With the multiemployer relief legislation cleared from Congress’ docket, look for policymakers to turn to efforts to expand retirement plan coverage, ARA staff explained during a March 23 NAPA webcast.
Will Hansen, Chief Government Affairs Officer at the American Retirement Association, and Andrew Remo, the organization’s Director of Legislative Affairs, offered their take on the legislative outlook for the rest of the year, as well as what retirement policy provisions we may see in forthcoming legislation.
An incidental consequence of the March 11 enactment of the Butch Lewis Emergency Pension Plan Relief Act as part of the American Rescue Plan Act was that it now allows the tax-writing committees to focus on other retirement policy issues. The Butch Lewis Act contained several retirement-related provisions, including the multiemployer plan relief provisions that focused largely on teamster and union-backed plans, many of which had been in dire straits for several years.
“It was frequently utilized as a talking point as to why [Congress] couldn’t focus on other retirement policies out there focused on 401(k) plans, because [they] needed to first solve for the impending insolvency of a number of these multiemployer plans,” Remo explained. But now that that issue has been addressed, it may open the door to other legislation.
One bill to keep an eye on is the Automatic Retirement Plan Act (ARPA) that had last been introduced in December 2017 by House Ways and Means Committee Chairman Richard Neal (D-MA), but a discussion draft of the legislation was floated late last year. “This is really a key piece of legislation in that it would drastically increase the number of Americans that are covered by a workplace retirement plan,” Hansen explained.
Overall, the bill would require most employers to offer a retirement plan. For employers based in a state that has a Secure Choice Plan or an automatic IRA arrangement, they would meet the requirements of having a retirement plan, but those employers would have to cover most of their employees.
Hansen further explained that the bill does include exceptions for small (less than 10 employees) and new (less than three years in operation) employers, as well as governments and churches. It also would grandfather all existing plans, but any new plans would have to have certain features in it, including auto enrollment at a minimum of 6%, auto escalation at 1% per year up to 10%, and a guaranteed income feature. Additionally, for employers with 25 or fewer employees, the bill includes a new start-up credit that covers 100% of the cost of setting up a plan for five years, he noted.
Hansen prefaced his comments on Neal’s ARPA bill by noting that it is not yet final, and that since the discussion draft was last circulated, Capitol Hill staff has received a lot of input and likely will be making additional tweaks.
Saver’s Credit Expansion
Another bill to keep an eye on is Senate Finance Committee Chairman Ron Wyden’s (D-OR) Encouraging Americans to Save Act. Among other things, the legislation would expand the Saver’s Credit to make it refundable, but the money would have to be put into a retirement savings vehicle. The bill would also enhance the credit by providing a 50% government match rate, expand the maximum contribution amount to $1,000 per year, and broaden the income eligibility requirements. It also would reestablish the myRA program for those individuals who would need some vehicle for the refundable portion to be deposited into.
While the refundable portion of the bill is unlikely to be advanced as part of a bipartisan process, Remo observed that the underlying expansion of the credit could potentially be picked up in Congress’ next budget reconciliation push—especially given that the legislation was introduced by Chairman Wyden.
Remo further observed that there is some overlap with this bill and Sens. Rob Portman’s (R-OH) and Ben Cardin’s (D-MD) Retirement Security and Savings Act, which would also make the Saver’s Credit refundable.
SECURE Act 2.0
Beyond ARPA and an expansion of the Saver’s Credit, the next “game in town,” according to Remo, is the Securing a Strong Retirement Act of 2020—dubbed SECURE Act 2.0—introduced by Chairman Neal and the Ways and Means Committee’s ranking Republican, Rep. Kevin Brady (R-TX). Instead of using the expedited reconciliation process, this legislation will likely be done through regular order, Remo noted. To that end, he explained that the committee is currently laying the groundwork to act on this bill in the coming months.
Among the key features of this legislation are an automatic enrollment requirement for new DC plans with a default rate of at least 3% of pay and auto escalation at 1% of pay until it reaches 10%. The bill would also increase the small-employer pension plan start-up credit to 100% of the cost for employers with up to 50 employees, capped at $5,000. Remo noted that the bill includes more than 30 provisions, but other key provisions include a student loan matching program; a safe harbor for corrections of employee elective deferral failures; a new long-time, part-time worker eligibility requirement definition; and an expansion of the Saver’s Credit.
Remo further observed that as the committee gets some of the cost estimates back on the bill and discover that some of the provisions would be very expensive to enact, it’s possible various provisions could be further tweaked to lower the cost.
Hansen and Remo also reviewed several legislative priorities of the American Retirement Association that could be introduced as a standalone bill or added to the next legislative package that moves, such as the SECURE Act 2.0 or the Portman-Cardin legislation. These include:
- fixing a non-discrimination testing issue with the student loan matching design provision;
- streamlining the compliance rules for long-term, part-time employees;
- allowing disaggregation of excludable employees from the top-heavy test; and
- revising the family attribution rules with respect to coverage testing and other non-discrimination tests with respect to a small business that wants to open a 401(k) plan.
While noting that the Biden administration and Congress currently have a lot of their plate, Hansen is hopeful there will be additional action this year on retirement policy. “The next reconciliation bill is being put together now and this is the big one that’s going to have infrastructure, some climate change and maybe immigration provisions,” he explained, adding that, “we’re hopeful that we can also have included into that the Automatic Retirement Plan Act, the Encouraging Americans to Save Act, which is the overhaul of the Saver’s Credit, and then potentially some other one-off provisions that were included in the SECURE Act 2.0 or other ones.”
“We definitely think that there’s going to be some other retirement bills included in the next reconciliation process, and that next reconciliation process is in the beginning stages right now, but I would see it as something that would pass probably by the summertime,” Hansen noted.