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Pension reform can’t afford further delay

The mixed result of the midterm elections has prompted predictions of legislative gridlock in Congress for the next two years as the Democratic-led House seeks to push its agenda, e.g., rolling back the Trump tax cuts, and the Republican-controlled Senate resisting.

But retirement provision reform, where there is bipartisan agreement on many of the changes needed to promote greater retirement saving, especially for those currently without access to an employer-sponsored plan, is an area that should be pushed through the gridlock.

A key issue is what to do about the large multiemployer plans that are in danger of failing, dumping billions of dollars onto the Pension Benefit Guaranty Corp. and hastening the exhaustion of its multiemployer fund.

A bipartisan House and Senate committee is scheduled to produce a proposal to solve the multiemployer plan crisis before the end of this week. If at least four members from each party agree on a compromise proposal, it will be guaranteed expedited votes in the House and Senate with no amendments allowed.

Should the proposal fail to get a thumbs up from four committee members from each party or get caught up in last-minute partisan bickering and not reach a vote in the lame-duck session, the process of rescuing the troubled multiemployer plans will be back to square one in the new Congress, and more retirees will see their pensions cut or disappear.

Even though members of both parties agree the multiemployer plan mess must soon be fixed, politically inspired gridlock could prevent any solution making it through the new Congress.

For that reason, a bill to solve the crisis in multiemployer plans must be passed before Christmas by the current Congress.

Another key issue that should be addressed soon is that of finding ways to encourage more small employers to offer their employees access to a retirement plan. Multiple employer plans are at least a partial solution, but the requirements are too restrictive. Congress must act to ease those restrictions as soon as possible, though the new balance in the next Congress could make it difficult to gain agreement on the details of any changes.

Some have proposed that multiple employer plans be opened to unrelated employers so they can share the administrative and financial burdens of offering defined contribution plans to their employees. At present, the Internal Revenue Service requires that MEPs have an organizational relationship, a common professional purpose or other common interest among the participating employers.

Some of these issues were addressed in the Retirement Enhancement and Savings Act introduced in the Senate in March, which had bipartisan support. Likewise, some were addressed in a House package of three bills in September. But the details differed and the package did not enjoy bipartisan support so its prospects are not good.

Every effort must be made to encourage employers to offer their employees access to a tax-deferred retirement plan, and RESA is one way to do so.

If Congress does not act, the Trump administration should urge the IRS to ease the restrictions through regulatory guidance.

Failing that, states and local governments should move ahead with their plans to sponsor retirement plans open to private-sector employees. The country cannot continue to allow up to 70 million workers to go without access to a tax-deferred retirement plan.