With President-elect Donald Trump promising to spend his first 100 days in office pushing an ambitious agenda that includes tax and regulatory reform — and above all, economic growth — retirement issues don't have much of a chance of being noticed, at least in a good way.
“They are not talking about retirement at all. That's the problem,” said Brian Graff, CEO of the American Retirement Association in Arlington, Va., at a Dec. 15 retirement policy conference held by the Employee Benefit Research Institute in Washington. “We're viewed as this big, attractive piggy bank that they can use for their priorities, and it's because we are not the priority. It's the fundamental indifference about retirement that is our biggest challenge.”
Mr. Trump and congressional Republicans who will be leading the tax reform effort want to stimulate economic growth by simplifying the tax code and lowering rates. To offset the revenue loss, they will have to find money somewhere else. That puts the two biggest tax deductions, health care and retirement savings, at risk of at least partial trimming, either through less generous deductions or limits for higher-paid workers.
“There's a potential threat,” said Geoff Manville, principal, government relations, at Mercer LLC in Washington. ”We've seen a number of proposals put forth. Some would reduce the types of plans (eligible for deductions) for simplicity and portability, similar to health care, to level the tax advantage playing field across the entire employer/non-employer space.”
He and others are hopeful that in the hunt for revenue, the recent trend of raising premiums paid to the Pension Benefit Guaranty Corp. will be reversed by legislation backed by Senate Budget Committee Chairman Michael Enzi, R-Wyo., to take PBGC premiums out of the federal budget process and keep more plan sponsors from leaving the defined benefit system.
Republican control of Congress and the White House could also revive a package of retirement savings reforms passed by the Senate Finance Committee in September that would, among other things, allow employers to access open multiple-employer plans, make it easier for them to offer annuities, expand access to 401(k) plans to some part-time workers, and offer startup and automatic-enrollment tax credits for small businesses. The multiple-employer plan model “could do a lot to expand coverage and could transform the industry,” said Mr. Manville.
The Senate Finance package also tried unsuccessfully to address severe underfunding of the $4.4 billion United Mine Workers of America 1974 Pension Plan, Washington. That plan plus several other large struggling multiemployer plans expected to overwhelm a struggling PBGC could provide an unexpected challenge to the Trump administration, which might have to support benefit cuts or new funding sources.