2018 to bring changes to Congress

Some high-profile committee leadership vacancies in Congress, combined with upcoming midterm elections and a one-sided tax reform victory for Republicans, promise to make 2018 an interesting year on Capitol Hill.

For starters, Republicans who ended 2018 with a major victory on tax reform now have to work with Democrats on fiscal year spending bills and budget limits to avert a government shutdown later this month.

Once that crisis is settled, other congressional priorities are expected to change following retirement announcements by influential committee chairmen, including Sen. Orrin Hatch, R-Utah, on the Senate Finance Committee. Mr. Hatch, who also serves on the Senate Health, Education, Labor and Pensions Committee, has championed numerous retirement savings bills, including the Retirement Enhancement and Savings Act in 2016, with more than 30 provisions addressing lifetime income, retirement plan rollovers, safe harbors for automatic features, and ways to encourage open multiple-employer plans.

Another notable departure from the Finance Committee is that of tax and benefits counsel Preston Rutledge, the newly installed assistant secretary for the Employee Benefits Security Administration at the Department of Labor. His agency's regulatory agenda includes more work on the fiduciary rule for brokers and advisers, and a revamp of Form 5500. Because of his experience, Mr. Rutledge has a good understanding of what this Congress can, and cannot, do.

On the House side, departures coming at the end of the year include House Transportation and Infrastructure Committee Chairman Bill Shuster, R-Pa., who pledged to work with the White House on passing an infrastructure bill this year, and House Financial Services Committee Chairman Jeb Hensarling, R-Texas, an outspoken critic of Dodd-Frank regulations who has ​ also pressed for reforming Fannie Mae and Freddie Mac.

Mr. Shuster's departure could delay efforts by the White House to advance a serious infrastructure program in 2018, which many investors have been waiting to see. Mr. Hensarling's departure is expected to mute calls to roll back post-crisis regulations.

The announcements are now sparking speculation of even more leadership changes to come, as other committee chairmen consider vying for the open positions.

That is particularly true for the Senate Finance Committee, which wields power over tax issues and entitlement programs, among other issues. One potential contender is Sen. Mike Crapo, R-Idaho, a senior committee member who now chairs the Senate Banking, Housing and Urban Affairs Committee, which oversees financial institutions and regulators like the Securities and Exchange Commission.

Looming over all of this activity on Capitol Hill are midterm elections on Nov. 6, when all 435 House seats and 33 of 100 Senate seats are on the line. With Senate Republicans holding just a two-seat advantage, committee leadership posts and legislative agendas also hang in the balance. In the House, Democrats would have to take 24 seats from Republicans in 2018 to win back the majority.

And polls right now favor Democrats. RealClearPolitics' latest poll asking whether people would vote for a Republican or Democrat congressional candidate in 2018 gave Democrats a 13-point lead, more than when they won back the House in 2006.

With all the bargaining it took Republicans to get tax reform passed through a special reconciliation process, from this point forward "they are probably just going to be doing must-pass legislation. I don't see how they're going to be able get much done on the Senate side," said Will Hansen, senior vice president of retirement and compensation policy for the ERISA Industry Committee in Washington, an advocacy group for employer benefits issues.

Some potential areas for bipartisanship in either chamber include variations on retirement savings bills introduced in 2017, including some making it easier for smaller employers to sponsor retirement plans through open multiple-employer plans, and one allowing for electronic disclosure of retirement plan information.

Legislation introduced in both the House and Senate to create a federal loan program for struggling multiemployer pension funds gained its first Republican sponsor in early January, Rep. Peter King of New York. Two other Republican House members, David B. McKinley of West Virginia and Don Young of Arkansas, signed a bipartisan letter urging House Speaker Paul Ryan, R-Wis., to deal with the multiemployer pension crisis.

Many on Capitol Hill watch are expecting the action in 2018 to shift to regulators at the Department of Labor, the SEC and the Treasury Department, which oversees the Financial Stability Oversight Council.

"The real play is going to be on the new people coming into the agencies," including the SEC, which has its first full commission since 2015, said Paul Atkins, CEO of Patomak Global Partners, a Washington financial services consultancy.

Mr. Atkins, a former SEC commissioner, is optimistic the agency will address market structure issues that should be less partisan. "What's good for investors should be good for markets," he said. On the enforcement side, he expects SEC officials to press for more personal accountability of officials whose companies are prosecuted for investor fraud.n