Conventional wisdom suggests that chances are slim that retirement policy legislation will be enacted in the remaining days of the legislative calendar going into the mid-term elections, but this year might be different.
The Senate currently remains in session, but the House has adjourned for its summer recess and is not scheduled to return until after the Labor Day weekend. According to the House calendar, there are only 19 legislative days scheduled before the Nov. 6 midterm elections and only 16 more days tentatively scheduled as a lame-duck session after the elections.
In the midst of this, the House and Senate do have obligatory legislation that needs to be addressed, including passing the remaining annual spending bills before the start of the government’s fiscal year on Oct. 1.
But the outlook for enactment of retirement legislation in 2018 is somewhat different, with a sliver of hope that the two parties and two chambers can come together.
RESA’s Long Road
The long-pending Retirement Enhancement and Savings Act (RESA) has now been introduced in both the House and Senate, and it enjoys broad bipartisan support — which is a rare occurrence in the current Congress. RESA had previously received overwhelming support by the Senate Finance Committee in the fall of 2016, but the legislation didn’t make it over the finish line before Congress adjourned.
In March 2018, nearly identical legislation was reintroduced by Finance Committee Chairman Orrin Hatch (R-UT) and Ron Wyden (D-OR), and companion legislation was introduced in the House for the first time by Reps. Mike Kelly (R-PA) and Ron Kind (D-WI). The House bill currently shows 59 Democratic and Republican cosponsors.
In addition, House Ways and Means Committee Chairman Kevin Brady (R-TX) has indicated that he intends to work on Tax Reform 2.0 when the House returns in September, which will include a package of legislative bills, including “a range of proposals” to address retirement savings issues. Among the components of Brady’s Tax Reform 2.0 plan released July 24 are to:
- create a new Universal Savings Account;
- allow families to access their retirement accounts penalty-free for new child expenses, whether by birth or adoption, with the ability to replenish those accounts in the future; and
- expand Section 529 education accounts to also be available to pay for apprenticeship fees to learn a trade, cover the cost of home schooling and help pay off student debt.
Meanwhile, Sen. Jeff Merkley (D-OR) reintroduced his American Savings Act legislation to give workers access to a retirement savings plan for those who otherwise do not have access through their employer. Even though this would be a government-run program modeled after the TSP, and may not receive broad bipartisan support, it does demonstrate that there is interest in addressing the coverage gap.
Moreover, a bipartisan group of senators — Cory Booker (D-NJ), Tom Cotton (R-AR), Heidi Heitkamp (D-ND) and Todd Young (R-IN) — introduced four bills on July 17 that seek to expand access to workplace plans and enable individuals to build emergency savings. Two of these bills contain components of RESA.
One, the Small Business Employees Retirement Enhancement Act (S. 3219), seeks to eliminate regulatory barriers to make it easier for small businesses to join pooled employer plans; the other, the Retirement Flexibility Act (S. 3221), would provide an additional nondiscrimination safe harbor for automatic contribution arrangements. In particular, S. 3221 would increase the current automatic escalation safe harbor cap from 10% to 15% and permit the initial contribution percentage to start as high as 10%, instead of the current 3%.
While they are less certain, other changes that could be in the mix include legislation to increase the contribution limits for health savings accounts and permit spouses to make catch-up contributions to the same account.
If anything, Chairman Brady’s announcement provides an opening for discussions on a retirement bill, but the overall shape of the legislation and its cost will be big determining factors of whether it could make it through the Senate. It does seem highly unlikely that anything will be enacted prior to the elections, but it does seem possible that a RESA-based bill that sticks fairly closely to the original legislation could be enacted in a lame-duck session. This, of course, also depends on the outcome of the elections. If the Democrats takeover at least one chamber, they may choose to punt this issue into 2019.
In addition to the National Association of Plan Advisors, a number of other powerful industry groups are calling for Congress to approve RESA.
In a July 25 letter to the House Ways & Means Committee, for example, the U.S. Chamber of Commerce strongly encouraged the committee to consider RESA. The letter suggests that removing barriers to open MEPs, enhancing automatic enrollment and escalation features, and clarifying the annuity selection safe harbor for DC plans would help their members increase access to retirement plans. “While there are provisions of H.R. 5282 we believe could be improved, we believe this legislation would have a positive impact on the retirement system and deserves due consideration by the Committee,” wrote Neil Bradley, Executive Vice President and Chief Policy Officer for the Chamber.
Geoff Manville, a Principal with Mercer’s Government Relations group, agrees with the assessment that RESA is possible, but will take some effort. “There’s a lot of work to do in ironing out differences between the House and Senate, but Chairman Brady’s interest in including RESA provisions in a retirement package — and broad bipartisan interest in encouraging savings — gives Congress a real chance at passing something this year,” Manville notes.