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 be changing.
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 followed.
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 push back.
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.