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With the focus currently on how President-Elect Biden will staff his new Administration and on the change in control of the Senate, we provide a brief review of the key Administration jobs that President Biden will have to fill, and the key Congressional leadership, that directly affect retirement savings policy, and some of the issues they will be considering.
Staffing the new Administration
President-elect Biden has designated a new Secretary of the Treasury, former Federal Reserve Chairwoman Janet Yellen, and a new Secretary of Labor, Boston Mayor Martin Walsh.
There are three critical sub-cabinet positions that affect retirement policy: the Department of Labor Assistant Secretary of the Employee Benefits Security Administration (EBSA); the Department of the Treasury Deputy Assistant Secretary (Tax Policy) for Retirement and Health Policy; and the Director of the Pension Benefit Guaranty Corporation.
We will probably have to wait until Ms. Yellen and Mr. Walsh are confirmed to learn (with certainty) who will fill these positions. In what follows, we discuss their significance and some of the issues they will confront. (We discuss current agency issues in more detail in our article Biden Administration agency agenda.)
EBSA
The new Assistant Secretary EBSA will have a significant role in setting priorities and driving policy in the areas for which she is responsible, critically, retirement plan fiduciary rules.
Issues at EBSA include:
ESG and proxy guidance – Many Democrats have been critical of DOL’s latest position on these issues.
Fiduciary advice PTE – There was significant criticism from Congressional Democrats and participant advocates of DOL’s reinstatement of the “five-part test” and of the fiduciary advice PTE generally. It is likely that the effect of this guidance will be held up pursuant to a day-one Biden Executive Order. How aggressive a Biden DOL will be on this issue may very much depend on who the new head of EBSA is and how much they are committed to aggressive regulation in this area and how the Secretary (presumably Mayor Walsh) views it.
Private equity advisory opinion – Some Congressional Democrats and participant advocates criticized this letter, providing guidance with respect to, e.g., the inclusion of PE in a target date fund in a DC plan. If a Biden DOL wishes to discourage this strategy, it may consider a “clarifying” letter and/or an enforcement project targeting it.
State plan initiatives – We would expect a Biden DOL to do something to reverse current DOL policy opposing these programs and, possibly, changing the position taken on litigation with respect to California’s program (Howard Jarvis Taxpayers Association v. The California Secure Choice Retirement Savings Program), currently on appeal to the Ninth Circuit.
PEP implementation – Some providers have just begun to roll out their “Pooled Employer Plans” (PEPs). The new Administration’s attitude towards PEPs and the implementation of the new PEP system will be a critical issue in 2021.
Treasury
The new Deputy Assistant Secretary (Tax Policy) for Retirement and Health Policy will have a critical influence on the new Administration’s retirement savings tax policy and, in that regard, a voice in retirement savings tax policy elements of any broader Administration sponsored tax reform effort.
Auto-IRA and savings incentives – We would expect that a Biden Administration will continue Obama Administration policy favoring a federal Auto-IRA/Automatic Retirement Plan program, an enhanced Saver’s Credit, and other initiatives to expand retirement plan coverage.
Tax Reform – If tax reform is (as seems likely) a high priority for the new Administration, then Deputy Assistant Secretary (Tax Policy) for Retirement and Health Policy will have a significant role in crafting any benefits-related tax reform provisions.
De-risking, retiree lump sums – In 2019, the (Trump) Internal Revenue Service issued Notice 2019-18, stating that it no longer intended to amend current required minimum distribution (RMD) regulations to prohibit the payment, as part of a “lump-sum window program,” of a lump-sum to a retiree currently receiving an annuity. This Notice effectively reversed (Obama) IRS guidance (Notice 2015-49) stating that it would issue such a regulation. We would expect a Biden IRS/Treasury to revisit this issue – Democrats and participant advocates have expressed ongoing concerns about lump sum payment programs.
PBGC
The PBGC is facing a ballooning surplus in its single-employer program, driven by increased premiums that many view as too high, and a related aggressive reduction in DB participant headcount. Even more critical, PBGC is facing a looming bankruptcy of the PBGC multiemployer plan program. The new Director of PBGC will have to grapple both of these issues – perhaps as early as 2021.
With regard to the multiemployer plan program, we would expect that a priority of PBGC leadership would be to work with Congress to craft legislation to bailout the PBGC multiemployer program and to address the multiemployer plan financial crisis more broadly.
Changes in Congressional leadership
The new (117th) Congress took office on January 3, 2021, with control of the Senate still up for grabs. With the elections in Georgia, the Democrats will be in control of both Houses (with Vice President-elect Harris providing the tie-breaking majority for Democrats in the Senate).
In both the House of Representatives and the Senate there are two committees with primary jurisdiction over retirement savings policy: In the House, the Ways and Means Committee (responsible for tax policy) and the Education and Labor Committee (responsible for “ERISA” issues such as fiduciary responsibility and reporting and disclosure). And in the Senate, the Finance Committee (responsible for tax policy) and the Health, Education, Labor & Pensions (HELP) Committee (responsible for ERISA issues).
Here is our current understanding of who will be leading these key committees.
House Ways and Means: No change – Richard Neal (D-MA) is staying on as Chairman, and Kevin Brady (R-TX) is staying on as Ranking Member.
House Education and Labor: No change – Robert C. “Bobby” Scott (D-VA) is staying on as Chairman, and Virginia Foxx (R-NC) is staying on as Ranking Member.
Senate Finance: We assume that Ron Wyden (D-OR) will take over as Chairman and Chuck Grassley (R-IA) will become the Ranking Member.
Senate HELP: We assume that Patty Murray (D-WA) will take over as Chairman and Lamar Alexander (R-TN) will become the Ranking Member.
We are going to provide a follow-on article reviewing retirement policy legislation that may be on the agenda for the new Congress.
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It is, obviously, still early days. We will update this survey of key retirement savings policymakers as the staffing process progresses.