The Build Back Better Act, the social spending bill Democrats have been in negotiating for months, will not include several key retirement provisions, according to a framework President Joe Biden unveiled Thursday.
The framework for the $1.75 trillion bill, cut from the original $3.5 trillion price tag, would make investments in clean energy, expand Medicare and establish universal prekindergarten, among other items. But after months of back and forth between the White House and lawmakers in the House and Senate, many provisions were dropped to lower the cost.
Not included in the framework is a proposal to require employers that don't offer retirement plans to automatically enroll them in individual retirement accounts or 401(k)-type plans. That measure, which was introduced by House Ways and Means Committee Chairman Richard Neal, D-Mass., and advanced out of his committee in September, would have required many employers to offer a 401(k) or IRA, with exceptions for governments, churches and companies with five or fewer employees or less than two years in business.
Also, a provision to make the saver's credit refundable, allowing people without any income tax liability to be eligible to receive the benefit in the form of a contribution to their retirement account, did not make the final cut.
Also dropped was a provision to pay for a portion of the bill to close so-called "back-door" Roth IRA strategies. That proposal would have eliminated Roth conversions for both IRAs and employer-sponsored plans for single taxpayers (or taxpayers married filing separately) with taxable income over $400,000, married taxpayers filing jointly with taxable income over $450,000, and heads of households with taxable income over $425,000.
In the Senate, Ron Wyden, D-Ore., proposed changing the tax treatment for in-kind redemptions used by exchange-traded funds and mutual funds as a way to pay for a portion of the bill. Mr. Wyden's proposal, also not included in the framework, included a provision to repeal a section of the tax code that allows regulated investment companies — which ETFs and mutual funds are considered — to avoid recognizing gains when distributing appreciated assets to their shareholders.
The framework, which is still not a sure thing to become law, would be paid for by establishing a 15% minimum tax rate on large corporations, creating a 1% surcharge on corporate stock buybacks and imposing a 5% surtax on income above $10 million and an additional 3% surtax on income above $25 million, among other things.
Democrats, who narrowly control the House and Senate, are aiming to pass the Build Back Better Act via reconciliation, meaning they need only a simple majority in the Senate instead of the usual 60 votes. No Republicans are expected to vote in favor. A vote on the packageand a separate vote in the House on a bipartisan infrastructure bill that the Senate passed in August have not been scheduled but could come soon.