There is a question as to whether retirement policy is a priority for President-elect Donald Trump. Either way, his administration will find many proposals to consider.
David Levine, principal, Groom Law Group, Chartered, points out that potential proposals in tax reform that could affect retirement plans include lowering or raising contribution limits, changing the tax benefits of retirement plans, adjusting Roth requirements and setting lifetime limits on retirement savings. “Under George H.W. Bush, contribution limits were lowered. And a reduction in tax benefits has been proposed by both parties,” he says. “Lawmakers see retirement policies as a way to fund other priorities.”
Below are some of the many retirement policy proposals on the table. Retirement Enhancement and Savings Act (RESA).
Brigen Winters, principal, also with Groom, notes that the Senate Finance Committee just approved a markup of RESA. RESA includes a proposal for pooled employer plans, or open multiple employer plans (MEPs). It would treat them as one plan under the Employee Retirement Income Security Act (ERISA) and take care of the “one bad apple” rule to prevent one participating employer from disqualifying the whole plan.
“This proposal has bipartisan steam, so, if not enacted this year, I think we will see it enacted eventually,” Winters says.
RESA also includes: a proposal to require lifetime income estimates at least annually on participants’ retirement plan statements; a fiduciary safe harbor for the selection of lifetime income providers for retirement plans; limits on stretch individual retirement accounts (IRAs) that allow beneficiaries to take out retirement plan assets over the remainder of their lifetime; a proposal to allow more time for participants who terminate with an outstanding loan to roll over the loan and pay it off without it being a deemed distribution; as well as other proposals that would affect nondiscrimination rules, the automatic enrollment safe harbor default rate, and the treatment of 403(b) custodial accounts upon plan termination.
Retirement Improvements and Savings Enhancements (RISE) Act.
Winters also notes that Senator Ron Wyden, D-Oregon, released a “discussion draft” of the RISE Act. Wyden wants to eliminate conversions of pre-tax contributions to Roths, permit employer matches on employees’ student loan repayments, make saver’s credit refundable and more generous, increase the 70½ required minimum distribution (RMD) age and provide an exemption for combined amounts under $150,000. He also proposes putting a $5 million cap on Roth IRAs, and allowing traditional IRA contributions after age 70½. Financial CHOICE Act.
Winters says the House Financial Services Committee is looking at the Financial CHOICE [Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs] Act. Noteworthy for retirement plans, the act would invalidate the Department of Labor (DOL) fiduciary rule and would require the Securities and Exchange Commission (SEC) to do an economic analysis before issuing fiduciary standards. “We probably won’t see movement on this until the next Congress,” Winters speculates.
According to Levine, it is hard to say what is coming. “Will all proposals happen? No, but some will,” he concludes, “The legislative process will determine whether things happen in 2017 or 2018 or later.”