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In this article we briefly consider several recent retirement policy legislative initiatives in the 116th Congress: the Retirement Enhancement and Savings Act of 2019 (RESA), re-introduced in the House by Congressman Kind (D-WI) on February 6, 2016; the Rehabilitation for Mutiemployer Pensions Act introduced in the House by Ways and Means Chairman Neal (D-MA) on January 9, 2016; and two proposals introduced by Senator Collins (R-ME) (Chairman of the Senate Special Committee on Aging).
We then discuss (again, briefly) the outlook for retirement policy legislation after the recent battles over the debt limit.
The 2019 House RESA legislation is for all intents and purposes identical to legislation introduced in both the House and the Senate in the 115th Congress. Key RESA proposals include:
Closed group relief – addressing certain nondiscrimination problems presented by grandfathered benefits under DB plans and make-whole benefits under DC plans.
Authorization of DC Open MEPs – allowing “Pooled Plan Providers” to offer defined contribution plan “Open” multiple employer plans (MEPs) by eliminating the current DOL “nexus” rule and providing a solution to IRS’s “one bad apple” rule for qualifying plans (“Pooled Employer Plans”), subject to certain conditions.
DC annuity safe harbor – generally deferring to state insurance regulation with respect to the issue of the financial condition of the annuity carrier selected by a plan fiduciary to offer annuities in a DC plan.
Mandatory lifetime income disclosure – requiring DC plan administrators to annually provide participants a description of the monthly “income stream” they would receive if their account balance were paid in the form of an annuity, based on assumptions specified in DOL guidance.
Savings and plan creation incentives – eliminating the 10% cap on the automatic escalation of contributions under the automatic contribution safe harbor, increasing the dollar limit on the small employer plan startup credit from $500 to $5,000, and adding a new small employer plan automatic enrollment credit of $500 per year for three years beginning with the year the automatic enrollment provision is included in the plan.
Most RESA proposals (mandatory lifetime income disclosure is to some extent an exception) have broad bipartisan support.
The Rehabilitation for Mutiemployer Pensions Act would generally provide federal loans to “’critical and declining’ status multiemployer pension plans, plans that have suspended benefits, and some recently insolvent plans currently receiving financial assistance from the PBGC.” Generally, a multiemployer plan is in critical status if the plan assets are less than 65% of liabilities and in critical and declining status if it is expected to be unable to satisfy its benefit payment obligations within 15 years (20 years for plans where the ratio of inactive participants to active participants exceeds 2 to 1).
We note that the Joint Select Committee on Solvency of Multiemployer Pension Plans (authorized by the Bipartisan Budget Act of 2018) – tasked with producing a consensus solution to the crisis by November 30, 2018 – has not produced a proposal.
Put simply, there is bipartisan support for doing something about the multiemployer plan solvency crisis but no consensus yet as to what. Thus, while the Mutiemployer Pensions Act has strong Democratic and some Republican support (it is sponsored by Ways and Means Chairman Neal and has 62 co-sponsors), there is some significant opposition to it, particularly from Republicans.
In February 2019 Senator Collins introduced two employer retirement plan proposals:
Bill to avoid duplicative annual reporting: This proposal would allow a group of DC plans to file a single annual report (form 5500) where the plans provide the same investments or investment options to participants and have the same trustee, named fiduciary, administrator/plan administrator and plan year. This proposal would, in effect, allow a multiple employer form 5500.
Retirement Security Act of 2019: According to Senator Collins’s press release (there is currently no text available for this bill) this proposal would:
“Enabl[e] more businesses to join multiple employer plans (MEPs) … without requiring a connection, or “nexus,” between them. … The bill would protect members of a MEP from losing their tax benefits if one employer in a MEP fails to meet the minimum criteria necessary for retirement plans to obtain tax benefits.
The bill would also “direct Treasury to simplify, clarify, and consolidate required notices to lessen costs.”
In connection with these and other retirement policy issues, the Senate Special Committee on Aging held hearings on February 6, 2019.
There is broad bipartisan consensus on a number of retirement policy proposals – including many of those in RESA and in recently introduced (December 2018) Portman-Cardin legislation. There are also proposals with “some” bipartisan support but also some significant opposition, e.g., the RESA lifetime income disclosure proposal and proposals to increase the use of electronic communications.
In the current highly partisan political environment, the best chance for action on some or all of these issues may be legislation to solve the multiemployer plan solvency crisis. As noted, however, there currently appears to be no consensus as to what that solution should be.
Other possible vehicles for retirement policy legislation include the need for a new budget deal by the end of September (if a new deal is not reached, across-the-board, “sequester”-based spending cuts will apply) or (conceivably) the next round of debt limit legislation.
Bottom line: the outlook for bipartisan policy legislation in the current Congress remains uncertain.