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A Change for the Better?

The mid-terms are over and the Democrats took back control of the House for the first time since 2010, while the GOP slightly expanded its hold on the Senate majority. Believe it or not, while the talk outside the Beltway has largely focused on the prospects for even more gridlock, the prospects for positive retirement plan legislation might have just brightened.

Rep. Richie Neal (D-MA), now the ranking Democrat on the House Ways & Means Committee, and the man in line to become chairman of that powerful committee in January, has already cited several priorities on which he even thinks he might align with President Trump, and two of them — increasing retirement savings and protecting multiemployer pension plans — deal with retirement. Neal has long been focused on retirement issues and has, in just the past year, introduced his signature piece of retirement legislation, the Automatic Retirement Plan Act (ARPA), to address the retirement plan coverage gap.

ARPA would require all but the smallest employers to maintain at minimum a deferral-only 401(k) or 403(b) plan with a requirement to automatically enroll workers into the plan. But that is not all. ARPA also expands the types of employees that have to be eligible to participate, to include all workers expected to work for an employer for more than three months, regardless of the number of hours worked. An employer would no longer be allowed to exclude up to 30% of its workforce from participating in a plan, and the current one-year/1,000-hour service requirement would be repealed. Employers with existing plans would have five years (seven years for smaller employers) to transition to these new coverage rules.

We have been in active discussions with Rep. Neal and his staff for months on sensible modifications to this legislation for the next Congress, including exempting the new coverage requirements from the top-heavy testing rules and significantly modifying the tax penalties for non-compliance. Neal and his staff have shown a sincere willingness to work with us to address our concerns while still achieving their core policy objective of reducing the coverage gap.

Read more commentary from Brian Graff here.

At the same time, proving that the spirit of bipartisanship is not dead, Sens. Rob Portman (R-OH) and Ben Cardin (D-MD) are once again teaming up on retirement security legislation. Most of us in the retirement industry came to refer to the Economic Growth Tax Relief and Recovery Act (EGTRRA) as “Portman-Cardin” for good reason, as they led the charge to passage in the U.S. House of Representatives that included a host of vital improvements for retirement savings.

This time the dynamic pension duo is taking up retirement security in the U.S. Senate, introducing a comprehensive retirement security bill Dec. 19 that includes provisions to encourage small plan startups, boost automatic enrollment and re-enrollment practices, expand employer matching contributions for student loan repayments, provide portability of lifetime income options, expand the Saver’s Credit, and reform the required minimum distribution requirements, among other things.

The recent decision by Sen. Grassley to return as Chairman of the powerful Senate Finance Committee following Sen. Hatch’s retirement also bodes well. Grassley has previously been a sponsor of comprehensive retirement legislation, including the Graham-Grassley legislation that formed the basis (along with the Portman-Cardin bill in the House) for the 2001 EGTRRA retirement reforms. He was also Chairman of the Finance Committee when Congress enacted the Pension Protection Act in 2006.

Beyond that, the Senate Finance Committee that he will now chair in 2016 unanimously passed the Retirement Enhancement and Savings Act (RESA), which would allow for “open” multiple employer plans (MEPs), facilitate in-plan lifetime income options and disclosures, and other key changes. The House version of that bill had 85 cosponsors in the House, and while it has been bogged down by procedural and policy disagreements, there remains hope that it could see action in the 116th Congress.

Just after Thanksgiving, House Republicans released a wide-ranging tax package — including a number of retirement savings provisions. We’re talking, and forgive me if I am starting to sound repetitive, “open” MEPs, enhancements for small businesses to start a retirement plan, changes to required minimum distributions, an annuity purchase safe harbor for employers, provisions to enhance lifetime income portability, and an increase in the current cap on contributions under the automatic enrollment safe harbor (QACA) contributions, from 10% to 15%. The prospects for this particular bill to become law in its entirety are remote — but it is a positive sign that the 116th Congress could address bipartisan improvements to the retirement system along the lines of RESA.

And then there’s the initiatives underway by the Trump administration: The President’s executive orders on Association Retirement Plans, RMDs and e-delivery — the need for clarity on the fiduciary implications when advisors service retirement plans and advise participants on rollovers (a remnant concern of ours due to the DOL’s vacated fiduciary investment advice rule), and the emerging interest of individual states in crafting their own fiduciary standards.

As we head into what looks to be another critical year for retirement plan issues, remember how important your attendance at the 2019 NAPA 401(k) Summit is. Your 401(k) Summit registration helps support our advocacy efforts here at NAPA. Your attendance at the Summit is an investment in your future, the future of your profession, and ultimately, the future of the nation’s private retirement system. You can register for the 2019 Summit here.

Brian H. Graff, Esq., APM, is the Executive Director of NAPA and the CEO of the American Retirement Association. This column appears in the Winter 2018 issue of NAPA Net the Magazine.