Act, Multiemployer Pensions, Taxes, Health Insurance
Dani Kehoe, Counsel to NAIFA
While there was a lot of news about Washington, Congress, and government this past week, there was almost no movement on issues of concern to NAIFA members. Here’s a status report on where we are heading into the week Congress returns from its Independence Day recess.
Retirement Savings: There’s more activity (or, more accurately, talk of activity) in the retirement savings arena than in any other issue area. Here’s the rundown:
SECURE Act: Senate Finance Committee GOP staffers report that they remain optimistic about winning approval from all Republican Senators so that the House-passed SECURE Act (H.R.1994) can pass the Senate by unanimous consent (UC). However, there was no sign that any of the three GOP Senators who have either objected or expressed concern are ready to relent and let the bill pass by UC. On the other side of the aisle, there are still no Democratic objections, but key staffers are growing increasingly pessimistic about chances for the bill moving.
Lobbying the Senate – including by NAIFA members and staff – remains intense. There is some hope that the bill will move prior to the August recess. Or, failing that, Hill insiders think it could be added to a fiscal-year-ending government spending bill. But right now, the bill is dormant. We’ll keep you posted.
SECURE-Part 2: Ways & Means folks are still working on a new retirement savings bill, with hopes of releasing a discussion draft by August. However, realistically (they say), it maybe this fall before a package comes together. Democrats and Republicans are working together on this initiative, but at the moment it is taking a back seat to preparing the multiemployer (union) pension plan bill that is next up on their agenda. Right now, both Republican and Democratic retirement savings staffers are collecting ideas for improvements to the employer-based retirement savings system. NAIFA is actively involved in this initiative and remains in close contact with relevant Hill staff as this work continues.
Multiemployer Pensions: Next up in the retirement world is the legislation aimed at solving the problem of bankrupt or near-bankrupt union pension plans (the multiemployer plan issue). A Ways & Means mark-up on a multi’s bill is set for July 9, and a House vote on the bill could come later in July. Ways & Means folks think they can win at least some Republican votes for the measure—optimistic predictions say as many as 40 GOP votes. Still, the issue is so controversial that most folks think it will take all summer and into the fall before an outcome can be predicted.
MEP Proposed Regulation: Finally on this issue area, last week, the Treasury Department released a proposed regulation on multiple employer plans (MEPs). The proposed reg would allow two exceptions to MEP “one bad apple” rules. The exceptions are for MEPs with a participating employer that can’t or won’t take remedial action to correct a failure of MEP rules, and for situations in which the MEP plan administrator has reason to believe there is or will be a failure by one participating employer, and requests relevant information about that situation from the participating employer in question. Under these circumstances, a MEP could (would have to) spin-off the participating employer’s workers into a single plan, and then terminate that plan, subject to a series of procedural notice and disclosure rules. The proposed regulation also discusses the tax consequences of a spin-off/termination on affected workers’ plan benefits.
The MEP proposed regulation is now open for comments. It will be at least months before the regulation can be finalized, perhaps as is or maybe with modifications, depending on the comments Treasury receives.
Taxes: Things are relatively quiet on the tax front. Probably the biggest priority right now, in both the House and Senate, is a tax extenders bill. As you know, the Ways & Means Committee approved tax extender legislation last month—it includes two provisions of interest to NAIFA: an acceleration of the expiration date of the Tax Cuts and Jobs Act (TCJA) estate tax rules, and an extension of the above-the-line deduction for unreimbursed medical expenses. However, there are no current plans to take the bill to the House floor for a vote—rather, House lawmakers view the Ways & Means Committee bill as a marker on the House position when it comes time to negotiate with the Senate on tax extender legislation.
Senate-side, the Finance Committee is collecting input from working groups of committee members on various tax extender issues. There may be a mark-up of an extenders package this month, but one has not yet been scheduled.
A big outstanding issue in both chambers is what to do about offsetting the cost of any tax bill. Ways & Means Committee Chairman Rep. Richard Neal (D-MA) has repeatedly promised that offsets (about $75 billion or so) will be identified to make the tax extenders bill as approved by the committee revenue neutral.
And, Ways & Means is working on other tax legislation, including such ambitious initiatives as a repeal of the state and local tax (SALT) deduction limitation. Altogether, they are looking hard to find more than $500 billion in new revenue. It’s a thankless task—they want whatever they propose to have a chance at being bipartisan, and they understand that any Democrat-only bill will be no more than a “show vote,” and so they don’t want to set up Democrats in the House for a tough vote on a bill that cannot be enacted into law.
So, despite a lot of support in the overall House Democratic Caucus for a bump up in the corporate tax rate, it is unlikely that Rep. Neal will propose a corporate tax rate increase. And so far, the revenue offsets the committee staffers have identified as potentially possible fall far short of the amount needed. Of concern to NAIFA is one such possibility: re-using the stretch IRA offset that is part of the SECURE Act. (That’s the provision that would require distribution (and tax paid) of most inherited 401(k) and IRA amounts within 10 years of inheriting.) Until the SECURE Act is enacted into law, the stretch IRA offset is “fair game” and maybe reused as part of an offset package in a subsequent tax bill. However, because tax writers are so very short of the amount of revenue they need, the risk for any offsets right now is fairly low. But this is something that needs to be (and will be) watched very, very closely over the next few weeks.
Health: A Senate vote on S.1895, the Alexander-Murray health reform bill (with its surprise billing and agent/broker compensation disclosure provisions) is likely this month, perhaps as early as in the next week or two. NAIFA remains concerned about the compensation disclosure provisions but supports addressing the surprise billing issue.