Dog Days in DC

The Dog Days of August are here. But that does not necessarily mean doldrums — like the mercury, the heat is on. American Retirement Association Chief Government Affairs Officer Will Hansen in an Aug. 15 webinar provided a look at legislative and regulatory developments in Washington, DC and the states.

Bipartisanship, but Brakes too

The leadership of the House Ways and Means Committee alone exemplifies, and perhaps helps set the tone for, an active time on Capitol Hill. Chairman Richard Neal (D-MA) “has been extremely active” concerning retirement planning issues since he became chairman in January, said Hansen. And his minority counterpart, Ranking Member (and former Chairman) Kevin Brady (R-TX) has also been very active, Hansen observed, and has been working with Chairman Neal, “especially regarding the SECURE Act”; in addition, he pointed out, Reps. Ron Kind (D-WI) and Mike Kelly (R-PA) are among that bill’s lead sponsor. And adding to the bipartisan activity have been Sens. Rob Portman (R-OH) and Ben Cardin (D-MD), whom Hansen described as among the most active members of the Senate.

Despite the bipartisanship, there are some differences between the priorities of the Democrats and Republicans in both chambers of Congress, Hansen noted. In the House, he said, for the Democrats, multiemployer plan funding relief is “especially high on their agenda, whereas the Republicans are especially interested in universal savings and expanding the availability of 529 accounts. In the Senate, Democrats are “also focused” on multiemployer plan funding relief, while the Republicans are more focused on judicial and executive branch appointments and are trying to avoid debate on taxes.

There also are differences between the Hill chambers. For instance, the SECURE Act enjoyed bipartisan support in the House and passed in May in a 417-3 vote, but the Senate has put the brakes on the bill. There had been hopes “that the Senate would pass it by unanimous consent, but that did not occur,” said Hansen.

So what’s next? The SECURE Act is pending in the Senate, and Hansen reports that at least three Senators — Ted Cruz (R-TX), Mike Lee (R-UT) and Pat Toomey (R-PA) — have a hold on the bill, because of concerns they have with various provisions, preventing imminent action. Hansen noted that Senate Majority Leader Mitch McConnell (R-KY) “doesn’t want to take up floor time unless he has to.” He said that the more likely path for the SECURE Act is for it to be added to the Senate spending bill or for there to be action on the measure in December.

Additional Legislation

The SECURE Act is not the only retirement-related measure in play, and Hansen discussed other bills currently under consideration.

The Retirement Security and Savings Act of 2019, S. 1431,  which is now before the Senate Finance Committee, has six titles and more than 50 provisions, including:

• expanding coverage and increasing savings
• income preservation
• administrative simplifications
• defined benefit plan reforms
• rule harmonization

Hansen said that the measure may “serve as the base bill for the next round of retirement policy reforms.”
The Butch-Lewis Act (H.R. 397), formally known as the Rehabilitation for Multiemployer Pensions Act, is a bill Hansen says “many see as the first step in addressing the multiemployer plan crisis.” It includes provisions that would establish the Pension Rehabilitation Administration within the Treasury Department, and also would authorize the Treasury to issue PRA bonds and use proceeds to make 30-year loans to approved multiemployer plans. “Approved plans” include:

• multiemployer plans in “critical and declining” status under Internal Revenue Code Sections 432(b)(2) and (6);
• plans with suspended benefits under the Multiemployer Pension Reform Act; and
• insolvent ongoing plans that received assistance from the Pension Benefit Guaranty Corporation (PBGC).

The Pension and Budget Integrity Act (H.R. 4035) has been reintroduced in the House of Representatives, Hansen reported, this time by Rep. Derek Kilmer (D-IA) on July 25. The bill includes a provision that would move any future premium increases or decreases “off budget.” This has been an issue, he said, because increases in PBGC premiums had been driven by “a need for additional revenue to pay for deficit reduction or unrelated spending, not sound pension policy, even though PBGC premiums are not general revenue,” and the measure would take away the temptation to treat premiums in such a way in the future.

Hansen also noted that there are bills that would impose a tax on financial transactions — such as sales of stock, bods and derivatives — including the Wall Street Tax Act and the Inclusive Prosperity Act; in addition, there are multiple presidential candidates who support such a tax in order to fund their health care proposals. These measures do not exclude retirement savings accounts from the taxes they would impose, he said.

Regulatory Activity

Hansen highlighted some recent actions at the IRS and the Department of Labor (DOL). The IRS has issued two revenue procedures: 2019-19, which concerns plan loan corrections via the self-correction program, and 2019-20, which he said “opens the door a little bit” for the determination letter program for hybrid plans and plans subject to a merger and acquisition deal. He also noted that the DOL issued a final rule on association retirement plans (ARPs) that was published in the Federal Register on July 31. ARPs were historically available to employer groups in the same line of business or industry, but now also can cover workers in the same geographic area as well as working owners, including sole proprietors. The DOL noted, however, that ARPs are not open multiple employer plans (MEPs); it says that current law would have to be changed in order to allow open MEPs.  

State Activity 

There is activity on the state level as well, Hansen noted, especially regarding fiduciary duty. Among the developments this year:

• Nevada released a draft rule in January;
• New Jersey released a proposed fiduciary duty rule in April; and
• Massachusetts accepted comments on a rule through July 26.

The impact on the retirement sector of state activity, said Hansen, is that it is possible that there could be dual compliance and standards if state rules do not exempt ERISA fiduciaries.

Some states also have put in place state-run retirement plans as well, and Hansen highlighted four:

• OregonSaves has been operational since July 2017;
• Illinois Secure Choice has been operational since January 2018; the registration deadline for employers with 100-499 employees was in July of this year, and employers with 25-99 employees are to register by November;
• CalSavers has operational since July 2019, and a lawsuit concerning ERISA preemption is pending; and
• New Jersey Gov. Phil Murphy (D) signed a Secure Choice bill this year.

Hansen added that Hawaii, Nevada, Colorado and Massachusetts will be the next states to implement a Secure Choice plan.

Webcast Available

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