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As a result of November 6, 2018, mid-term elections, Democrats will control the House of Representatives in the 116th Congress. Whether the new Congress will produce retirement legislation on issues as to which there is bipartisan agreement will in all likelihood depend on the political climate. The change in control will, however, bring additional focus to issues of particular concern to Democrats: a solution to the multi-employer plan financial crisis and initiatives to increase low-paid workers’ retirement savings.
In this article we consider the implications of the election for retirement policy, beginning with changes in the leadership of key committees.
Congressman Neal (D-MA) is likely to take over as Chairman of the House Ways and Means Committee. He has had a long-run interest in retirement policy issues, introducing, at the end of 2017, two significant pieces of retirement policy legislation: The Automatic Retirement Plan Act of 2017, which would (with some very limited exceptions) require every US employer to maintain an “automatic contribution” retirement plan and would also create a framework for “open” multiple employer plans (Open MEPs). And the Retirement Plan Simplification and Enhancement Act of 2017, which would make a number of changes to current rules for which there is (in most cases) bipartisan support.
Congressman Scott (D-VA) is likely to take over as Chairman of the House Education and the Workforce Committee. He has for the most part not made retirement policy a special focus.
Either Senator Grassley (R-IA)or Senator Crapo (R-ID) is likely to take over as Chairman of the Senate Finance Committee. The current Chairman of the Senate Finance Committee, Senator Hatch (R-UT), has had a significant ongoing interest in retirement policy. This year’s Retirement Enhancement and Savings Act of 2018 (RESA), bipartisan retirement policy legislation addressing a collection of outstanding retirement policy issues, was co-sponsored by Senator Hatch and the Finance Committee’s Ranking Member Senator Wyden (D-OR). Whether the new chairman of this committee will continue this focus remains to be seen.
Senator Alexander is likely to remain as Chairman of the Senate Health, Education, Labor and Pensions (HELP) Committee.
If you’re keeping score, Congressman Neal taking over at Ways and Means probably adds momentum for some sort of comprehensive retirement policy legislation; Senator Hatch’s retirement probably subtracts it.
As noted, there are several legislative “packages” of bipartisan retirement legislation that have been introduced (or, in the case of the proposal by Senators Portman (R-OH) and Cardin (D-MD), circulated) in the current Congress. Very briefly, some of the more significant items in these proposals include:
Permanent relief from Internal Revenue Code nondiscrimination rules for defined benefit plan closed groups and for certain make whole contributions under defined contribution plans.
Authorization of DC Open MEPs.
A DC annuity safe harbor that wouldgenerally defer to state insurance regulation on the issue of the financial condition of the annuity carrier.
A new automatic enrollment 401(k) ADP nondiscrimination testing safe harbor.
Mandatory lifetime income disclosure in DC plans.
Liberalization of the rules for electronic participant disclosure.
Legislation addressing rules for missing participants and creating a missing participant “lost and found.”
A number of changes to theInternal Revenue Code required minimum distribution (RMD) requirements.
For a more detailed discussion of these and other proposals, see our articles on Congressman Neal’s Retirement Plan Simplification and Enhancement Act and Automatic Retirement Plan Actproposals, RESA, and theFSA.
It’s unclear whether the chance of comprehensive retirement legislation passing into law in the 116th Congress will be greater than it was in the 115th Congress. Much will depend on whether the two parties are more interested in passing legislation or settling political differences.
One issue that may be a catalyst for retirement legislation: the multi-employer plan financial crisis.
Congress is currently considering what to do about the multi-employer plan financial crisis. Proposed legislation from the Joint Select Committee on Solvency of Multiemployer Pension Plans (authorized by the Bipartisan Budget Act of 2018 and chaired by Senator Hatch) is due by November 30, 2018.
At this point, we have no idea whether this committee will be able to produce a proposal that (1) will adequately address the problem and (2) can win enough support either in the current Congress, or the new one taking office in 2019, to be passed into law.
Democrats have, at least once in the past, been prepared to withhold support from (generally bipartisan) retirement legislation over this issue. In 2016, Democratic members of the Senate Finance Committee conditioned their approval of the 2016 version of RESA on committee approval of relief for the UMW multi-employer health and pension funds (the Miners Protection Act of 2016).
It’s possible that, in the new Congress, Democrats will insist on some Republican support for an adequate solution to the multi-employer plan financial crisis in exchange for their support for broader retirement legislation. This could cut both ways – it might, on the one hand, delay consideration of retirement legislation or it might, on the other, give urgency to it.
The last time Democrats controlled the House (in 2010), the then-Chairman of the House Education and Labor Committee Miller (D-CA) was focused on the issue of 401(k) plan fees. Many of the issues with respect to 401(k) plan fees raised by Congressman Miller were addressed by fee disclosure regulations adopted by the Obama Administration Department of Labor. Some issues, however, remain, particularly those addressed by the Obama DOL’s fiduciary rule. That rule was ultimately struck down by the Fifth Circuit. Since the Fifth Circuit’s decision, the SEC has come out with proposed new broker-dealer/investment adviser conduct rulesthat address a number of these same issues.
Congressman Scott (expected to take over as Chairman of the House Education and the Workforce Committee) has been strongly critical of the Fifth Circuit’s decision, and it is conceivable that he may make continued action on regulation of 401(k) and IRA fees and conflicts of interest a focus.
The other issue raised by (former) Congressman Miller during his term as Chairman of the House Education and Labor Committee was the fairness of the 401(k) system. During the Obama Administration, certain Democrats criticized 401(k) plans as providing “upside-down” incentives, primarily benefiting higher income Americans. Democratic opposition, in 2017, to “Rothification” of 401(k) plan contributions – considered by House Republicans as part of the 2017 tax reform project – seems to have signaled a change in their views on this issue, with Senate Minority Leader Schumer characterizing 401(k) plans as a “middle class” benefit.
The concerns in the new Congress of Democrats (and some Republicans) about 401(k) plan “fairness” are likely to focus on incentives for low-paid employee savings – e.g., expansion of the Saver’s Credit and subsidies for matching contributions for low-paid employees in small employer plans (proposals that are included in the Portman-Cardin draft bill). And on expansion of coverage – e.g., various proposals to increase the small plan startup credit, incentivize automatic enrollment and automatic escalation of contributions and cover long-term part-time employees in 401(k) plans.
In January 2014, President Obama famously said, “We’re not just going to be waiting for legislation in order to make sure that we’re providing Americans the kind of help they need. I’ve got a pen and I’ve got a phone.”
At the beginning of his term in 2017, President Trump and his cabinet moved aggressively on many fronts to reverse some changes made by President Obama. For the most part, however, this did not happen at DOL’s Employee Benefit Security Administration. Labor Secretary Acosta did not aggressively move against the fiduciary rule. And the recently produced proposal on multiple employer plans made very modest changes to current rules.
Thus, with respect to retirement policy at least, it appears (at this point) unlikely that the Trump Administration will try to act on issues without legislation.
Finally, there was some speculation earlier this year that Congress might act on bipartisan retirement legislation in a post-election lame duck session. With the change in control of the House, however, most believe it more likely that Democrats will want to use their new power to further issues of particular concern to them, some of which we’ve noted – e.g., a solution to the multiemployer plan crisis and initiatives to increase low-paid workers’ retirement savings.
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As we said at the top, much of what will happen in the 116th Congress will be determined by political issues far removed from retirement policy. But retirement policy is an area where there is bipartisan agreement on a number of issues. And if enough Republicans and Democrats are prepared to work together, it is possible that some legislative progress can be made on them in the new Congress.