NAGDCA Expects Movement on Retirement Reform in 2021

Priorities of the National Association of Government Defined Contribution Administrators is in recently introduced legislation, including allowing 403(b) plans to invest in CITs.

During a webinar sponsored by the National Association of Government Defined Contribution Administrators (NAGDCA) on Wednesday, Paul Beddoe, head of U.S. government affairs at NAGDCA, said, “Retirement reform is bipartisan and right front and center.” He said the Retirement Security and Savings Act, proposed by Senators Rob Portman, R-Ohio, and Ben Cardin, D-Maryland, “should and will eventually be passed.”

Reagan Anderson, senior vice president, government affairs at Capital Group, said, “The thing to highlight is that Portman’s commitment to a bipartisan bill is genuine and important,” but that the margins between the Democrats and the Republicans in both the House of Representatives and the Senate “are so slim, it will be tough to get a vote.” That said, Anderson added that she believes the leadership of the Senate Finance Committee, whether that turns out to be Democrat or Republican, will realize that “retirement security is a kitchen table issue and that it is important to help people rebuild their savings once we get past the pandemic, so I believe the Senate Finance Committee chairman will let the Portman-Cardin bill lead the way.”

Beddoe said all six of NAGDCA’s priorities are in the Portman-Cardin bill on the Senate side, and three on them are in the bill on the House side. Those objectives are, first, to expand 403(b) investment options to include collective investment trusts (CITs), and, next, to permit non-spousal beneficiaries to roll inherited individual retirement account (IRA) assets into defined contribution (DC) plans.

NAGDCA wants to eliminate the 457(b) “first day of the month” rule, Beddoe continued. The association also wants to permit participants with Roth accounts in DC plans to roll Roth IRA assets into these plans. NAGDCA also wants to exempt Roth contributions in DC plans from required minimum distribution (RMD) rules, Finally, the association wants to permit DC plan participants to make qualified charitable distributions (QCDs). The first, third and sixth priorities are in the House version of the bill, Beddoe said.

He agreed with Anderson that because of the nation being sharply split between Republican and Democrat objectives, “We are feeling pretty good about the commitment of our key champions—but it is not going to be smooth sailing, and it won’t just land on our laps. We are going to have to work for it.”

As far as how the pandemic has affected public sector defined benefit (DB) plans, Jeannine Raymond, director of federal relations at the National Association of State Retirement Administrators (NASRA), said that because most state and local plans had business continuity plans in place, “they were able to get monthly contributions out the door. And, thankfully, the markets recovered, so most plans are expected to have stable assets in 2020.”

Andy Blocker, head of U.S. government affairs at Invesco, said it remains to be seen how the Department of Labor (DOL) will handle retirement issues under the Biden administration. It depends on who President-elect Joe Biden selects for key positions at the DOL and what their priorities will be, he added.

He said he doesn’t expect the Securities and Exchange Commission (SEC) to rewrite Regulation Best Interest (Reg BI), but that the SEC could be more stringent about its enforcement.

As far as Biden’s proposal to replace tax deferrals on contributions to 401(k)s with tax credits, Blocker said “that would be a major sea change” to the way 401(k) plans have been managed since their inception. “It would cause confusion, and you would have to explain a whole new system to participants,” he said, adding that he hopes it doesn’t go into effect.

Anderson said she expects Biden will be a champion of environmental, social and governance (ESG) investing.

She said the trillions in monetary and fiscal support the federal government has pumped into the economy to fight the effects of the COVID-19 lockdowns should, and will, become a concern of lawmakers. “So far, we haven’t been worried about paying for anything, but that is going to have to change in a big way,” Anderson said. “The spending has not been checked at all. Industries like ours will have to pay the tab.”

Raymond said she fears that retirement plan tax breaks are likely to fall in legislators’ crosshairs as they turn their attention to raising revenue to offset the COVID-19-related spending. “They always look to retirement plan tax preferences when they look for revenue raisers, because that is where the money is,” Raymond said.

However, at least at the outset of the Biden presidency, Anderson said, “Our industry is not at the top of Biden’s list right now because there are so many pressing issues, with COVID-19 still a threat.”