Congress is expected to vote for the fifth time this week to temporarily extend (this time through March 22) the current levels of funding for federal operations under what is called a continuing resolution. The federal government has been functioning in this way since the 2018 fiscal year began on September 30, 2017 due to an absence of a federal budget agreement between Congressional Democrats and Republicans on “top line” amounts for both defense and non-defense spending. Congressional Republicans generally want an increase in defense spending and significant decreases in non-defense spending. Congressional Democrats are generally fine with an increase in defense spending but only if there is a corresponding increase in non-defense spending. There was even a brief shutdown of the federal government from January 20-22 as these disagreements over the level federal government spending and unrelated policy matters such as immigration came to a head.
In November 2017, Congressional Democrats introduced legislation to create the Pension Rehabilitation Administration (PRA) within the Department of Treasury that would make long-term low interest loans to struggling multiemployer pension plans in a bid to stave off the insolvency of the Pension Benefit Guaranty Corporation (PBGC) should enough of these plans go bankrupt. The bill directs Treasury to create a new trust fund within the PRA – funded with proceeds from Treasury-issued bond sales – that would then loan out money in the trust fund to any multiemployer plan that asks and demonstrates an ability to repay the loan amount. According to the PBGC’s latest projection, the PBGC multiemployer pension insurance program has a $59 billion liability exposure and is anticipated to become insolvent by 2025. Congressional Democrats are strongly pushing to include this proposal in a larger budget deal if one materializes.
Other Retirement Policy Legislation
Congressman Richard Neal (D-MA, 1st), Ranking Member of the House Ways and Means Committee, introduced two bills in December 2017 aimed to make it easier for working Americans to save for their retirement.
The Automatic Retirement Plan Act (ARPA) of 2017 (H.R. 4523) would require employers with 10 or more employees to have at least a deferral only workplace based defined contribution plan. The requirement to maintain a plan would be enforceable through an excise tax on employers that do not comply. For employers with fewer than 25 employees, ARPA provides an annual tax credit equal to 100% of any plan-related expenses (other than contributions) up to $5,000 for five years.
In addition, ARPA would make significant changes to the current qualified plan coverage rules. Under the proposal, generally all employees who have attained age 21 must be covered by the plan, including new workers (employed for more than 30 days) and part-time workers (if expected to work longer than three months). A third major component is that ARPA authorizes open multiple employer plans with a provision that relieves employers with fewer than 100 employees of all fiduciary and administrative duties (other than transmitting contributions and conveying payroll data to a designated MEP provider). In sum, ARPA represents an aggressive set of changes to current law with the goal to dramatically expand worker access to payroll deduction savings plans.
Congressman Neal also introduced the Retirement Plan Simplification and Enhancement Act (RPSEA) of 2017 (H.R. 4524). The legislation includes a variety of provisions – including many that the American Retirement Association Legislative Relations Committee have formally endorsed – that will simplify and clarify qualified retirement plan rules. For instance, RPSEA permits employers to adopt a qualified plan for the prior plan year up to the due date (including extensions) for filing its tax return since most small business owners will not know the true profitability of the business (to determine whether adopting a plan makes sense) until after the end of the year. RPSEA also amends the top heavy rules to allow for separate testing of participants that have not met the minimum statutory age and service requirements to encourage small employers with top heavy plans to allow more of their employees into a qualified plan. RPSEA has a provision that provides for a grace period to correct, without penalty, reasonable auto-enrollment and automatic escalation feature errors to encourage small businesses to adopt plans with auto-enrollment. In sum, RPSEA represents a package of consensus driven tweaks to the current rules.