House Republicans’ Proposals Consolidate Retirement Provisions

A Neuberger Berman analysis of House Republicans’ tax and retirement policy proposals indicates fundamental tax reform is unlikely, but portends smaller changes. 

By PLANSPONSOR staff | August 24, 2016
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Fundamental tax reform is “politically unlikely” and would largely depend on one party controlling the House of Representatives, the Senate, and the presidency, says Neuberger Berman in a recent analysis of House Republicans’ policy proposals.

However, the firm says corporate tax reform is more likely considering “bipartisan agreement that something should be down about it.”

The analysis shows that House Republicans’ tax and retirement policy proposals may suggest a push toward a universal savings account and a consolidation of current tax code retirement savings provisions.

Republicans in the House of Representatives led by House Speaker Paul Ryan (R-Wisconsin), propose that the Committee on Ways and Means create more general savings vehicles and “consolidate and reform different retirement savings provisions …to provide effective and efficient incentives for savings and investment.”

One such vehicle, Neuberger Berman points out, may be a Universal Savings Account in which account holders could contribute cash and withdrawal contributions as well as earnings at any time without penalty, while having full control of their investments.

The House Republicans’ proposal on “Poverty, Opportunity, and Upward Mobility” includes a section on “Building Retirement Security through the Private Retirement System.” This section advocates for open Multiple Employer Plans (MEP)s to make it easier for companies to band together and offer 401(k)s, something which has wide support.  According to Neuberger Berman, “small ball” proposals, such as MEPs may also be possible granted the administration of whichever party wins in November would support them or “at least be prepared to accept them.”

House Republicans’ proposals to lower individual-level taxes on investments income would make 401(k)s marginally less attractive, the paper says. However, it also points that House Republicans’ proposal to lower the corporate tax would “increase returns for all savers, regardless if they are saving inside a plan or outside a plan.”

The proposal also calls for the protection of access to affordable retirement advice. The firm says this proposal appears to be advocating “rejection” or Congressional repeal of the Department of Labor (DOL)’s recent Conflict of Interest, or fiduciary, rule.