Midterms giving new hope for upgrades to retirement

Tight midterm election races and a potential power shift in the House of Representatives are raising hopes that retirement-related bills could be passed by early 2019.

"It seems like there has been a flurry of retirement activity lately," said Christopher Spence, senior director of federal government relations for TIAA- CREF in Washington.

The odds of Democrats gaining control over the House are considered higher than those for the Senate, where Republicans hold a 51-49 majority.

Even if leadership of House committees like Ways and Means and Education and the Workforce does change hands, members of both parties "are still going to be champions of retirement," said Paul Richman, vice president of government relations for the Insured Retirement Institute in Washington. "Retirement issues have always been bipartisan issues. Regardless of the outcome of the election, I think it will still get attention."

Much of that sense of continuity comes from the fact that the ranking member of the House Ways and Means Committee, Richard Neal, D-Mass., has a long record of promoting ways to increase retirement savings, including several proposals introduced earlier this year.

"Neal has always been a strong champion of retirement security issues. I don't think that's going to change, and it may move higher up on the agenda," Mr. Richman said. His members have been encouraged by more attention paid this session of Congress to lifetime income options.

Mr. Neal is expected to become chairman of the committee if Democrats take over the House.

"Congressman Neal has proposed a lot of legislation to help Americans save for retirement. He's been a fan of employer-based retirement and he understands our issues," said Geoffrey Manville, principal, government relations at Mercer LLC in Washington. "Whatever the election outcome, I think there will be a bipartisan bicameral push to get something done during the lame-duck (session)," Mr. Manville said. He is also encouraged that Sens. Ben Cardin, D-Md., and Rob Portman, R-Ohio, have floated a discussion draft of possible legislative ideas to introduce next year, including letting plan sponsors contribute to 401(k) plans while employees pay down student debt. "I think its notable that they've put down this marker. They're actively soliciting ideas from the retirement policy community," Mr. Manville said.

Negotiations intensify

With both parties interested in having a productive finish to the lame-duck session after Election Day, negotiations have stepped up to find common ground on a compromise package between House and Senate ideas: The Senate's Retirement Enhancement and Savings Act, which now enjoys 80 bipartisan co-sponsors, and the House passed Family Savings Act, which makes it easier for employers to offer lifetime income options, allows smaller employers to join open multiple employer plans and eases non-discrimination testing rules.

Among other provisions, RESA also 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 auto escalation in defined contribution plans, and give cooperatives and small-employer charities smaller Pension Benefit Guaranty Corp. premiums.

While these ideas enjoy bipartisan support, more controversial provisions include annual lifetime income disclosures by plan sponsors to show participants the annuity value of their defined contribution accounts, and a ban on stretching out defined contribution and individual retirement account payments to non-spouse beneficiaries of larger accounts beyond five years.

"We are preparing for hopefully a compromise bill," said Mr. Spence of TIAA. "The closer it looks to RESA, the better because that's the most comprehensive proposal out there. It sounds like the House and Senate are starting to talk about that. "

Bills introduced by Mr. Neal echoed many of the same provisions, although one idea — requiring many employers to offer a 401(k) or 403(b) plan or incur an excise tax — would have a hard time under either election outcome.

Both parties and chambers also are working to help struggling multiemployer pension plans stave off a widespread collapse and imperil the PBGC's multiemployer program. "The multiemployer problem is still the biggest retirement issue in Congress and will be next year. It just gets bigger," Mercer's Mr. Manville said.

But those solutions are expected to be tougher and more partisan, if the congressional Joint Select Committee on Solvency of Multiemployer Pension Plans meets its end-of-November deadline for some sort of resolution. According to a new study by Segal Consulting, critical and declining multiemployer pension plans are not likely to recover without help from Congress, and pensioners at risk of seeing drastic cuts have been stumping in local races in Ohio, Michigan and elsewhere to keep the pressure on.

More or less regulation of money managers and other financial firms hangs in the balance with the prospect of the House changing hands, given the stark philosophical contrast between current House Financial Services Committee Chairman Jeb Hensarling, R-Texas, a longtime critic of Dodd-Frank and shareholder activism, and ranking member Maxine Waters, D-Calif. Mr. Hensarling is not seeking re-election, and a close ally, Peter King of New York, is next in line to succeed him if the House stays in Republican hands.

Potential compromise

One area for potential compromise is the JOBS and Investor Confidence Act, known as JOBS Act 3.0, passed by the House in July. Characterized by the House Financial Services Committee as the "third and largest installment" of Jumpstart Our Business Startups Act legislation, the package eases regulations on angel investors and expands the definition of accredited investors to allow more investment in startup companies and small businesses. It also would make it easier for companies to go public by extending on-ramp exemptions for emerging growth companies to access public markets and simplifying securities regulations on initial public offerings.

The package is also supported by the Council of Institutional Investors because of several provisions on insider trading and multiclass-share-structure disclosure.

Institutional investors could also see a warmer welcome for initiatives regarding environmental, social and governance investments from a Democratic House, although more muted and practical given a Senate and White House under Republican control.

Rep. Gerry Connolly, D-Va., a member of the Sustainable Energy and Environment Coalition, recently called on Democrats to "focus on the practical and the opportunistic" in the short term. "It's going to be, I think, more of an opportunistic strategy, where, in various pieces of legislation, across the board, we're going to insert measures that address climate change," he said.