The House Education and Labor Committee reported the Protecting America’s Retirement Security Act April 5, sending the bill to the House floor for a vote.
The committee voted 29-21 to report the bill to the House. No Republicans voted for the bill, and no Democrats voted against it. The legislation “takes important steps to help Americans plan and save for a dignified retirement,” said Committee Chairman Rep. Robert Scott (D-VA) in a press release.
The committee wasted little time taking up H.R. 7310; Rep. Lucy McBath (D-GA) had introduced it on March 31. The measure contains a variety of provisions that would affect retirement plans and retirement saving.
Defined Contribution Plan Fee Disclosures
The bill provides that within two years after it is enacted, the Secretary of Labor is to review Section 2550.404a–5 of title 29, Code of Federal Regulations, and explore:
- how the content and design of the covered disclosures may be improved to enhance participants’ understanding of fees and expenses; and
- the cumulative effect of fees and expenses on retirement savings over time.
It further stipulates that the review is to continue an outreach to stakeholders, including those representing plan sponsors and retirement plan participants.
Within three years after the bill is enacted, the Secretary of Education, in consultation with the Director of the Bureau of Consumer Financial Protection, the Secretary of the Treasury as chair of the Financial Literacy and Education Commission, and the Commissioner of Internal Revenue, is to create a personal finance education portal on a centralized and publicly available website of the Department of Education pertaining to federal financial aid for voluntary use by recipients of aid awarded under title IV of the Higher Education Act of 1965.
The bill calls for ERISA to be amended by adding a new section to Section 205 addressing spousal consent requirements. The new section provides that no distribution may be made under the plan unless the spousal consent requirements of subsection (e) are met:
- The plan is to provide to each participant, within a reasonable period before such distribution or designation or change of beneficiary is made and consistent with such regulations as the Secretary of Labor may prescribe, a written explanation of the rights of the participant and the participant’s spouse.
- The spouse of the participant must consent in writing to the distribution or designation or change of beneficiary. The written consent for a distribution is to be made during the consent period—the 90-day period immediately preceding the date of such distribution. The written consent is to acknowledges the effect of a distribution or designation or change of beneficiary, and is to be witnessed by a plan representative or a notary public.
- There are some exceptions to the spousal consent provisions, however. They would not apply regarding any distribution or designation or change of beneficiary if a participant establishes to the satisfaction of the administrator that—
- there is no spouse,
- the participant and the participant’s spouse have not been married for at least one year as of the date of the distribution or designation or change of beneficiary, or
- such consent cannot be obtained because: (1) the spouse cannot be located after taking documented search efforts in accordance with guidance from the Secretary of Labor; (2) there are exceptional circumstances that require the participant to seek the spouse’s consent would be inappropriate; or (3) due to other circumstances regulations prescribe.
The bill also provides that written consent by a spouse or the establishment by a participant that an exception applies regarding a spouse, shall be effective only concerning that spouse and to the distribution or designation or change of beneficiary to whom it relates.
The American Retirement Association is opposed to the legislation—especially the spousal consent provisions. In an April 5 letter to the Committee, ARA CEO Brian Graff outlined those objections.
The bill calls for ERISA to be amended to provide that for any automatic contribution arrangement taking effect after Dec. 31, 2024, at least every three years each employee who had been automatically enrolled but who made a positive election to not participate in the plan would be automatically reenrolled and would have to make another election to not participate. Determinations by plans to reenroll employees could be made at one time for all employees for a plan year, regardless of individual employee dates of enrollment.
In the April 5 markup session prior to approving the bill, Chairman Scott hailed the bill as a measure that “takes important steps to help Americans save for a secure retirement.” Ranking member Virginia Foxx (R-NC), however, argued that it would be better to instead focus on passing the RISE Act. The House Education and Labor Committee had approved the Retirement Improvement and Savings Enhancement (RISE) Act of 2021 (H.R. 5891) on Nov. 10, 2021 by a unanimous voice vote. That bill is supported by the American Retirement Association. Rep. Rick Allen (R-GA) joined Foxx in preferring the enactment of the RISE Act.
Bill sponsor McBath remarked that the legislation “helps workers, it helps families” and that the spousal consent provisions prevent a spouse from withdrawing all of the funds from a retirement account without the assent of the other. She called on Congress to replicate what it did in 1983 in reforming Social Security, this time with regard to retirement plans.
Foxx and Allen both disputed Scott’s contention that the bill is bipartisan. Foxx called it “a missed opportunity for bipartisanship.” Allen remarked that “retirement policy as long been an area of bipartisan cooperation” but that H.R. 7310 “inflates the federal role at the expense of workers and retirees.” Similarly, Foxx said that it takes a “wrongheaded government-knows-best approach.”
Rep. Teresa Leger Fernandez (D-NM) lauded the bill’s provisions that address financial education, stressing the importance of that for students and members of younger generations.
Rep. Diana Harshbarger (R-TN) called the spousal consent requirement a “significant departure from current law” governing distributions and proposed an amendment to H.R.7310 that would require the Government Accountability Office (GAO) to study the effect of the spousal consent requirement. “The committee should not legislate in the dark,” said Harshbarger.
“The problem has been well-established,” McBath countered, adding that Congress should act on it.
The amendment was defeated on a voice vote.
Rep. Scott Fitzgerald (R-WI) argued against the automatic reenrollment provision, calling it paternalistic and saying that it forces individuals who have already affirmatively opted out to do so again every three years. “It should be an individual’s decision to determine on their own” whether or not to participate in a plan, he said.
Rep. Katy Manning (D-NC) spoke against the amendment, endorsing the provision as a “critical and common-sense” improvement. She noted that autoenrollment has significantly improved participation in retirement plans. Manning further argued that those who opt out are unlikely to change their minds and later opt in and participate. However, she said, their circumstances may have changed since the initial opt out, making them better able participate in a retirement plan—and automatic enrollment would make it possible for such individuals to overcome the likelihood that otherwise they would not.
Fitzgerald’s amendment was rejected in a committee voice vote.