Not much coming out of the most recent Congressional session has affected retirement plans, but that could change in upcoming sessions, according to Rich McHugh, of counsel at Porter Wright Morris & Arthur LLP and vice president of Washington Affairs at the Plan Sponsor Counsel of America (PSCA).
McHugh noted to attendees of the PSCA’s Annual Conference that the tax treatment of defined contribution (DC) plans escaped unharmed in the 2015 budget, but proposals are still being debated. President Obama’s proposed Fiscal 2017 Budget includes a cap on amounts that can be accumulated in retirement accounts. McHugh said the tax provisions in that proposed budget may be a blueprint for actions the retirement industry may see if a Democratic president is elected this year.
There are a couple of retirement plan proposals that have the potential for enactment, “maybe even this year,” according to McHugh. He said one is an electronic distribution bill to streamline rules about electronic disclosures to plan participants, and another is an action to make multiple employer plans a possibility for unrelated employers. When the Department of Labor (DOL) proposed rules for state-run plans, one suggestion was to allow for multiple employer plans, and some in the industry felt this created an unlevel playing field between states and the private sector.
Speaking of state-run plans, McHugh pointed out that the consideration that state-run plans could create different rules for different states, some in Congress are rethinking their opposition to federally mandated automatic individual retirement accounts (IRAs).NEXT: Regulators have been busy
McHugh noted that retirement industry regulators have had more effect on retirement plans than Congress recently. Of course, the DOL’s fiduciary rule was big news.
But, he says the Internal Revenue Service’s (IRS’) elimination of its determination letter service is a bigger deal to plan sponsors than many think. He noted that determination letters are a big part of due diligence in mergers and acquisitions, and the PSCA has provided comments to the IRS encouraging it to continue the program in some form. Guidance issued in January that said expiration dates on determination letters issued prior to January 4, 2016, are no longer operative helps now, but eventually these letters will become stale.
Finally, McHugh mentioned the Pension Benefit Guaranty Corporation’s (PBGC’s) recent focus on defined benefit (DB) plan practices for locating and paying terminated vested, participants. He said the agency may suggest that missing participants’ assets be moved to the PBGC until those participants are found and can make rollover elections.