Mid-term elections are coming up, and some lawmakers may view this as a
time to push retirement plan agenda items through before changes occur in
Congress, while the result of the elections could change some of the focus for
retirement plan legislation.
Brigen Winters, principal at Groom Law Group, told attendees of the Plan
Sponsor Council of America (PSCA) 71st Annual National Conference that
Congressman Kevin Brady (R-Texas), chairman of the House Ways and Means
Committee is talking about a primary agenda item being tax reform, with a focus
on making individual tax rate cuts that sunset in 2025 permanent. “It is likely
to bring with it changes in the retirement space. Brady talked about wanting
the committee to dig in to make the retirement and other savings process simpler
and consolidating different types of plans,” he said.
Winters noted that there will be no budget bill this year, so nothing
will become active, but it will give the House an opportunity to put its
imprint on future budget legislation.
David Levine, principal at Groom Law Group, said plan sponsors should
care because whoever is in power after the mid-term elections, Republicans or
Democrats, will just drag out the old bill. It creates a baseline, and if there
is any more effort to grab at the retirement space, some on both sides will
agree, he said.
On the fiduciary rule, Levine told attendees that after the 5th
Circuit vacated the rule, the Department of Labor (DOL) has not
appealed, and state attorney generals and others tried to jump in and appeal,
but were unsuccessful, so the retirement industry is back to the
old rule. He said all plan sponsors can do is ask service providers if they are
going to act as fiduciaries. Many providers have already rewritten their
business models, and plan sponsors should ask what, if anything, providers will
The DOL has just issued a temporary enforcement policy.
Winters added that the DOL could ask for Supreme Court review, and has
until June to do so. However, he said, “We don’t think there is a good basis
for them to do so; there is no conflict between circuits.”
For distributions, Levine pointed out the DOL rule said those giving
advice and not receiving compensation were not fiduciaries, but that has
changed, so plan sponsors need to go back to the education model and reframe
from giving direct advice. Plan sponsors should understand what service
providers are doing on their distribution advice models, and monitor what is
going on about advising on rollovers.
Steve McCaffrey, senior counsel of National Grid U.S., a subsidiary of
National Grid UK, a global gas and electric utility, and the PSCA board
chairman, suggested plan sponsors listen to provider call center conversations to make sure
what information/advice is given and that call center scripts are being
The Retirement Enhancement and Saving Act (RESA) has been
reintroduced in Congress. Winters noted that it includes a proposal for pooled
employer plans, or open multiple employer plans (MEPs), a proposal to require
lifetime income estimates at least annually on participants’ retirement plan
statements; a fiduciary safe harbor for the selection of lifetime income
providers for retirement plans; limits on stretch IRAs that allow beneficiaries
to take out retirement plan assets over their lifetime; a proposal to allow
more time for participants who terminate with an outstanding loan to rollover
the loan and pay it off without it being a deemed distribution; as well as
other proposals that would affect nondiscrimination rules, the automatic
enrollment safe harbor default rate and the treatment of 403(b) custodial
accounts upon plan termination.
According to Winters, the House has been reluctant to push RESA through.
It has raised some opposition to the stretch IRA and illustrations of lifetime
income disclosures proposals. In addition, Congressman Orrin Hatch (R-Utah) is
retiring and there will be a new chairman of the Senate Finance Committee.
Winters said RESA will have a bigger chance of being passed if there is a
change in control of the House or Senate after the mid-term elections: however,
“Hatch may feel that pushing through RESA would be a good-bye gift.”
Winters also said if there is a change in control of one or both houses
of Congress, the fiduciary rule could come back into focus, and there probably
won’t be an agreement on the multiemployer pension plan crisis: Democrats will
Levine said there is a real chance of a big impact on the retirement
plan agenda if Republicans take losses in the mid-terms, so he expects a huge
push to pass everything they can before then.
Click here for the original article from Plan Sponsor.