Retirement Proposals on the Table for Trump Administration

Some discussion topics during president-elect Donald Trump’s campaign included tax reform, jobs, Social Security, and the Affordable Care Act (ACA), noted David Levine, principal, Groom Law Group, Chartered, during a webcast sponsored by the Plan Sponsor Council of America (PSCA) titled “Post-Election Washington Update.”

He pointed 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, Roth requirements, and setting lifetime limits on retirement savings.

“We’ve seen some of these things before. Under George H.W. Bush, contribution limits were lowered. And, a reduction in tax benefits has been proposed by both parties,” he said. “Lawmakers see retirement policies as a way to fund other priorities.”

However, Levine noted that while health care is at the front and center of Trump’s priorities, there’s a question whether retirement is a priority.

There are many retirement policy proposals on the table, and it is uncertain whether anything can get approved during the lame duck session.

For example, Brigen Winters, principal, Groom Law Group, Chartered, noted that the Senate Finance Committee just approved a markup of the Retirement Enhancement and Saving Act (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 a lot of bipartisan steam, so if not enacted this year, I think we will see it enacted eventually,” Winters said.

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 IRAs that allow beneficiaries to take out retirement plan assets over their lifetime; a proposal to allow more time for participants who terminate with an outstanding loan to rollover 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.

Winters also noted that Senator Ron Wyden, D-Oregon, released a “discussion draft” of the Retirement Improvements and Savings Enhancements Act (RISE Act). Wyden wants to eliminate conversions of pre-tax contributions to Roths, permit employer matches on employee’s student loan repayments, make saver’s credit refundable and more generous, increase 70 ½ 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 70 ½, among other points.

Winters said the House Financial Services Committee is looking at the Financial CHOICE Act, which is broad legislation that rolls back much of the Dodd-Frank Act. Most noteworthy for retirement plans, he said, the Act would invalidate the Department of Labor’s (DOL)’s fiduciary rule and related guidance 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 speculated.

He also predicted there will not be a lot of robust legislative initiatives during the lame duck session. “It may just end up being a time just to do the things the government has to do to fund itself through the remainder of the fiscal year,” Winters said. “Still, there will be negotiations and Obama leadership, so riders to go along with the must haves offer the potential for retirement provisions, especially ones that have bipartisan support. If not, these proposals will be at the center of the next administration’s agenda.”

Levine said it is hard to say what is coming. “The federal government is a sprawling institution; Trump has to hire 4,000 people in the coming months,” he noted. Cabinet appointments and agency shuffling will have an effect on retirement plans. “Who will be the Secretary of Labor, and will the head of the Employee Benefits Security Administration, or EBSA, change? We will have to see who will be in these roles to drive us forward and influence processes,” Levine added.

In addition to changes in the cabinet and agency appointments, there will be different committee leadership in Congress, Winters said. However, the chairman of the U.S. Senate Committee on Health, Education, Labor and Pensions (HELP), which deals with ERISA issues, will continue to be Lamar Alexander, R-Tennessee.

“Will all proposals happen? No, but some will,” Levine concluded, “But the legislative process will determine whether things happen in 2017 or 2018 or later.”