Between a recent White House retirement directive and more legislative proposals from Capitol Hill, plan executives and other retirement security advocates are encouraged that, while it might take months or years to see concrete change, Washington is paying attention.
"It's been a while since retirement was a big issue," said Jack Towarnicky, executive director of the Chicago-based Plan Sponsor Council of America, a division of the American Retirement Association.
The ideas coming out of Washington include promoting open multiple employer plans to allow unrelated businesses access to professionally managed retirement accounts for workers; reducing paperwork burdens on plan sponsors, establishing tax credits to encourage small employers to offer retirement plans; setting higher default contributions for automatic enrollment and escalation in defined contribution plans; and updating timetables for required distributions.
"I think they are all constructive. It's just a matter of whether they truly move the needle much," said Erin Turley, partner, McDermott Will & Emery. The Dallas benefits attorney said it also depends on which ideas gain enough political traction to translate into reality. "If the agencies got together and Congress said, 'This is how it's going to work,' it could easily be done," Ms. Turley said.
The stage was set in March, when Senate Finance Committee Chairman Orrin Hatch, R-Utah, and ranking member Ron Wyden, D-Ore., reintroduced the Retirement Enhancement and Savings Act, which enjoys widespread bipartisan support. Among other provisions, RESA would make it easier for smaller employers to join open multiple employer plans, ease non-discrimination testing rules for plan sponsors, lift a 10% safe harbor cap on default contributions for automatic enrollment and escalation in defined contribution plans, and reduce Pension Benefit Guaranty Corp. premiums for cooperatives and small charities that sponsor plans.
More controversial provisions include annual lifetime income disclosure by plan sponsors, and a ban on "stretching out" payments from defined contribution accounts with large balances to extend the tax benefits.
The House followed suit Sept. 10, introducing a tax reform 2.0 package of three bills, including the proposed Family Savings Act of 2018, with many of the same concepts that are in RESA. It also would end required distributions for defined contribution accounts of less than $50,000 and remove the age limit for individual retirement account contributions, now set at age 70½.
Unlike RESA, the House proposal does not include a safe harbor for plan sponsors to select a retirement plan annuity, or a requirement for lifetime income disclosure. To the dismay of cooperatives and small charities, it also does not reduce what they consider disproportionately high PBGC premiums but does call for a review of single-employer premiums.
The package was approved along party lines by the House Ways and Means Committee on Sept. 13, but without the bipartisan support for RESA, its prospects are not bright.