Retirement savings tax incentives in danger post election
Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Asset owners and the coronavirus
    • Alternatives
    • Consultants
    • Coronavirus
    • Defined Contribution
    • ESG
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • SECURE Act
    • Special Reports
    • WorldPensionSummit
    • Ron Schmitz
      Pandemic drives faster transition for Virginia to private markets
      Mubadala Investment Co. logo
      Mubadala draws on portfolio in coronavirus fight
      T.J. Carlson
      Texas Muni reduces downside risk during pandemic, finding opportunities now
      Scott Davis
      ‘Triage plan’ at Indiana system helped stem losses
    • CI Financial launches global real estate, infrastructure joint venture
      Tina Byles Williams
      Xponance, Investcorp link up to give diverse alts managers a boost
      MidOcean taps 2 for investor relations team
      Erik Hirsch
      Russell’s deal with Hamilton Lane about forming ‘strategic partnership’
    • Hub International agrees to buy Plan Sponsor Consultants
      Aon names public markets solution leader
      Deloitte to acquire Sydney-based consulting firm Rice Warner
      Jo Holden
      Mercer picks new global head of investment research
    • Jerome Powell, chairman of the Federal Reserve, listens during a Senate Banking Committee hearing in Washington on Dec. 1, 2020
      Fed saw some time before taper conditions met – minutes
      International Monetary Fund and World Bank spring meetings signage at the IMF headquarters in Washington
      IMF upgrades global growth forecast, warns of diverging recoveries
      A cashier standing behind a protective barrier assists a customer at a Peter Harris Clothes store in Latham, N.Y.
      Job growth tops 900,000 in March as hiring broadens
      Duncan Bonfield, CEO of IFSWF
      Institutional investors putting risk back on the table – report
    • Economic Group Pension Services scoops up third-party administrator
      OregonSaves gathers $100 million in assets
      Treasurer: CalSavers hits 10,000-plus in employer sign-ups
      Wisconsin Deferred Compensation cutting American Beacon fund from lineup
    • 2 standards better than 1 when it comes to ESG reporting – research
      Girls Who Invest aims for diversity
      Investors press Berkshire Hathaway on climate action
      U.K. pension regulator warns plans on climate disclosures
    • Ken Griffin
      Ken Griffin donates $5 million to give Miami students internet
      New book culls institutional wisdom from podcast series
      Fearless Girl
      SSGA’s Fearless Girl statue now shattering glass ceiling
      Tangen video
      Norges chief dons chef’s hat to boost employees’ spirits
    • Hedge funds post best first-quarter return since 2000
      Jason Kephart
      Managers see good times ahead in 2021
      Jev Mehmet, CEO of Brevan Howard's Coremont unit
      Brevan Howard runs $50 billion unit like BlackRock’s Aladdin
      A sign outside a Credit Suisse Group bank branch in Murten, Switzerland
      Credit Suisse, Nomura slump as banks tally Archegos damage
    • CalSTRS puts $1 billion into 2 BlackRock low-carbon strategies
      U.S. bonds have worst quarterly return since 1981
      Norway wealth fund should reduce equity universe – report
      Hedge funds post best first-quarter return since 2000
    • Former Winton executive joins digital asset trading firm
      Michael Dommermuth, chief executive officer of Manulife Asset Management speaks at the Bloomberg Markets Most Influential Summit in Hong Kong in 2015
      Manulife, Samsung Asset Management to cooperate on S. Korea opportunities
      Hamilton Lane puts 3 in charge of fund investment amid promotions
      two businessmen seal deal with handshake over table with documents, laptop, table, smartphone and documents
      Future Planet Capital acquires venture capital firm Midven
    • Pennsylvania State Capitol, Harrisburg
      PennPSERS subject of probe into fiscal-year return data
      Florida Senate bill seeks to close state pension plan to most new hires
      A foreign currency dealer on a telephone in a dealing room of Hana Bank in Seoul
      S. Korea tweaks NPS domestic equity target ranges
      NISA index ticks down in March, as funding gains
    • Former Winton executive joins digital asset trading firm
      Hamilton Lane puts 3 in charge of fund investment amid promotions
      TimesSquare Capital taps ISS veteran for ESG post
      Carl Pettersson
      Finland’s Elo chooses next CEO
    • Hand typing on stationary iPhone at an office reception desk
      Private equity’s taste for tech spurs $80 billion deal spree
      Vista Equity promotes 2 to leadership roles on 2 funds
      Azimut takes minority stake in HighPost
      Bills of euro, dollar and pound currencies, among others
      Ardian acquires Bregal’s stake in Freshstream fund
    • CalSTRS indutrial property
      Investors hungry for industrial properties
      Tim Wang
      GLP names co-president of logistics, industrial real estate for China
      Frank Forster
      StepStone Real Estate adds managing director for Europe
      Christine Iacoucci
      BentallGreenOak promotes from within to fill Canadian CIO role
    • Andy Schreiner
      New PEPs targeting firms without retirement plans
      Jackie Walorski
      Contribution catch-up for caregivers gaining favor
      Retirement cartoon
      Hopes rising for retirement readiness in 2021
      Neal and Brady
      Retirement security could be only issue both sides accept
    • Corporate pension contributions
      Eddy Awards 2021
      COVID-19: One year in
      Charging Bull, sometimes referred to as the Wall Street Bull or the Bowling Green Bull, a bronze sculpture that stands on Broadway just north of Bowling Green in the Financial District of New York City
      Top-performing managers Q4 2020
    • U.S. still a key market for investors
      Collected coverage of P&I's 2020 WorldPensionSummit
      Pedestrians pass a large advertisement on the Arndale Center shopping mall reading 'Act now to avoid a local lockdown' in Manchester, England
      COVID-19 puts new opportunities and risks on the agenda - WPS panelists
      Screens display stock price information over the trading floor of the NYSE Euronext exchange in Paris
      Private assets will continue to grow in portfolios – WPS panelists
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q2 2020 searches and hires overview report
      Q2 2020 money manager M&A activity summary
      Q2 2020 legal overview report
      Q1 2020 searches and hires overview report
    • Q1 2021 searches and hires overview report
      New Jersey hires 2 alts consulants
      CalSTRS puts $1 billion into 2 BlackRock low-carbon strategies
      Phoenix DC plans stick with Morley for stable value
    • Q1 2021 searches and hires overview report
      New Jersey hires 2 alts consulants
      CalSTRS puts $1 billion into 2 BlackRock low-carbon strategies
      Phoenix DC plans stick with Morley for stable value
    • Passive Investment Management Services
      Active Extended Global Credit Manager Search
      Actuarial Services
      Investment Management Services
    • U.S. bonds have worst quarterly return since 1981
      Stable value retains edge over money market funds
      Taiwan Semiconductor’s No. 1 in the emerging markets book
      U.S. fixed-income returns post another positive year
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Letters to the Editor
    • Partner Content
    • Publisher's Update
    • CalPERS cartoon
      Urgency underscores CalPERS' search for a CIO
      Multiemployer plans cartoon
      Money — but no fixes — for multiemployer plans
      Vaccination cartoon
      Rallying to meet the ongoing COVID-19 challenge
      Tesla cartoon
      Don’t confuse wealth creation with retirement saving
    • China: the outlook is bright for longer-term investors
      Finding Differentiation in Securitized Assets
      Bipsync Client Stories: RMS in Action at Pensions and Superannuation Funds
      Green and sustainable bonds in emerging markets
    • Greg Shea and Steven Kindred
      Commentary: The solution for yield-seeking allocators may be hiding in plain sight
      Jim Park
      Commentary: Asian Americans, Pacific Islanders face ‘bamboo ceiling’ in money management
      Jared Gross
      Commentary: Anchors and allocations – breaking the grip of 60/40
      Peter Marber
      Commentary: Is it time for an emerging markets rally?
    • Writer using a typewriter
      OCIO industry needs to adopt GIPS
      Writer or journalist workplace. stock illustration
      Even as it assails China, Trump administration emulates it
      Skeptical of Main Street support for proxy adviser proposal
      Focus on manager diversity pushes asset owners’ to walk the talk
    • P&I Content Solutions
      Research for Institutional Money Management
      P&I Content Solutions
      Top questions for institutional investors
      Sponsored Content By Newton Investment Management
      Growth and Innovation in Emerging Markets
      P&I Content Solutions
      In Challenging Markets, Systematic Global Macro Strategies Could Hold Opportunity
    • Help us help you by supporting quality journalism
      You Must Believe in Spring
      Everything Must Change
      Tomatoes & Investments
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • watch video
      1:23
      The passive fixed-income glut
      watch video
      1:38
      Is it time for DC plans to embrace private equity?
      watch video
      5:39
      The coronavirus pandemic: One year later
      watch video
      0:45
      Private funds weathered 2020 turmoil
    • Understanding the PEP Evolution
      Divest or engage?
      New Outlook on Income: A Framework for Evaluating DC Retirement Income Solutions
      Innovations in DC: Helping supercharge retirement outcomes
    • POLL: The Biden infrastructure plan
      POLL: Retirement income solutions
      POLL: Working after the pandemic
      POLL: The year ahead for the 1,000 largest U.S. retirement funds
    • view gallery
      9 photos
      Coronavirus and the markets
      view gallery
      22 photos
      The 1,000 largest retirement funds: 2020
      view gallery
      10 photos
      Outlook 2020
      view gallery
      10 photos
      2019 as seen through the eyes of Roger
    • U.S. bonds have worst quarterly return since 1981
      A lost decade for funded status
      Graphic: The passive fixed-income glut
  • Events
    • Conferences
    • Webinars
    • DC Investment Lineup Virtual Series
      ESG Investing Virtual Series
      Private Markets Virtual Series
    • Understanding the PEP Evolution
      Divest or engage?
      New Outlook on Income: A Framework for Evaluating DC Retirement Income Solutions
      Innovations in DC: Helping supercharge retirement outcomes
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. REGULATION AND LEGISLATION
November 12, 2012 12:00 AM

Retirement savings tax incentives in danger post election

Hazel Bradford
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    BlackRock's Barbara Novick: “We either go over the edge or we don't. Hopefully we don't.”

    The odds of reduced tax incentives for retirement savings and further regulatory action on retirement issues increased significantly with the Nov. 6 federal election results.

    The largely unchanged balance of power in the White House, Senate and House of Representatives as officials face pressing fiscal problems raises the likelihood of substantial changes and shared pain.

    President Barack Obama's re-election also has retirement industry experts preparing for further action on the regulatory front. “With a second Obama administration, we have a pretty good sense of what the regulatory agenda is going to be,” said Bob Holcomb, head of legislative and regulatory affairs at J.P. Morgan Retirement Plan Services, Kansas City, Mo. The top item on that list is a reproposed fiduciary rule from the Department of Labor, followed by a proposed rule on lifetime income projections on plan participant statements.

    Outside the regulatory arena, the first order of post-election business is dealing with the fiscal cliff created by expiring tax cuts, potential spending cuts and a federal deficit left unchecked by partisan squabbling. With no political party gaining a stronger mandate from the election, “the message to both sides is that there's got to be some middle ground here,” Barbara Novick, vice chairwoman and head of government relations for BlackRock Inc., said in a conference call. “We either go over the edge or we don't. Hopefully we don't.”

    With a few short weeks left in the current congressional session, the expected scenario is that time-sensitive tax and spending issues are extended temporarily, leaving the real work for the 113th Congress to be seated in January.

    Once deficit reduction and tax reform begin in earnest in the new year, the second largest federal tax expenditure — an estimated $105 billion for defined contribution and defined benefit pensions — will have nowhere to hide, and proposals offered by Mr. Obama and several study commissions to cap tax preferences for retirement contributions, especially for higher-income taxpayers, will get serious consideration.

    “They obviously are going to be looking for tax revenue wherever possible, and further limits on retirement savings are likely to come up because it's such a big piece,” said Craig Rosenthal, a partner in Mercer's retirement risk and finance practice. This year's MAP-21 highway law, for example, breezed through Congress “because it was a revenue raiser” on two counts, Mr. Rosenthal said. The law allowed for fewer tax-deductible defined benefit pension contributions — so it left more corporate income as federally taxable — and it raised premiums paid to the Pension Benefit Guaranty Corp.

    Defined contribution plans could be next. “From a retirement prism, the biggest question out there is, are we going to see all (tax) expenditures take a hit?” J.P. Morgan's Mr. Holcomb said.

    Another possible scenario, Mr. Rosenthal said, is greater emphasis on Roth-type retirement plans, because taxes on contributions are paid up front. “They could call it a compromise, where there is more tax revenue upfront but there's still incentive for people to save for retirement. If it's instead of taking an outright cut, I think it's a reasonable compromise,” he said. “We are in the midst of a retirement crisis. It's much better to get something that gets people to save for retirement than nothing at all.”

    Cathy Weatherford, president and CEO of the Insured Retirement Institute, Washington, thinks that the importance of encouraging retirement savings will not get lost in the tax debate. “Every policymaker is concerned about retirement security for their constituents. Tax deferment (of retirement contributions, where tax is paid at the time of distribution) is not a tax expenditure, and we've tried to make sure that's been known on the Hill,” she said. Hampering that argument is Congress' method of calculating or “scoring” the lost tax revenue of such tax preferences only with a 10-year time frame, which prevents the later tax collection from being counted toward the revenue score of a tax bill.

    Ms. Weatherford also expects the administration to advance the idea of annuities within qualified plans to create lifetime income for retirees. “We have been working closely with DOL to reduce some of the regulatory hurdles to having annuities within qualified plans. We're going to continue to see priority given to that” regardless of whether there are personnel changes within the department, she said.

    Plan executives and service providers also will be closely watching how Labor and Treasury department officials address ways to get participants to focus on lifetime income needs. With income projections on participant statements, “the only question is, are they going to mandate them, and how much flexibility is there going to be,” said Mr. Holcomb of J.P. Morgan.

    Key administration backers of those ideas —J. Mark Iwry, deputy assistant Treasury secretary for retirement and health policy, and Phyllis C. Borzi, assistant secretary of labor in charge of the Employee Benefits Security Administration — are expected to stay in their posts to advance those ideas. Ms. Borzi has also made her agency's fiduciary rule a priority.

    Regardless of those outcomes, “there is no appetite for mandates, even for auto IRAs,” said James Delaplane Jr., the Washington-based principal for government relations at Vanguard Group. In a Nov. 6 keynote address at Pensions & Investments 2012 West Coast Defined Contribution Conference in San Francisco, Mr. Delaplane added: “(You) are more likely to see state-level tax and entitlement changes.”

    Key committees

    Outside the executive branch, left unchanged by the elections were key congressional committees with jurisdiction over retirement issues. Senate Health, Education, Labor and Pensions Committee Chairman Tom Harkin, D-Iowa, vowed to push his idea of a universal private retirement system with professional money management. His House counterpart, Education and Workforce Committee Chairman John Kline, R-Minn., promises to keep a close watch on the PBGC and Department of Labor regulators for any moves that could drive up employer costs.

    PBGC Director Joshua Gotbaum, whose five-year term will outlast Mr. Obama's, would like to shift more of the risks and costs of plan insurance to plans whose sponsors are more likely to get into financial trouble.

    Most of the spotlight in the coming months will be on the budget and tax-writing committees. Republican vice presidential candidate Rep. Paul Ryan, R-Wis., is returning as chairman of the House Committee on the Budget, while Rep. Dave Camp, R-Mich., will continue to lead the Committee on Ways & Means and Sen. Max Baucus, D-Mont., will lead the Senate Committee on Finance.

    One seat to watch is the Senate Budget Committee chair being vacated this year by Sen. Kent Conrad, D-Neb., whose replacement will be chosen by committee Democrats. Another notable change is the departure of Rep. Barney Frank, D-Mass., as House Financial Services Committee ranking member. Mr. Frank, who will retire at the end of the current term, leaves as his legacy the Dodd-Frank Wall Street Reform and Consumer Protection Act.

    Mr. Obama's re-election also means continued implementation of 90-plus regulations mandated by Dodd-Frank, including a common fiduciary standard for allinvestment advisers that is more stringent than the current suitability standard and is similar to one for registered advisers.

    Personnel changes are expected at the Treasury Department, where Secretary Timothy Geithner already announced plans to leave. Federal Reserve Board Chairman Ben Bernanke doesn't have to decide on a new term until the current term ends in January 2014, “which means that a market-friendly Fed will continue to be in place,” Peter Hayes, head of BlackRock's municipal bonds group, said during a post-election conference call.Outside of retirement-specific tax changes, Mr. Obama's campaign promise of raising rates on higher-income taxpayers and plans to end the carried interest deduction for private equity general partners also will be back on the table.

    George Michaels, CEO of G2 FinTech in Boston, a tax software provider for institutional investors, thinks revenue hunters could also find some money by ramping up enforcement of existing tax rules, including those covering securities transactions often used by hedge fund managers to lower their tax bills. “It's low-hanging fruit and it only really hurts rich people. It's an easy target for them to go after.”

    Some of the fiscal compromises could even start in this year's lame duck session of Congress. With 12 senators and 70 House members leaving, “you've got a lot of people thinking about their legacy and what their last act might be,” noted Ms. Novick of BlackRock. “They have nothing to lose.”

    Related Articles
    Financial industry dollars flow to Republicans in about-face
    November's winners face pressing retirement, tax issues
    BlackRock, pension funds warn candidates of impending fiscal cliff
    Time to address the retirement savings crisis
    Fiscal cliff has money managers tiptoeing
    No need for new DC plan
    Corporate pension group wants temporary funding measures made permanent
    Fiscal talks could result in corporate pension funding relief
    ASPPA launches grass-roots Save My 401k campaign
    Fiscal cliff bill would reduce 401(k) taxes, ease fund transfers
    Recommended for You
    Standards-of-conduct rules approved along party lines
    Standards-of-conduct rules approved along party lines
    Investors hail SEC guidelines on exchanges
    Investors hail SEC guidelines on exchanges
    U.K. regulator watching manager over Woodford fund freeze
    U.K. regulator watching manager over Woodford fund freeze
    Innovations in DC: Helping Supercharge Retirement Outcomes
    Sponsored Content: Innovations in DC: Helping Supercharge Retirement Outcomes
    sponsored
    Events
     
     
    Sponsored
    White Papers
    COVID-19 Makes LP Portfolio Management More Important Than Ever
    Green and sustainable bonds in emerging markets
    Finding Differentiation in Securitized Assets
    Bipsync Client Stories: RMS in Action at Pensions and Superannuation Funds
    Portfolio Protection: One Size Fits None
    China: the outlook is bright for longer-term investors
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    April 5, 2021 Page One

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    pilogo-NEW
    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    150 N. Michigan Ave.
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Asset owners and the coronavirus
      • Alternatives
      • Consultants
      • Coronavirus
      • Defined Contribution
      • ESG
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • SECURE Act
      • Special Reports
      • WorldPensionSummit
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Letters to the Editor
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center