semi-autonomous regions of Puntland and Somaliland escaping its grasp, Somalia is in much better shape. However, when compared to the spring of 2013, when I took a previous research trip there, the 2015 spring (my latest trip), and summer hardly look peppy. Security is tenuous, with al Shabab and the African Union Mission in Somalia (AMISOM) forces stuck in a draw, and politics has been regressing to many of the same old discouraging patterns.

The rest of 2015 and 2016 are important times for Somalia. They could either resurrect optimism about the country’s progress or reinforce disappointment. The current AMISOM mandate expires in November 2015. By 2016, as a compact between the international donors and Somalia government specifies, presidential elections are supposed to take place, a constitution redrafting is to be finished, and the transformation of a centralized state into a federal one with states formed is to be completed. From the perspective of the middle of 2015, this agenda looks daunting.

AL SHABAB’S BATTLEFIELD

After struggling against al Shabab for several years and hunkering down in a few blocks of Mogadishu, AMISOM forces, with the assistance of international private security companies and international funding, finally began to reverse the al Shabab tide in 2011. As clan militias defected from al Shabab, AMISOM succeeded in pushing the terrorist group out of Somalia’s major cities. U.S. air and Special Forces attacks against al Shabab leadership eliminated some key figures, such as the group’s amir, Ahmed Godane, in September 2014 and its previous leader, Aden Ayro, in May 2008.

That said, al Shabab is hardly defeated—even if its membership is thought to be down to around 6,000, with the most potent and hardcore Amniyat branch down to perhaps 1,500. (Such estimates, given by Somali government officials and international military advisors, need to be taken with a grain of salt, since the capacity of insurgent groups to replenish their ranks often outpaces the capacity of counterinsurgent forces to kill or arrest the groups’ members.) The group’s spectacular terrorist attacks in Kenya and Uganda, such as the one on Nairobi’s Westgate Mall in September 2013 and on a teaching college in the city of Garissa in April 2015, don’t necessarily mean that al Shabab has lost the capacity to operate in Somalia. In fact, if anything, al Shabab’s operations have become more targeted and more effective, and generate more casualties with the militant group losing fewer fighters. The fact that the group has deeply infiltrated Somali military and police forces helps it in that regard.

Although AMISOM still holds the major cities that it won back from al Shabab as part of the 2014 Operation Eagle and Operation Indian Ocean, al Shabab’s presence in supposedly liberated cities is often robust. The group extorts shopkeepers and intimidates the local population with threatening night letters that regularly appear in public spaces. People routinely receive cell phone texts such as “You forgot to pay your zakat (religious tax); tomorrow we cannot guarantee your security.” Such intimidation is prevalent even in Kismayo, a strategic port in the southern region of Juba that used to be a key source of revenue for al Shabab from customs and smuggling items like charcoal. Kismayo, and the newly-formed state of Jubaland, are controlled by Ahmed Madobe, who defected from his role as al Shabab commander several years ago and, with the support of Kenyan forces, took control of the area and declared himself president of the state.

Over the past year, al Shabab attacks have also escalated in Mogadishu. Assassinations are a daily occurrence. Many government officials have to live and work (often in the same room) in hotels close to the Mogadishu airport, a palpable symptom of the decline in confidence and sense of security since 2013. The fact that some assassinations are actually perpetrated by rival politicians, warlords, and businessmen, with al Shabab happily taking the credit, does not lessen the sense of insecurity.

Al Shabab also controls roads and limits AMISOM’s movement. Attacks on AMISOM convoys and IEDs are frequent. In fact, despite its two much-touted offensive operations last year, AMISOM is mostly in defensive garrison mode. Rarely does it actually fight al Shabab; in advance of AMISOM’s clearing operations, al Shabab often disperses. Usually, by the time AMISOM arrives, it finds a ghost village (sometimes destroyed by al Shabab). AMISOM leaves, and al Shabab comes back from the bush. Often locals, at best, sit on the fence and, at worst, continue to support al Shabab because of their calculation that al Shabab will ultimately be the dominant force in their area.

That does not mean that Somalis actually like al Shabab: Its brutality is still shocking; memories of the militant group’s aggravation of the 2011 famine are still vivid; and al Shabab has hardly been a competent ruler enabling local economic growth. Instead, the group often tried to suppress or undermine vital economic markets, such as in qat. And, thanks to its control of the roads, ordinary Somalis fear traveling on them. Those who are willing have to be prepared to pay bribes of about $30 dollars to travel to Mogadishu from Merka and over a $100 to travel from there to Kismayo. Only the wealthy can absorb such costs, increasing Somalis’ frustration and sense of insecurity. Likewise, urban Somalis are quick to point out that inflation, including the cost of basic food items, has significantly increased since deliveries must now either come by air, be smuggled in, or are levied with substantial extortion fees and illegal taxes.

STUCK IN THE SAND WITH AMISOM

On the other side of the fighting, AMISOM nominally numbers 22,000 soldiers from Burundi, Djibouti, Ethiopia, Kenya, and Uganda. It could and should be much more efficient in its fight against al Shabab. But it is not clear how many soldiers are actually on the ground at any one point. The capacity and training of the AMISOM deployments varies widely across the countries. Some of the forces, such as those from Burundi, do not speak English and have little training overall. Many of these militaries were built during their country’s own political revolutions and have had little deployment or battle experience since. Very few of the deployed troops have had any counterinsurgency training and they lack logistics, medevac, and intelligence and reconnaissance support. AMISOM was to be equipped with ten helicopters, with Uganda promising to provide four and the other United Nations member states the rest. Three, however, crashed into Mt. Kenya as they were flying from Uganda to Somalia, and Uganda is now in dispute with the international community over who will pay for the destroyed aircraft.

Moreover, the original expectation that a United Nations force would eventually replace AMISOM has long since died. Nor do the AMISOM forces necessarily want to get out of Somalia (or fully defeat al Shabab): The international funding they receive for their effort makes for good living for their soldiers and a substantial financial boost for their military institutions. Moreover, their presence in Somalia allows them to pursue their regional interests and enhance their importance with the broader international community.

AMISOM has weak headquarters to which few member countries pass on any information, let alone intelligence, or bother to coordinate. Some AMISOM commanders maintain highly personalized and sometimes outright subversive agendas: There are credible rumors that AMISOM units have sold fuel and arms to al Shabab or looted humanitarian convoys.

The fact that AMISOM is organized into five sectors operated mostly by one of the AMISOM member countries does not help with coordination and planning. The division of the sectors reflects the strategic interests of the intervening forces. Kenya and Ethiopia, although they have suspended some of their mutual rivalries, still mostly cultivate proxies in their sectors to create buffer areas, prevent the leakage of terrorism into their countries, disrupt support for separatists within their own countries, and project land and sea power. Offensive operations are decided mostly on a sector basis, with the forces in each area reporting and taking orders from their own capitals. Whether captured weapons are handed over to Somali forces varies by sector. So does how al Shabab terrorists are dealt with. There is little coordination among the sectors and little planning at AMISOM headquarters; in fact, they are generally only interested in working together when headquarters has something to offer to them, such as logistical support via the United Nations.

Not surprisingly, it has been hard for AMISOM to hold and build a “cleared” territory. At first, AMISOM forces exhibited little interest in providing any governance functions or even conducting stabilization operations, such as repairing bridges or providing clean water systems. They expected the Somali security forces and government to do so. But Somalia hasn’t been able to because local governance structures are frequently destroyed, blocked off by al Shabab, dominated by problematic powerbrokers, or lack resources. And so AMISOM has come under pressure from the United States and the international community to take over these stabilization functions.

Pushing AMISOM into stabilization operations is a difficult call. On the one hand, it should be the responsibility of the local and national government to administer its territory, and the credit for doing so should accrue to the Somali government, not to foreign forces. On the other hand, local communities are frustrated by the lack of security and services after AMISOM clears a territory. In either case, it isn’t clear that AMISOM militaries could do much better at governance, since they, too, lack resources and training. And the political sensitivities abound. Somalis do not see themselves as African, but rather as Arab; and al Shabab can easily label Burundi, Uganda, Kenya, and Ethiopia as Christian invaders. Although Somalis are deeply divided along scores of clan divisions, they also identify as nationalists, opposing foreign intervention.

If AMISOM does take on a stabilization role, it should be limited, discreet, and concrete, including short-term support for building water and other infrastructure. One of the current ideas is to deliver quick-impact projects only when some, even interim, local authority has been created and is supported by local peace committees consisting of clan elders, imams, women’s groups, businessmen, and civil society members. Even though the projects could still become fronts for graft, any accountability is better than none.

SOMALI NATIONAL FORCES IN TATTERS

Another major official combatant in the war is Somalia’s own forces, consisting of the army, police, and militarized intelligence service. They have not been able to provide stabilization operations on their own because, as still mostly a collection of disparate militias, they lack the capacity. They remain beholden to clans and powerbrokers, and lack both a national ethos and training. When pressure rises, they mostly fall apart or return to militia behavior. Underpaid and often not paid for months, they frequently resort to selling their equipment to obtain some income. They are also notoriously infiltrated by al Shabab. The paramilitary intelligence service run by the National Intelligence and Security Agency, and the preferred partner of U.S. and Ethiopian counterterrorism efforts, is somewhat better, but also rather brutal and beholden to clan politics.

Not surprisingly, the Somali people do not trust their national forces. Although the federal government nominally controls the national forces (while explicitly not controlling regional militia forces), its presence beyond Mogadishu is limited and it depends on AMISOM and international support for protection from al Shabab and rival powerbrokers. In order to wean itself off AMISOM, defeat al Shabab, and suppress regional conflicts, Somalia’s national forces would need to be significantly bigger than they are now at about 10,000 fighters. But donors, aware that a large percentage of foreign military aid disappears into personal pockets of Somali politicians, are reluctant to commit more money for larger Somali security forces.

The security forces of the semi-autonomous state of Puntland are somewhat more capable, but insecurity in Puntland, too, has been increasing since al Shabab was pushed into the state from central Somalia. Numbering perhaps about 4,000, the forces include a state-armed militia/police force known as darawish as well as other police forces and custodial forces. Many other unofficial entities also operate in Puntland, including the Puntland Security Force, which is paid by the United States to fight al Shabab and presumably reports to the Puntland president, and the Puntland Maritime Police Force, which is paid for by the United Arab Emirates. The latter was originally created to fight pirates, although recently it has also apparently been dispatched to fight al Shabab in the Galgadud area. The Puntland government has little interest in integrating these forces into the Somali national armed forces.

Somaliland remains the most secure part of Somalia with the best functioning government­—although, of course, the local leadership there continues to want to secede from the country and establish independence. Mediation talks in Ankara facilitated by Turkey collapsed in the spring of 2015. Since then, Somaliland has been preoccupied by presidential and parliamentary elections for the state government, which were to be held on June 26, 2015. But despite popular demand and strong pressure from international donors, the elections were delayed by at least 17 months due to a lack of preparedness, (as they had previously been in Puntland). This delay undermines governance and accountability in the state.

THE VICIOUS CIRCLE

It is not just security that has been sliding in Somalia for the past year and half. Equally, the sense of political momentum has dissipated. In 2013, there was a great deal of optimism among the Somalis whom I interviewed that Somalia hit rock bottom in 2011 and that the pernicious clan politics that plagued the country for the past three decades have ended. They placed a great deal of hope in their President, Mohamoud. A Somali professor and member of the country’s civil society, he was not a former warlord nor a member of the diaspora parachuted in. And although he was elected by a parliament of appointed (or self-appointed) clan elders and former warlords, he was not seen as beholden to any particular clan. The international community, including the United Kingdom and the United States, also embraced him.

But that was then. With little control over the country’s armed forces and budget, and unable to tackle pervasive and extensive corruption, the president fell back on one source of support: his Hawiye clan. And so the cycle of exclusionary politics began again, privileging access to business deals for his supporters and promoting clan backers for government positions.

Mohamoud’s government was soon paralyzed by the infighting between him and his prime ministers (a familiar story in Somalia over the past decade), whom he would repeatedly seek to replace. The Somali constitution makes the president the symbol of authority, but his role and relationship with the prime minister is not clearly defined. Ultimately, the constitution is generally interpreted as mandating a Hawiye president and a Darod prime minister. That design is meant to encourage inclusiveness. In truth, however, it mostly led to a struggle between the president and prime minister, mimicking the power fights between the two main clans.

The constant turnover of government officials at the federal and subnational levels is another major problem: With appointments often lasting only a few weeks, officials have far more interest in quickly making money and placing allies in other public sector positions than in governing effectively and building equitable and accountable state institutions—or any institutions for that matter.

To give itself legitimacy, the government has embraced a brand of conservative Islam that is not as far from al Shabab’s teachings as many would like. The president is reputed to have admiration for the Muslim Brotherhood in Egypt and is said to consider Mohamad Morsi, the imprisoned former Muslim Brotherhood–affiliated president of Egypt, a personal friend.

Indeed, the contest for political legitimacy in Somalia revolves around four elements: Who is more Islamic? Who is more nationalistic? Who delivers better security? And who is less corrupt and delivers better services? For years, the Somali federal government has struggled to win on any of these fronts. And it has exhibited little recognition of, or interest in, the problems of clan marginalization and poor governance, even though these grievances thrust Somalis into al Shabab’s hands.

To address some of these problems, under a 2013 compact between the international community and Somalia, Somalia was supposed to hit three milestones by 2016: hold presidential elections; adopt a new constitution; and form subnational states. All are important, and none is easy to do, much less do well, in the given timeframe. Yet international donors, not wanting to repeat their frequent sin of setting up conditions but still delivering aid after a Somali government fails to meet them, are loath to relax the 2016 timeline.

Pervasive insecurity makes holding national elections difficult. It also enables fraud and heightens feelings of purposeful exclusion. AMISOM has helped little when it comes to providing security for a vote. And the government has made few preparations itself. So far, there is not even a voter registry. In late May 2015, the Somali government launched a census effort (a step toward creating a voter registry). However, the census itself could lead to new conflict, particularly if the resulting counts of the Hawiye, Darod, and other clans and subclans make any one group unhappy—as is almost sure to happen. Meanwhile, the fact that the independent electoral commission is located within the presidential palace of Villa Somalia, even if for legitimate security reasons, makes it seem potentially biased and illegitimate.

But there is little alternative to holding a national election. Many Somalis want to see a change in government; and international donors are also increasingly frustrated with the current one. Perhaps the president could again be appointed by members of parliament, with all the legitimacy limits such a process brings. Ultimately, though, a vote and the creation of real political parties is important. It is the only way to realign Somali politics away from narrow clan parochialism and individual patronage networks and toward broader national representation and coalitions. But few Somali powerbrokers have an interest in allowing their formation; even under the best of circumstances, they will not materialize by the 2016 election.

It is also possible that the international community will agree to postpone the elections. It did so in Puntland, it now has to live with it in Somaliland; and it may do so again at the national level. Even if national elections do not take place, it is worth considering whether some subnational elections (such as for the mayor of Mogadishu) could be held to facilitate greater accountability.

The next task is revising the constitution in a way that increases inclusiveness. Donors do not want the redrafting process to drag on for years, as it has in Nepal for over a decade. Somalis are already disappointed with initial drafts, though: Quotas for women have disappeared from the constitution, and progressives have little faith that the current language—women should have a “meaningful representation” in all elected and appointed positions—will achieve progress. Moreover, the constitution drafters are still to tackle some of the most politically contentious issues, including how power (including arms, taxes, and other resources) will be distributed between the center and the newly forming states.

But the fact that Mogadishu has accepted federalism and power decentralization is perhaps the greatest political accomplishment in years. Competition over who controls Mogadishu and crucial resources has, for years, been a major source of conflict and corruption. Few outside of the capital, including Hawiye clans who dominate business there, want to be ruled by it.

However, there is as yet little agreement about the relative balance of power between the center and subnational states, including whether they will be allowed to retain their militia forces as some sort of paramilitary police. In the Jubaland State, Madobe, whose self-declared presidency was accepted by Mogadishu on an interim basis in 2013 for two years, has so far shown no inclination to give up control of any of his forces. In the Southwest State that has also been formed, local state officials decry the absence, incompetence, and untrustworthiness of national forces and clamor for their own armed services.

In both Jubaland and Southwest States, the state formation process was unable to avoid fighting between warlord and clan forces over which areas would be included in which state and under whose control. In Jubaland, the process ended with Madobe’s victory over the forces of Barre Hirale’s (who are still mostly hiding in the bush). In the Southwest State, the two local rivals created a coalition government, with over 60 ministers and plenty of built-in political dysfunction, nepotism, and paralysis. State formation still needs to be completed in other areas, such as the Shabelle. In April 2015, a state-formation conference was launched for the Central Regions State. Some representatives continue to question whether six states are enough and others are debating which state their territory should belong to.

How to generate revenues is another major challenge in the federalization process. Neither the state governments nor the national one trusts the other to share revenues: The states do not want to give up land taxes to the federal state; but the federal government strongly dislikes the idea of having to rely only on the tax revenues from fisheries and maritime routes. And the promise of potentially huge mineral resources under the Somali sand only makes the federal versus state competition more intense.

How control is devolved matters a lot. The biggest danger is that the exclusionary politics over spoils and war rents that have dominated Mogadishu for so long will be replicated at the local level. And given how the state formation processes have been going, there are reasons to fear that the clientalistic patronage networks that systematically discriminate against rivals will be reestablished at the state level. In some areas, especially in the Juba Valley, that is already underway, creating a significant number of internally displaced people and potentially allowing al Shabab to insert itself into the area on the side of the oppressed.

IT’S GOOD GOVERNANCE, STUPID

Over the past few decades, international actors have not paid enough attention to subnational governance in Somalia, and they are running that risk again. Many, including the United States, focus predominantly on the problem of al Shabab, even though al Shabab is merely the latest result of poor governance. Many of the crucial donors lack presence outside of Mogadishu, which limits their understanding of life at the regional, town, and village levels. Local peace committees of clan elders, imams, and representatives of civil society and the business community can be an important mechanism of better governance. But the international donors need to work with them, and to be aware of the politics behind the peace committees—such as, for example, of who is selected for them and who is excluded. Other international actors, such as Kenya and Ethiopia, often embrace problematic powerbrokers for the sake of their strategic and counterterrorism interests, even though these powerbrokers ultimately undermine stability.

Fundamentally, whether Somalia succeeds in breaking out of decades of conflict, famine, misery, corruption, and misgovernance depends on the Somali people. It depends on whether a sufficient constituency for better governance and less conflict eventually emerges or whether Somali businessmen and politicians continue to find the way to work around conflict or make money from it while the Somali people eke out survival amidst the harshest conditions without mobilizing for change. Since 2012, Somalia has had one of the best chances to pull off such transformation in years. It should not waste it.

This article was originally published by Foreign Affairs.

Recently, Bolivian President Evo Morales declared himself a “slave of the people” and said he is backing the proposed constitutional reform that would enable him to seek re-election in 2019 if that’s what the citizens want. Last Saturday, September 26, the Legislative Assembly partially amended the Constitution (by a two-thirds majority), authorizing Morales to run for the presidency once again in 2019. February 21, 2016 is set as the date of the popular referendum to validate or reject the amendment.

This amendment allows presidential re-election for two consecutive terms, rather than just one re-election, as dictated by the previous constitutional provision. The change takes into account the current presidential term (2015-2020) and clarifies that Evo and his vice president are authorized to run only one more time, that is, to seek re-election only for the 2020 to 2025 period. The opposition immediately denounced the amendment as “tailoring the law to the needs of one person”.

It should be noted that Morales and García ran and won in the 2005, 2009, and 2014 elections. The current term is the second consecutive term under the new Bolivian Constitution (adopted in 2009) and the third since they were first elected, in 2005. If he wins the elections scheduled for 2019, Evo would become one of the leaders to hold power the longest in Bolivia and throughout Latin America.

Re-election fever

This constitutional amendment, recently adopted in Bolivia, is not an isolated event. Rather, it fits within a regional trend toward re-election that has been gaining ground in Latin America over the past 20 years.

While the region ushered in democracy in the late 1970s and many clearly opposing re-election, this situation changed dramatically a few years later. The first wave of reforms favorable to immediate or consecutive re-election came in the first half of the 1990s with the impetus of Alberto Fujimori in Peru (1993), Carlos Menem in Argentina (1994), and Fernando Henrique Cardoso in Brazil (1997). From then on, several more presidents introduced reforms during their administrations to keep themselves in power. A second wave of reforms, led by Hugo Chávez, took place in the middle of the last decade, with a view to moving from immediate re-election to indefinite re-election. Chávez secured this objective via referendum in 2009.

Chávez’s example was reproduced by Daniel Ortega in 2014 in Nicaragua (the second country to allow indefinite re-election). Currently one more president, Rafael Correa (Ecuador), is promoting a reform along similar lines.

Recent reforms and trends

The years 2014 and 2015 have been full of news a about re-election. In the last 20 years the Dominican Republic has led in the number of re-election related reforms, with four from 1994 to 2015. The most recent, in July 2015, has re-established immediate re-election, enabling President Danilo Medina to run once again in May 2016 elections to aspire to a second consecutive term.

Two more countries have moved in what some might call extreme directions in 2014 and 2015. Nicaragua eliminated any impediment to re-election from the constitution in January of 2014, while Colombia moved in the opposite direction when they approved a reform prohibiting presidential re-election, in June 2015, a decade after re-election was first adopted.

On April 22, 2015, the Honduran Supreme Court declared the articles of the constitution that prohibited presidential re-election inapplicable. These articles also punished public officials and any other citizen who proposed or supported amending them, as these articles were considered not subject to reform. In 2009 the effort to call a National Constitutional Assembly after a non-binding consultation to amend the constitution and do away with this provision, led to the coup d’état that removed former President Zelaya from office.

In Brazil, the Chamber of Deputies cast an initial vote in 2015 in favor of eliminating re-elections, which is now being examined in the Senate. Most analysts consider it likely that the senate will adopt a similar position as the lower house, i.e. in favor of doing away with re-election.

Finally, one should note the cases of Ecuador and Bolivia, countries in which efforts are under way to amend the constitutions in relation to elections, in the terms analyzed above.

As a result of the reforms of the last few years, at this time 14 of the 18 countries in the region allow re-election, albeit with different specific rules. Venezuela (since 2009) and Nicaragua (since 2014) are the only countries so far that allow indefinite re-election. In five countries – Argentine, Bolivia, Brazil, Ecuador, and the Dominican Republic – consecutive re-election is allowed, but not indefinitely (only one re-election is permitted). Nonetheless, presidents who re-founded the institutional order through constitutional assemblies have been able to benefit from a third term, leaving out the first term on the argument that it pre-dated the constitutional reforms (Bolivia and Ecuador). To these five countries we should added the above-mentioned case of Honduras.

In six other countries one can return to the presidency after an interval of one or two presidential terms. These are Chile, Costa Rica, El Salvador, Panama, Peru, and Uruguay. As we have observed, only four countries have an absolute prohibition on any type of re-election, namely Mexico, Guatemala, Paraguay, and, since last July, Colombia.

My opinion

This re-election fever is bad news for a region like ours given the institutional weaknesses, the crisis of the political parties, the growing personalization of politics, and, in several countries, hyper-presidentialism.

Something is very wrong when a president of a democracy considers himself or herself as indispensable as to change the constitution in order to stay in power. As Pope Francis noted recently; “a good leader is one who is capable of bringing up other leaders. If a leader wants to lead alone, he is a tyrant. True leadership is fruitful.”

“The leaders of today will not be here tomorrow. If they do not plant the seed of leadership in others, they are worthless. They are dictators,” he concluded.

I agree with Pope Francis. The health of a democracy depends essentially on its ability to limit the power of those in government so they cannot reshape the law to fit their personal ambitions. In other words, democracy in Latin America does not need leaders who are slaves of the people, but who are slaves to the law and the institutions.

This piece was originally published by International IDEA.

President Paul Kagame of Rwanda has been a very effective leader for his small Central African nation. First, he led the Rwandan Patriotic Front when it ended the 1994 genocide and brought a measure of stability to a land that had just suffered a terrible holocaust. Then as vice president until 2000, and president since then (being formally elected under the current constitution twice, in 2003 and 2010), he has helped usher in remarkable economic growth and human development. Many Western leaders have personally offered high praise for Kagame—calling him a “visionary” and among “the greatest leaders of our time”—and have marshalled considerable resources to aid in Rwanda’s post-genocide development.

But his leadership has not been without controversy. There have been some excesses and allegations of abuses of political opponents during the Kagame years. And his abuses of power have arguably increased in recent years—suggesting that, whatever his past accomplishments, his real motives for wanting to stay in office may have less to do with a call to service and more with his increasingly autocratic tendencies.

On balance, though, he has been an effective leader who has saved countless lives. Does that legacy justify his seeking what would be a third seven-year term in the nation’s 2017 presidential elections? Rwandan voters choose today whether to approve a constitutional amendment—already passed by the Senate—that would allow President Kagame another stint in power.

Murky waters 

Kagame has been for his nation arguably what Franklin D. Roosevelt was for our own, given the nature of the emergencies facing Rwanda that led to his ascent to power. And we elected FDR four times. To be sure, after the fact, we thought better of it and decided never to allow that again. But we did it. George Washington chose not to run for a third term, but he was blessed with a legion of founding fathers of remarkable ability all around him, and was succeeded by Adams and Jefferson. Lincoln never had the chance to consider a third term—and maybe we would have been better off in the day if he could have served for many years. 

I am not comparing Kagame with Washington, Lincoln and Roosevelt to assert that he belongs in their league. But to dramatize the issue, suppose that he is just as important to his nation as those three gentlemen have been to ours. Would that justify another term? Putting the question this way muddies the waters, but I think it is the only fair way to address the issue. 

More often than not, of course, two terms is more than a given leader deserves. Witness President Hamid Karzai in Afghanistan, or Pierre Nkurunziza in Burundi who just garnered a third term amidst much violence, or Joseph Kabila next door in the Democratic Republic of Congo who is due to step down next year. Indeed, Kabila may or may not do so—and it would be unambiguously bad for his country and American interests if he stayed past that date. All the more reason that, for consistency, we should want Kagame to step down—otherwise leaders like Kabila could use his behavior to excuse and justify their own attempts to hold onto power indefinitely. 

But is it really so simple in his case, and is it really such an easy call? Another tough case is President Yoweri Museveni of Uganda, who has brought a degree of peace and development to his nation after the Amin and Obote periods—but who is now in his sixth term. Perhaps once in a blue moon, a nation can benefit from multiple terms in office for a particularly gifted leader at a particularly fraught and important period in a country’s history.

Mr. Kagame: Prove us wrong 

Ultimately, institution building and the establishment of solid democratic procedures are the only sure guarantor of long-term national stability. Kagame is only 58, but he will not live forever. At some point, Rwanda really will need a succession strategy. 

So I hope Kagame chooses not to run again. But if he does run, we need to pressure him to justify it in terms of the legacy he is helping to create so that Rwanda will have future leaders and institutions that can keep the country moving forward.

Ultimately, institution building and the establishment of solid democratic procedures are the only sure guarantor of long-term national stability.

Thus, if Kagame does persuade the public to change the constitution and does win a third elected term, we should cut aid (though not impose stronger measures like trade sanctions) to show our disapproval. That is, we should cut aid unless he uses the third term—which must certainly be his last—to show his countrymen and the world that in fact his rule is about improving his country, not turning it into another fiefdom run by an African strongman. 

For us, taking this approach will necessitate creating a method for evaluating whether Rwanda’s institutions gradually move closer to true democracy in the years ahead so that, whatever might happen with a third term, a fourth term becomes entirely unjustifiable. Presidents for life are bad for their countries while they are alive, and they are dangerous for their countries when they die. Kagame needs to understand this basic fact before he becomes the next world leader who starts out a noble man and then allows power to corrupt him.

More than two decades after the genocide, Rwanda is ready for a more vigorous democratic process—and any responsible leader should be building up the institutions to prepare for that eventuality. Stronger political parties that do not have exclusive ties to just one ethnic group, clear laws constraining and regulating the nature of political competition so that it is inclusive and nonviolent, strong courts—these are the essence of an established democracy, and Rwanda needs them.

Please note that this Engelberg Center for Health Care Reform Health Policy Issue Brief first appeared in the Health Affairs Blog on July 31, 2014. Click here for the Health Affairs Blog version.

Abstract

Individual patient expanded access is a process by which patients can obtain investigational drugs that have not been approved by the Food and Drug Administration (FDA) outside of a clinical trial setting from biopharmaceutical companies when no other alternative therapy is available. Currently, no industry-wide structural principles exist to help companies navigate this process while balancing the needs of getting a drug to the market as quickly as possible with providing potentially life-saving treatment to individual patients. The Engelberg Center convened a stakeholder group to identify common themes and identify common principles related to expanded access, as none currently exist. The result was 4 A’s - Anticipation, Accessibility, Accountability, and Analysis – to help assist patients, providers, and companies with expanded access. Process and capacity building recommendations for the FDA also were proposed to assist companies with sustaining expanded access programs.

Call to Action: The Importance of Expanded Access Programs

Individual patient expanded access, sometimes termed “compassionate use,” refers to situations where access to a drug still in the development process is granted to patients on a case-by-case basis outside of a clinical trial, prior to completion of mandated clinical trials and approval by the Food and Drug Administration (FDA). This typically involves filing a single patient or emergency investigational new drug (IND) request with the Food and Drug Administration and voluntary release of the drug by the manufacturer. Generally, the following criteria must be met: there is reasonable expectation of meaningful benefit despite the absence of definitive clinical trial data, the patient has a serious or life-threatening condition, there are no comparable or satisfactory treatment alternatives, and there are no suitable clinical trials for the drug available to the patient. This form of expanded access, which is the focus of this paper, is different from the situation in which a drug is discharged to a large group of needy patients in the interval between successful phase 3 trials and presumed FDA approval, a strategy often termed a “treatment” IND or protocol, which was initially used in the 1980s for releasing zidovudine to patients with acquired immune deficiency syndrome.

The Engelberg Center for Health Care Reform at the Brookings Institution recently invited senior leaders from several pharmaceutical companies, two bioethicists, a senior FDA representative, and a patient advocate to share experiences and discuss organizational strategies related to expanded access (see acknowledgements). A driving factor for this meeting was a recent flurry of highly public cases of desperate patients seeking access to experimental drugs, which lead to social media campaigns and media coverage. Such cases included 7-year-old Josh Hardy (brincidofovir from Chimerix for disseminated adenovirus infection), 45-year-old Andrea Sloan (BMN673 from BioMarin for ovarian cancer), 41-year-old Nick Auden (pembrolizumab from Merck for melanoma), and 6-year-old Jack Fowler (intrathecal idursulfase from Shire for Hunter Syndrome). Expanded access requests to the FDA for new patients are increasing, from 1,000 patients nationwide in 2010 to more than 1,200 in 2012.[i] (This is likely an underestimate, since it does not include appeals made directly to companies.)

In the wake of these events, it became clear that many biopharmaceutical companies had varying experiences and policies related to such access. From the domestic regulatory standpoint, the FDA revised its expanded access regulations in 2009, which define criteria that must be met to authorize expanded access, list requirements for expanded access submissions, describe safeguards that will protect patients, and preserve the ability to develop meaningful data about the use of the drug. Biopharmaceutical companies typically face a complex global environment in which legal and regulatory frameworks can differ substantially. At the meeting, a senior FDA representative indicated the agency has approved over 99 percent of expanded access requests submitted via single patient or emergency INDs since 2009, suggesting the regulatory agency is not a major barrier to expanded access. As such, provided the access request is reasonably related to the potential benefits of the drug, the biopharmaceutical company is almost solely responsible for the decision and liability regarding whether to grant expanded access to an individual. Still, the public belief persists that the FDA is the main bottleneck that restricts access. In April 2014, Representative Morgan Griffith (R-VA) proposed H.R. 4475, The Compassionate Freedom of Choice Act of 2014, designed to restrict the FDA’s ability to prevent the use of investigational drugs in terminally ill patients. Similarly, some states have passed “Right to Try” legislation to reduce FDA oversight, but contains no requirement that companies must make drugs available.[ii]

The goal of our meeting was to identify common themes and possibly broad outlines to suggest industry-wide policies related to expanded access, as none currently exist. The group first discussed background issues related to expanded access and agreed on definitions. The meeting then focused on three topics. First, the group participants who play key roles in evaluating expanded access requests were invited to share narrative experiences in specific clinical cases, in an effort to lay the groundwork for trust and open discussion. Second, the group was asked to identify internal industry-specific structural barriers, such as the existence of clear procedures or tracking mechanisms within companies to handle requests. Finally, the participants reflected on situations in which expanded access may not be appropriate, or where regulatory barriers or liability concerns may hinder expanded access. This paper reflects the authors’ observations and assessment of the internal and external landscape, based upon information provided by the meeting participants.

Laying the Groundwork with Shared Experiences

The FDA allows companies to provide drugs and charge individual patients that do not meet the enrollment criteria for clinical trials geared towards regulatory approval through expanded access programs.[iii] These programs are meant to provide the drug directly to treat the patient’s condition, rather than having the primary goal of collecting efficacy or detailed safety data in support of approval. Before 1987, the FDA lacked formal recognition of expanded access, although investigational drugs were provided informally.[iv] Since then, the FDA has instituted novel classes of individual INDs so that a company sponsor or licensed physician can legally obtain treatment access from the FDA to provide a drug while it is still in the approval process.[v] Essentially, this provides companies a legal exception from the law to ship unapproved drugs across state lines, and if they desire, to charge for them. These INDs are designed solely for the potential benefit of desperate patients and not intended to formally collect safety or efficacy data that could potentially inform a regulatory decision, but can have regulatory impact, nonetheless.

At the outset, several participants objected to the term “compassionate use,” since it introduces inherent value decisions, can emotionally charge discussions, and does not recognize that there may be valid and ethically appropriate reasons for denial. The generally agreed upon term “expanded access,” is used throughout this paper. (One participant suggested the term “early access.”) Ideally, the term would make it obvious that this is access to an unapproved drug, in order to temper expectations of favorable results. Somewhat confusingly, the FDA uses the terms “expanded access,” “access,” and “treatment use” interchangeably to refer to the use of a drug, and of which none clearly identify the stage of development.[vi]

Participants shared numerous examples of requests for expanded access and explained that their companies handle anywhere from a handful to several hundred requests per year. The following selected stories illustrate the wide range of experiences and situations that companies encounter when navigating the complex decisions involved in administering an expanded access program. Several other examples were discussed and the specific participants expressed that they would be willing to share these particular examples publicly.

Chimerix, a 54-employee company based in Durham, North Carolina, is developing the drug brincidofovir and previously had created an intermediate expanded access protocol for the drug (CMX001-350) as encouraged by the FDA following over 200 emergency INDs granted for access to brincidofovir.[vii] One such case was for an armed services member with previously undiagnosed acute myelogenous leukemia who developed life-threatening vaccinia infection following smallpox vaccination in 2009.[viii] The patient received the drug from Chimerix through an emergency IND. After two years, the company had not secured FDA approval for the drug and eliminated expanded access in February 2012 in order to focus on studies which would inform a regulatory decision. In March 2014, Chimerix originally rejected an emergency IND request for 7-year old, Josh Hardy, who was critically ill from disseminated adenovirus infection after bone marrow transplantation. A highly public social media campaign targeted the company in the wake of this decision, and the experience was traumatizing for many of the employees. Following discussion with the FDA, Chimerix initiated a new clinical trial for the treatment of adenovirus infection in order to collect safety and efficacy data to support an NDA submission. Hardy was the first patient enrolled in the clinical trial, and his family reported through several media outlets that he recovered from the adenovirus infection and was discharged home.

One biopharmaceutical company representative described receiving a middle-of-the-night telephone call directly at home, with an emergent, time-sensitive request for an experimental therapy for a critically ill child with a rare acute disease in a foreign pediatric intensive care unit, where regulatory standards were different from those in the U.S. The ideal pediatric dosage was unknown, and only limited safety data and clinical details were available. Urgent efforts were made to gather more information and the request was approved, but despite these efforts the patient did not survive.

Bristol-Myers Squibb began a clinical trial for a cancer drug several years ago.[ix] A woman with pancreatic cancer enrolled in the trial and saw that her tumor was no longer growing. After the 3.5 year trial, the study closed because the drug was deemed ineffective for all other patients and was not approved for further development. However, the company continued to provide the drug for the one woman for whom the drug was effective through a single patient IND for an additional 9 years.

To demonstrate the volume of expanded access requests, one participant showed several messages on his mobile device during the half-day discussion, directly from patients who had located his email addresses through on-line searches, to plead for expanded access to an anticancer therapy.

Development of Structural Principles: The Four A's 

Broadly, no specific industry-wide consensus on expanded access procedures exists. As a result, there is significant variation in company policies and procedures. During this phase of discussion, participants shared their own company strategies and suggested possible areas of consensus that might form the basis for shared principles and industry-wide practices. These suggestions fell into four categories, which we termed the 4 “A’s”: Anticipation, Accessibility, Accountability, and Analysis (see Figure 1).

First, the group agreed that large and small companies should anticipate the need for and creation of expanded access programs when developing drugs expected to generate expanded access requests and as part of the drug development plan. This is particularly important for drugs that might be considered for priority or breakthrough designation during FDA approval. In these cases, companies should strongly consider developing a written expanded use policy with clear guidelines for inclusion and exclusion, which would also feature a defined review process, clear decision making criteria, and a defined time frame for response to requests. This also allows companies to plan for the demands that may be placed on their supply chain and staff resources to ensure sufficient supply for investigational and expanded use purposes. Identifying a decision maker within each company and for each disease area/product will also help patients or physicians reach the appropriate contact when requesting a drug, as well as assist the company in gaining expertise in responding to these requests. For example, one large company identifies one point of contact for all expanded access requests regarding each product and posts that individual’s contact information on the website.

In the early stages of drug development, supplies of investigational drugs are extremely limited. This is often because the technically-challenging process of optimizing drug product manufacture takes a considerable amount of time. Low yielding manufacture batches are not uncommon at the early phases of research. Some companies do not approve expanded access requests because they do not have enough of the drug in stock to supply these external requests and meet the needs of investigational study patients and individuals participating in clinical trials, an issue which may be particularly acute for biologics. Smaller companies may have more resource constraints, such as inadequate staff to manage requests or supply chain and logistics issues. One representative suggested that if a company had early transparency from regulators about the final numbers of subjects they would be willing to accept to achieve drug development milestones, it would make it much easier for the company to feel less reservation about its drug supply. (It may be beneficial for companies to analyze their financial ability to provide drugs potentially at no cost or when there is not a large enough supply, ideally in a transparent manner.)

Once an expanded access policy is anticipated and developed, the second key principle the group identified was making the policy accessible to all individuals who may qualify. First, for patients, with guidance from their treating physician, the company making the drug should always steer the patient to enter a clinical trial (if they meet eligibility criteria). If the contacted company cannot accommodate the patient, they should steer them to other open trials if possible, even if sponsored by another company. Many of our participants noted that this already occurs.

The group was particularly cognizant of the disparity in access to drug companies and their expanded access programs: patients with savvy social media strategies are more likely to succeed in navigating across organizational constraints than without similar sophistication. The group believes that increased accessibility would assist in making opportunities for expanded access more equitable. In addition, these policies could help educate patients and physicians about submitting legitimate expanded access requests and help decrease the costs of reviewing inappropriate requests on the company (for example, if there are other proven therapies or the situation is not life threatening).

If the patient is ineligible for a trial, the patient should be able to easily access the written expanded access policy online. For example, both large and small companies like Pfizer, Bristol-Myers Squibb, Shire, and Merck post their expanded access policies on their websites, though the terminology may in some cases be complex. In addition, Janssen has developed a video explaining their policies in non-technical terms. Ideally, such policies should be available in some web based or public facing platform to both patients and physicians and written in a clear manner that is jargon free and accessible to individuals at various education levels. Most participants felt strongly that requests for expanded access should originate from a medical provider, not from a patient, since expertise is needed to first screen appropriate candidates. This is consistent with current FDA regulations for an IND, in which a physician or qualified medical expert must sponsor an IND or serve as an investigator under an existing IND for expanded access.

Third, companies should have accountability to the requesting party for expanded use requests that they receive and review them within a specified, transparent amount of time. If the request could not be approved, the company should consider clear communication and provide an explanation of why the request was turned down. In these cases, some participants suggested that the company might also consider instituting an appeals process by which a patient can receive an additional review if not approved, potentially from a non-binding third party such as an independent, multidisciplinary body or a regulatory agency like the FDA. (Two participants, however, were uncomfortable with any third party review.)

The final principle would encourage companies to release timely analysis of data from expanded access patients. In addition to tracking communication, companies should keep a database of the number of requests and outcomes, in a manner that doesn’t slow getting drugs to needy patients rapidly. One company refined its internal tracking tools to determine who was requesting drugs, for what conditions, and where they lived. Where possible, companies might be encouraged to share anecdotal or preliminary safety or efficacy data from expanded access in peer-reviewed or other refereed venues in a prudent time frame following collections, if this is available or known. This is not always possible, because emergency INDs do not require provision of safety or outcome data to the company.

There are several challenges associated with operationalizing this in the current model, namely the appropriateness of anecdotal data, the level of detailed safety and efficacy data currently available through expanded access, suitability for publication, and funding for these activities in the current budget climate. One potential approach to address this is funding from federal or state regulatory agencies or payers for the reasonable costs of follow-up and reporting outcomes.

Regulatory Considerations

The participants then discussed the types of risks, including regulatory and financial, that may affect companies’ expanded access policies. When a company is considering expanded access requests, they consider the risks-benefits of providing the drug outside of a clinical trial as well as the potential for any regulatory issues in an era of litigation and an increased threshold for demonstration of safety. While a company’s provision of a drug for expanded access is voluntary, the FDA does require the company to collect and report safety data. Notably, none of the representatives felt that the FDA is a major regulatory barrier to processing and approving expanded access requests once the sponsor has reviewed the request, assessed the benefit-risk, and determined the request meets FDA requirements and evidentiary standards. In addition, the attendees felt that adverse effects and related liability risk were not of particular concern given that the drugs are assessed on a risk-benefit analysis.

However, companies that make drugs in particularly limited markets with small numbers of patients (for example, for unusual diseases with less than 200,000 patients nationwide which may justify a special designation called “orphan status”) may be more concerned about restrictive labeling if an unusual adverse event occurred even in one or two patients during expanded access of an orphan or small market therapy. However, there is no data of which participants were aware and no public reports that an adverse event during expanded access has harmed regulatory approval.[x] The group opinion was that that safety data would be available eventually in any event and an FDA “safe harbor” provision would not necessarily affect companies’ willingness to accept more requests for expanded access. A final concern was that there is no regulatory mechanism to consider data from expanded access in the evidence generation process for approval.

An Expanded Role for the FDA

While the FDA may not serve as a strong barrier to expanded access, the group considered strategies to promote equitable and fair access. For example, some argued that the breakthrough or priority review categories for FDA review might identify products that could have high potential for expanded access requests. This designation expedites “the development and review of drugs for serious or life-threatening conditions.”[xi] As of mid-April 2014, the FDA had received nearly 180 requests for breakthrough designation, with 44 requests granted.[xii] By hastening the drug development process, the FDA has already begun to bring drugs that have a reasonable expectation of benefit to the market faster. In order to receive breakthrough therapy designation, current legislation might be amended so companies could be asked to provide evidence that the 4 A’s are being followed in some capacity.

The FDA might also assist companies in establishing expanded access programs during open clinical trials in two main areas: process and capacity building. First, in terms of process, the FDA could be asked to create a defined path for regulatory approval with provisions that would encourage companies, both large and small, to include plans for expanded access programs when developing a drug. While FDA’s draft guidance related to INDs notes that larger expanded access programs could threaten enrollment in clinical trials,[xiii] and some participants agreed that this was a significant issue, not all companies have had difficulties enrolling patients in both clinical trials and expanded access programs. For example, one large pharmaceutical company left a Phase 1 clinical trial open for a promising therapy while concurrently enrolling individuals who didn’t qualify for open clinical trials into an expanded access program, without appreciable leakage of enrollees in their advanced phase trials that might affect the key development pathway.

Second, the FDA could support convening around capacity building and sharing best practices with companies. With the understanding that there are many small biotechnology or pharmaceutical companies with limited budgets and staff, the FDA could foster a partnership of large and small companies. This partnership could be achieved by convening meetings where companies share their experiences in creating and sustaining expanded access programs. This could be supported by creating a database for these shared ideas, as well as any expanded access data that can be made legally available, such as how many requests are granted or patient outcomes.

To ensure equitable, consistent, and transparent review of requests, some companies suggested the use of an impartial external advisory board. Similar to an unbiased review from an institutional review board (IRB), this committee could have an advisory or decision making function. Companies with supply constraints may feel that if they cannot give the drug to everyone who requests it, then they should give it to no one. This committee could help the company triage the patients who would benefit the most, and would be protected from liability.

Next Steps

The most efficient and equitable way to make new effective treatments to the largest number of needy patients is regulatory approval, accelerated or otherwise, following successful demonstration of efficacy and safety for a given indication in a specific population. Until that process is complete, access to an experimental therapy is by definition an additional risk, as the agreed necessary safety and efficacy have not yet been demonstrated. True informed consent in this setting is difficult to obtain (i.e. studies have shown that severely ill patients, such as those with life-threating circumstances requesting expanded access, had less retention of information discussed in the informed-consent process and less-clear understanding of the risks of therapy compared to healthier patients[xiv]).

One position companies and regulators can consider is that the default answer to expanded access requests should be affirmative, unless there are compelling reasons for not approving requests to patients with life-threatening illnesses. (Such reasons, for example, might include limited treatment supply or lack of reasonable expectation of benefits versus risks.) Such a position would require, however, that there be broader industry, clinician, regulatory, and patient advocacy agreement of shared principles. This paper outlines the experiences, structural principles, and regulatory considerations of a small group, but further meetings may convene a broader group of stakeholders to build upon these concepts. Such consensus-based approaches might lead to durable systems that meet the needs of desperate patients who have run out of options—while allowing innovation to continue to benefit those who may come afterwards.

Acknowledgements: We are grateful for the participation of the following representatives in the roundtable: Jeff Allen (Friends of Cancer Research), Michelle Berrey (Chimerix), Renzo Canetta (Bristol-Myers Squibb), Anne Cropp (Pfizer), Joseph Eid (Merck), Aaron Kesselheim (Harvard Medical School), Howard Mayer (Shire), Jeffrey Murray (FDA), Lilli Petruzzelli (Novartis), Amrit Ray (Janssen), and Robert Truog (Harvard Medical School). We thank Mark McClellan (Brookings Institution) for helpful discussions of this topic and comments on the manuscript, and to the Richard Merkin Foundation for support. The views and opinions expressed in this article were interpreted and organized by the staff of the Brookings Institution. They do not necessarily reflect the official policy or position of any individual roundtable representative, their companies, or their employers.

References

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• The Four A's of Expanded Patient Access

Over the past year, much attention has been given to the growing production of shale oil and the challenge that these unconventional sources of energy pose to traditional producers in the Gulf. As the world’s leading exporter of liquefied natural gas (LNG), Qatar faces related concerns – mounting competition from new LNG exporters and more competitive pricing in key Asian gas markets. How will this global gas boom unfold? How can Doha develop a robust response to growing volatility in gas pricing and demand?

In a new Brookings Doha Center Analysis Paper, Naser al-Tamimi examines Qatar’s position on the global gas stage and assesses the prospects of new competitors. He argues that new LNG production and exports – from Australia, the United States, and other countries – present a challenge to Qatar’s dominant status in global gas markets, particularly in the Asia-Pacific region. At the same time, diversification and slowing growth in this region’s major economies, such as China, South Korea, and Japan, may reduce LNG demand across the board.

Read "Navigating uncertainty: Qatar’s response to the global gas boom"

Ultimately, Tamimi argues that Qatar’s pricing mechanisms and export revenues will come under significant pressure as a result of these developments, posing a potential challenge to Qatari finances. He contends that an effective response from Qatari officials must emphasize greater exports to the Middle East/North Africa region, greater contract flexibility to attract new buyers, and cooperation with other GCC members to improve Gulf bargaining power in key regional markets.

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Americans — especially low- and middle-income workers — are simply not saving enough for retirement. The current retirement income deficit—the gap between what Americans will need in retirement and what they will actually have—is well over $6 trillion. This gap will be insurmountable without a significant change to current tax policy to help incentivize more Americans to save for their own retirement.

On September 9, the Retirement Security Project at Brookings hosted a briefing in collaboration with the Senate Special Committee on Aging to examine new ways to help Americans save for retirement without increasing government spending. A panel of experts on tax, retirement and budget policy explored ideas to modify the tax incentives for retirement savings.

After the panel, participants took audience questions.

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• Rethinking Incentives to Save for a Secure Retirement

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• 20110909_retirement_saving_incentives

Americans who use defined contribution retirement savings plans (for example, 401(k) or 403(b) plans) or Individual Retirement Accounts will see their retirement security enhanced by two recently announced regulatory initiatives. The first is a series of Treasury Department/IRS proposed regulations that such individuals to use annuity-like guaranteed lifetime income products. The second is a final Department of Labor rule requiring complete fee disclosure to employers sponsoring retirement saving plans. Together, the two initiatives will give current retirement savers and future retirees more flexibility in structuring their retirement incomes, while making it possible to avoid excessive or hidden fees.

Four Treasury/IRS proposals, which were developed under the leadership of our former RSP colleague Mark Iwry, deal with several of the most pressing issues faced by employers and savers that currently reduce the use of annuities. The first proposal would reduce barriers to giving retiring savers the option of annuitizing part of their account balances. Currently, people need to annuitize either the entire balance or none at all. People are naturally wary of annuitizing the entire amount because it leaves them with little in the way of a cash cushion for emergencies. By choosing to annuitize part of the balance, people can retain a lump sum for emergency or other purposes.

A second proposal would remove a technical impediment to using longevity annuities, an annuity that is typically purchased close to retirement but does not begin to pay benefit until the retiree reaches age 85 or a similar age. Longevity annuities enable retirees to manage their money for a set period of time, secure in the knowledge that the longevity annuity will provide income after that, should they live longer than expected.

The third proposal would allow an individual to begin to partially annuitize their savings well before retirement. Starting to annuitize early by buying small pieces of an annuity over twenty or so years allows the saver to avoid having to make a “once and for all” decision and allows the savers to spread out the interest rate risk over time. This option had been subject to a requirement that the saver get a notarized statement from his or her spouse (if any) concerning whether the annuity covers just the saver or both the saver and his or her spouse. The proposal allows this to be handled by the issuing insurer when payments would begin rather than when purchases begin.

The fourth proposal would apply to relatively rare case where the employer has both a retirement savings plan and a traditional defined benefit pension, and would allow an employee to buy a low-cost annuity through the employer’s DB pension.

These four regulatory changes are positive developments. The changes announced today eliminate unintentional barriers to the use of lifetime income products without dictating how individuals should use them. Some may choose to partially annuitize at retirement, some to use longevity annuities to protect them in later years, and some to begin to buy annuities well before retirement. Whatever the choice, the proposals open up new options to future retirees, and should encourage even more market innovations.

At about the same time, the Department of Labor released final regulations requiring providers to disclose all direct and indirect fees to the employer sponsoring a 401(k) plan. The regulations will add needed transparency on fees that will enable increased competition to produce better results for employers and employees.

Despite removing a required template of charges, the new regulations nevertheless give employers a complete and accurate picture of all charges they have to pay, including indirect fees paid by the provider to others. Currently, many indirect fees are not disclosed even though they may reduce the earnings of participants. Endorsed by industry and consumer groups, the disclosures will enable employers who use this information properly to meet their fiduciary responsibility to choose a responsible fee level. What is even more important, the full disclosure will enable employers to structure their 401(k) plan so that individual savers can get the best returns possible, and not be subject to unreasonable fees.

While much more remains to be done to improve retirement savings plan, the steps taken by the proposed Treasury/IRS regulations and the Department of Labor’s final regulations will help savers to improve retirement security.

The new 2013 budget unveiled by President Obama on Monday again contains the Automatic IRA, which was developed by Brookings' Retirement Security Project in conjunction with The Heritage Foundation. This year's version again includes an important change that will also encourage more employers to offer a 401(k) account to their workers. However, important changes to the Saver's Credit, which had been in previous budgets failed to make it this year.

Nearly half of American workers - an estimated 78 million- currently have no employer-sponsored retirement savings plan. The Automatic IRA is a simple, easy to administer and understand system that is designed to meet the needs of small businesses and their employees. Employers facilitate employee savings without having to sponsor a 401(k)-type plan, make matching contributions or meet complex eligibility rules. Employees are enrolled automatically into an IRA with a simplified system of investment choices and a set automatic savings level. However, they retain complete control over all aspects of the account including how much to save, which investment choice to use, or even to opt out completely. Automatic IRAs also offer savings options for the self-employed, for independent contractors, as well as providing those who are changing jobs the ability to continue their retirement savings.

The new 2013 budget would also double the size of the tax credit that employers receive in return for starting a new 401(k) plan from $500 annually for three years to $1,000 annually for the same period. This increase will ensure that the credit covers more of an employer's costs, and should encourage more employers to offer such a plan. This is a very good move, but the credit could be still further expanded to $1,500 for three years as will be proposed by a new House bill coming from Rep. Richard Neal. As Congress examines the proposal, it will have the opportunity to also expand the smaller credit that would be offered to employers that start an Automatic IRA to ensure that they are fully reimbursed for all expenses connected with starting and operating such an account for their workers.

A disappointing development is the failure to again include proposals to expand and improve the Saver's Credit by making it fully refundable. The Saver's Credit is an incentive for middle-and lower-income taxpayers to save in 401(k)-type accounts or IRAs. Retirement Security Project research found that more than 69 million taxpayers had income that was low enough for them to be eligible for the Saver's Credit in 2007. However, nearly 45 million of these filers actually failed to qualify for the credit because they had no federal tax liability. If the Saver's Credit was made refundable as RSP has proposed and deposited directly into the account as a match for savings, those 45 million taxpayers could have taken advantage of the program and had significantly higher retirement savings.

Editor's Note: this article originally appeared in the 2012 Print Version of AARP: The Journal.

Using one platform to offer a variety of services

Known in the UK under the term “corporate platform” to indicate that it expands options available on the employer’s benefit platform, the development allows employees to use the employer’s retirement savings mechanism to save and invest for additional nonretirement purposes. When the corporate platform is fully implemented, employees will be able to man­age almost all of their investments and savings plans from one location, thus giving them a con­solidated view of their entire financial status. If carried to its full potential, the expanded saving platform will allow employees to shop for sav­ings products, among options that are available on the platform, instead of having to seek them out from individual suppliers—a search that often takes up work hours. Of even greater value, it gives employees one source to go to for indi­vidualized advice or financial literacy training.

The enhancement has special significance in the UK, where by fall 2012, the larger employers that don’t offer any other type of pension or retirement savings plan, must begin to automatically enroll their employees into basic retirement savings accounts. This requirement is causing a great deal of discussion about the future role of employer-provided benefits, as well as recon­sideration of the fees and services included in a traditional package. The platform enhancements allow an employer to differentiate its employee benefit package from the required basic account structure. It also gives younger employees a benefit of more immediate value, than they would have from a retirement savings account that they won’t access for a good 40 years.

Presentations from a variety of service providers at an October 2011 summit hosted by Pensions Insight, a UK trade journal, showed that the platform can be easily customized to meet the special needs of a specific workforce. Using a single computer interface, employees can select from a wide variety of savings and investment options that are appropriate for their income level and stage of life. Thus, an upper income manager who manages his or her own finances could see more sophisticated products, while an entry-level worker sees more basic sav­ings products. Live presentations by financial professionals who explain what is available on the computer platform add to the system’s value and increase its use.

A place to provide choice and to build financial literacy

The platform will have special value for moderate- and lower-income employees. While higher salaried employees may appreciate the opportunity to build their investments, the real value of the platform will be to enable moder­ate- and lower-income workers to find savings opportunities that they might otherwise miss because they don’t know where to go, are uncertain about what is a fair price, or for a variety of other reasons. Because employees tend to believe that services included on the corporate platform are implicitly endorsed by the employer, they usually have greater faith that the services are from legitimate providers at a fair price.

Employees at all levels can also use the site to receive guidance on individual products or basic financial literacy training. Individuals can choose from a range of options, from short videos on a specific topic by experts or fellow employees, to longer connected courses designed to meet the needs of specific age or income groups. Use is increased when employ­ees receive emails or text messages geared to birthdays or other life events, or generated after the employee visits a specific part of the website.

Understanding the value of peer evaluations to motivate others, some providers include a place where employees can post feedback about spe­cific products or savings choices. These postings help to guide other employees’ decisions and build the reputation of the platform as a source of unbiased information. The site can also include links to outside advisors who can answer specific questions, guide employees to another site for more information, or perform other services either online or over the telephone.

Differing age groups can be contacted and guided through different technologies. At the UK platform summit, David Harris, of Tor Financial Consulting, showed that younger employees preferred different communication methods than either older workers or the usual way employers provide information. However, the platform is able to use a wide variety of methods and is equally effective no matter which is used.

The platform’s value to international policy makers

Although the UK’s platform is intended as an enhancement to employer-provided benefits, it can also be used for a wide variety of policy goals, as the basic structure can be easily adapted to meet almost any nation’s specific tax and savings system. In the United States alone, policy experts have proposed dedicated savings accounts for nonretirement purposes ranging from unemployment benefits and retraining, home purchases, health care, and long-term health care coverage, to repaying student loans or building college balances for children or grandchildren. However, if all of these various accounts were established and funded, it is doubtful the employee would have any money left for food, clothing, and shelter.

Rather than having a host of specific savings programs, employees may be better served by more flexible accounts usable for a variety of purposes, as outside developments or chang­ing needs dictate. The platform concept would allow individuals to choose which purposes they need to save for and how much to save for each. Combined with targeted guidance or education, this structure could expose individuals to pos­sibilities they might not have considered before.

The structure is ideally suited to employment situations, but it could also be used by the self-employed or by consultants at sites aimed specifically at them and sponsored by trade associations, unions, or even government agen­cies. While their circumstances may preclude payroll deductions, the same products could be offered through direct debits to bank accounts.

The added value of nudge

The flexibility of the platform allows it to be used by employees with all levels of financial sophistication, but new participants would benefit from a variation on automatic enroll­ment that places certain amounts, in addition to the retirement savings amount, into a general savings account or similar vehicle. The automatic savings amounts deducted need not be large, and where the law allows, could vary according to employee age, with a larger proportion of the overall deduction going to nonretirement purpose for younger employees and to retirement for older ones.

As with automatic retirement enrollment, the employee would have the ability to vary amounts, divide the total among various accounts, and even stop all future contributions. However, automatic enrollment would offer workers direct experience with the nonretire­ment side of the platform. By varying enrollment in various accounts according to employees’ age, automatic enrollment could encourage them to consider saving for various purposes, such as a first home, college tuition for children, or additional health services.

Improving retirement security

Although the platform is applicable to a wide variety of other uses, its primary purpose is to build retirement security. Before retirement, the platform helps employees understand how to save, what they have, and how much more they need for a comfortable lifestyle. The other savings provide funds that can be used in the event of an emergency, thus helping to reduce leakage from retirement accounts in countries that allow early access to that money. At retire­ment, the platform helps individuals to see what other assets are available, and what loans or other liabilities must be factored in. In the UK, it is also being used to encourage individuals to use annuities and add them to their invest­ments. The UK experience can help to guide US policymakers in their efforts to increase the use of similar products.

The enhanced information and flexibility of the corporate platform should help individuals to better understand their finances and how to meet their goals. It moves retirement savings plans from a minor part of employees’ financial lives, to a central feature that has many more uses than just an event many years in the future. This promotes regular use of the platform, and a fuller understanding of what is necessary for a comfortable retirement.

Many American households do not save for retirement. Those that do save often contribute too little, invest poorly, or withdraw funds early. These patterns leave households, particularly low- and middle-income households, vulnerable to insufficient savings to finance adequate living standards during old age and retirement.

This research report proposes retirement saving reforms designed to help boost saving among low- and middle-income households. These 11 proposals are grouped under five themes: (1) making saving easier, (2) making saving more rewarding, (3) strengthening the market infrastructure for saving, (4) providing private information to savers, and (5) improving public education for saving.

Download the full report at aarp.org »