On Deck: What the 116th Congress Is Doing About Retirement

Passing retirement legislation proved difficult in the 115th Congress, in which Republicans controlled both chambers of Congress. Could things proceed more smoothly in the 116th, now that Democrats have regained control of the House while Republicans remain in charge of the Senate? Actually, they may, says Angela Montez, senior vice president, general counsel and chief legal officer for ICMA-RC, an organization that seeks to help public sector employees build retirement security.

Speaking at the 2019 SVIA Spring Seminar in early April, Montez noted that the midterm election moved a longtime retirement champion, U.S. Rep. Richard Neal, D-Massachusetts, into the chairmanship of the House Ways and Means Committee. Neal has made clear that advancing retirement legislation is his top priority. “He really delivered on that promise last week when the SECURE Act was voted out of his committee, but I don’t think he’s done yet,” Montez told her SVIA audience. “There are a number of retirement proposals that he has waiting in the wings from the last Congress, so we’re hopeful there will be a lot of movement there.”

SECURE is an acronym for Setting Every Community Up for Retirement Enhancement. Among other things, the bill would allow unrelated small employers to join together to offer so called “open” multiple-employer retirement plans (MEPs). It also would increase the age at which people must begin to take mandatory withdrawals from retirement accounts to 72 from 70½, and require an annual disclosure on the statements of retirement plan participants indicating what their account balances might translate to if used to create a stream of retirement income.

Montez said Neal appears to have a “willing dance partner” on retirement issues in the Ways and Means Committee’s ranking member, U.S. Rep. Kevin Brady, R-Texas. Brady tried unsuccessfully in the last Congress to pass the Family Savings Act, which included a number of popular retirement reforms.

Meanwhile, in the Senate, Montez said she expects two longtime bipartisan champions of retirement security, Sen. Rob Portman, R-Ohio, and Sen. Ben Cardin, D-Maryland, to continue their efforts in 2019. In the 115th Congress, they introduced legislation known as the Retirement Security and Savings Act. Among other things, the Portman-Cardin bill would expand retirement plan coverage, reform defined benefit plans, and revise some of the rules around retirement plans to harmonize with IRA rules.

Although the House Ways and Means Committee has 11 new Democratic members and three new Republicans, all of whom may have to negotiate a learning curve, Montez said the committee got off to a strong start in February with its first hearing. It focused on improving retirement security for Americans and looked at a broad range of issues, including MEPs, shoring up Social Security, expanding access to workplace retirement plans, improving those plans, and examining state efforts to provide greater retirement plan coverage for workers in the private sector.

“Witnesses and members on both sides of the aisle expressed their strong support for RESA (the Retirement Enhancement and Savings Act) and MEPs,” Montez said. “Chairman Neal also used the hearing as an opportunity to highlight some of his retirement proposals, including the Automatic Retirement Plan Act, which would require all but the smallest of employers to offer a retirement plan, and the Retirement Plan Simplification Act, which would help streamline and facilitate the adoption and administration of plans. That bill shares a number of provisions with Portman-Cardin.”

On the same day as that hearing, Montez noted, the Senate Special Committee on Aging held hearings aimed at addressing the challenges older Americans face as they prepare for retirement.

Montez said there are approximately half a dozen reform packages under consideration that could form the basis of any retirement legislation that moves through the 116th Congress, starting with RESA, which was first introduced in 2016 during the 114th Congress and has strong bipartisan and bicameral support. “There’s also the Family Savings Act, which was the House Republicans’ retirement reform effort and shared a number of provisions with RESA and also Portman-Cardin, the latter of which moved really quickly from a discussion draft in September or October to being introduced in December with fairly little controversy,” she said. “And then there are those other two pieces of legislation that I mentioned from Chairman Neal, which we think, along with some Portman-Cardin provisions, are likely to form the basis of a RESA 2.0 package.” She said her organization is optimistic that a compromise bill between the two branches of Congress could be forthcoming as early as this May.

Among the expected updates to a revised RESA bill, Montez said, would be language allowing 403(b) retirement savings plans, which are similar to 401(k) plans but are used primarily by schools and other tax-exempt organizations, to offer collective investment trusts (CITs) as investment options for plan participants, rather than just annuities or mutual funds. She said some experts estimate making CITs available in 403(b) plans could save plan participants as much as $10 billion annually and provide access to a broader range of investment options, including pooled stable value funds.

Montez observed that after three years of relative inactivity a number of states are starting to move on legislation that would create state-run retirement plans for private sector workers within their borders. In March, New Jersey became the sixth state to sign such a program into law.

There are some potential hurdles to the success of these plans, but they are starting to attract some participants. “The farthest along right now is Oregon with its Oregon Saves Program,” Montez said. “To date, they’ve been able to garner about a thousand employers who have started to make payroll deductions into the plan and have (collected) about $13 million in assets. They’re rolling it out like a lot of other programs in tranches based on employer size.”

Montez said the state plans could be viewed as an opportunity for the stable value industry to expand its reach—as could the introduction of open MEPs and continued growth in Health Savings Accounts, which are tax-advantaged savings and investment vehicles available to participants in high-deductible health care plans.