A panel at the Oct. 22 opening session of the 2023 ASPPA Annual Conference noted that there is legislation that would allow 403(b) plans to offer CITs and separate account insurance contracts as investment options.
Panel members were Brian Graff, American Retirement Association (ARA) CEO; Will Hansen, ARA’s Chief Government Affairs Officer; Allison Wielobob, ARA General Counsel; and Kelsey Mayo, Partner at Poyner Spruill LLP and ARA Director of Regulatory Affairs.
H.R. 3063, the Retirement Fairness for Charities and Educational Institutions Act of 2023—was amended and passed by the House Financial Services Committee in May 2023; however, it has not reached the floor of the House, nor is there a companion bill before the Senate. Nonetheless, Graff said that the ARA is “very confident” that something will be done about this at some point.
Graff highlighted the significance of the matter, noting that 15 million participants in 403(b)s would benefit. This is “a top priority for us,” he added.
Other Measures
The panel also discussed other bills and regulatory developments that are relevant to NTSA members and the service providers and plan participants they serve.
Retirement Savings for American Act. The Retirement Savings for Americans Act (RSAA), introduced on Oct. 19, actually is a reintroduction; Hansen noted that it is the same version as that which had been proposed in 2022. The bill, whose sponsors in both chambers of Congress hail from both major political parties, would create a federal retirement plan run by the Treasury. All uncovered or excluded employees would be auto-enrolled at a 3% contribution rate. The program would be available for individuals making $150,000 per year or less—which means that 80% of working Americans are eligible. Its limits would be comparable to those set for IRAs.
An especially great concern is the provision in the bill that would provide a safe harbor match, Hansen indicated. The legislation could have severe effects on the private-sector retirement industry, Hansen said, especially if there is a match.
“It just doesn’t make any sense” for the federal government to be getting into the retirement coverage business, said Graff.
Spousal Consent. Both the House and the Senate have before them legislation that would require spousal consent for nearly all distributions from individual account plans. There would be exceptions, however—for distributions from required minimum distributions (RMDs), QJSAs, and if 50% of account balances are transferred to a spouse.
Graff said that this is “not a new idea” and that it is “not going away.” He noted that there are many examples in which people being forced to get spousal consent could be detrimental. This is “a very emotional issue for a lot of people,” he said.
RMDs. The proposed RMD regulations the IRS is considering are much broader than the provisions of SECURE 2.0 concerning RMDs, Mayo said. She told attendees that the IRS expects to finalize them soon.
LTPT. The IRS says guidance concerning LTPT employees will be coming out “soon” and that it is aware that the matter is a priority.
VFCP. An update to the Department of Labor’s VFCP was proposed in late 2022, Wielobob noted, and that the ARA had submitted a comment letter on the matter. She said that the DOL aims to further expand the program.
Fiduciary Rule. The DOL will be issuing a draft of a revised fiduciary rule soon, Wielobob said. “It remains to be seen” what will be in it, she said, but told attendees that a “rollover piece” is likely. There are “very important issues here,” Graff said, especially in light of the expectation that hundreds of new plans will be adopted in the next few years.
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