Could the SECURE Act finally be on its way to becoming law this year? Perhaps. But politics could get in the way.
The legislation—more fully known as the Setting Every Community Up for Retirement Enhancement Act—was approved by the U.S. House of Representatives on a nearly unanimous vote in May. It would make significant changes to the laws governing retirement savings accounts. Among other things, it would make it easier for small businesses to offer 401(k) plans by providing tax credits and protections for multiple employer plans. But it has yet to gain traction in the Senate. If it is to pass this year, its supporters believe it may have to be wrapped into a larger spending bill. But that assumes there will be a spending bill; Congress could choose instead to continue funding the federal government using a continuing resolution. If so, the SECURE Act could languish a bit longer.
“You really can’t talk about the outlook for retirement and health initiatives without talking about politics because it is all wound up together,” said Diann Howland, vice president of legislative affairs for the American Benefits Council, speaking at the 2019 SVIA Fall Forum in October. “And that’s too bad, because the view in Washington is pretty much that until the SECURE Act passes, it is highly unlikely that anything else in the retirement world is going to be enacted.”
If so, that would mean Congress wouldn’t be addressing several other issues important to employers, such as facilitating student loan assistance programs that could help indebted younger employees make ends meet and save for retirement, increasing the amount older workers can contribute to a retirement savings plan in the form of catch-up contributions, stabilizing funding for defined benefit pension plans, and facilitating the creation of voluntary emergency savings programs for employees.
Howland said the large employers who belong to her organization also would like to see Congress take steps to preserve the traditional preemptive position the Employee Retirement Income Security Act (ERISA) holds when states create their own retirement program regimes—something several large states continue to pursue—and to preserve the tax benefits associated with retirement plan savings. Some legislators, she noted, would be willing to eliminate the deferral of taxes on retirement plan contributions and then use the income that would generate to fund other government initiatives. That would make it harder for workers to save for retirement, as would introducing some type of financial transaction tax, also supported by some legislators, Howland suggested.
Of course, not all potential changes to the retirement plan landscape come directly from Congress. Federal agencies get involved, too, when they are charged with creating the rules needed to implement new laws. With Eugene Scalia newly installed as U.S. Secretary of Labor, Howland said, her organization anticipates that the Department of Labor will be issuing a notice of proposed rulemaking that would consolidate and simplify some of the paperwork burden on plan sponsors. Among other things, this would likely include some relief from the burden associated with audits plan sponsors must conduct to identify and try to track down “missing” plan participants—participants who haven’t begun to withdraw money from their retirement accounts as required after the age of 70½ and so haven’t begun to pay taxes on that money.
Howland encouraged the retirement industry professionals attending the Fall Forum to let their elected representatives know that the tax incentives for retirement savings plans, and the ERISA preemption, are important. “ERISA preemption is at risk of being eroded,” she said.
