Congress recently wrapped up a busy work period in May, but is still left with unfinished business heading into the summer. The most pressing item on the Congressional agenda for June is the reauthorization of certain federal government surveillance provisions originally contained in the USA PATRIOT Act. Those provisions expired beginning June 1, 2015 and will remain that way for at least a brief period of time until Congress can agree on either an extension of or reforms to those surveillance authorities currently enjoyed by our federal intelligence agencies.
The other three politically thorny issues facing Congress in the coming weeks will be action on a bill to reauthorize federal highway programs, legislation granting President Obama trade promotion authority, and a decision on whether to renew the charter of the Export-Import Bank.
Out of those three issues, legislation to reauthorize federal spending on highways is one that is virtually guaranteed to be addressed in some form. The current authorization was set to expire on May 31, 2015, but Congress pushed that deadline back by two months before leaving for the Memorial Day holiday break. Congress was able to extend the authorization for two months without replenishing the Highway Trust Fund but will now need to make funding decisions to pay for these programs by the end of July, assuming Congress does not want to increase the budget deficit. Under that assumption, it is projected that Congress will need to pony up $10 billion just to extend these programs through the end of 2015.
Congress has resorted to retirement policy budget gimmicks in the past to shore up the Highway Trust Fund. For instance, in 2012, the MAP-21 transportation law contained a provision that stabilized pension plan interest rate projections and increased PBGC’s flat and variable premium rates, both of which “raised” billions of dollars in revenue. In 2013, PBGC premiums were raised further in a bipartisan budget deal to suspend sequestration for two years. In 2014, the MAP-21 pension plan interest rate corridor was extended in another transportation funding bill. The ARA GAC team is closely monitoring what will happen in 2015 if and when Congress goes back to the revenue well for transportation infrastructure spending.
The main activity on tax reform is in the Senate. The Senate Finance Committee’s bipartisan tax working groups, including the Savings & Investment Group examining the retirement provisions in the tax code, continue to meet and search for reform proposals that could garner widespread support. Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR) recently announced an extension of this process since trade issues have been consuming most of the Finance Committee bandwidth in recent weeks.
A possible “down payment” to a more comprehensive tax reform package could be a bipartisan deal on international or multinational corporate tax reforms. Senators Rob Portman (R-OH) and Chuck Schumer (D-NY), co-chairs of the International Tax Group, have been busy negotiating a package that could lower the corporate tax rate and create a new minimum tax on foreign earnings, while allowing multinational firms to repatriate those foreign earnings back to the United States below the current corporate income tax rate. The resultant revenue from this repatriation scheme could be used to pay for transportation infrastructure or other things. This deal, however, remains a heavy lift since numerous small businesses groups are generally opposed to corporate only tax reform because their members are mainly “pass-through” entities that will not benefit from a corporate income tax rate cut.
Congress passed its first budget in six years this month. The budget agreement sets the top-line discretionary spending amount at $1.1 trillion for fiscal year 2016 and allocates portions of that amount to different categories so that the appropriations committees can begin to fill in the details. The closely watched reconciliation instructions that were included in the package were limited to repealing the Affordable Care Act or Obamacare. There were no reconciliation instructions in the agreement concerning tax reform, making it less likely that Congress will push for a comprehensive tax reform package this year.
Retirement Policy Proposals
Last month, the Vice Chair of the House Democratic Caucus – the fourth position in the House Democratic Leadership hierarchy – Representative Joe Crowley (D-NY, 14th), unveiled a set of savings policy proposals. Included in these proposals is the creation of a new defined contribution program that would require employers with 10 or more employees to both offer a retirement plan to its employees and contribute to it. The program creates so-called “Secure, Accessible, Valuable, Efficient Universal Pension” (SAVE UP) accounts with auto enroll and escalation features for employees. Employers would be required to contribute to the SAVE UP accounts or to their existing workplace retirement arrangements a specific, inflation-adjusted amount per hour for each participant. The plan offsets some of the employer cost by providing a refundable tax credit to small employers (with less than $5 million in annual gross receipts) worth the value of their contributions into the accounts of up to 10 employees (or up to $10,400 a year for five years).
Rep. Crowley’s other proposals include the establishment of child saving vehicles called “USAccounts”. These accounts would be established for every new born child with $500 in seed money from the federal government. The federal government would also provide a match of family contributions to the account in succeeding years the amount of which would be based upon income. Rep. Crowley also proposed to make President Obama’s myRA program permanent, eliminate the earnings cap on Social Security withholding and maintain the current Social Security cost of living adjustment.
Finally, Congress reintroduced legislation this month supported by the American Retirement Association that would require retirement plans to include a “lifetime income stream equivalent” on plan participant statements. In the House of Representatives, Education and Workforce Committee Reps. Luke Messer (R-IN, 9th), Jared Polis (D-CO, 2nd), and Mark Pocan (D-WI, 2nd) as well as Ways & Means Committee Reps. Dave Reichert (R-WA, 8th), and Ron Kind (D-WI, 3rd), introduced the Lifetime Income Disclosure Act (H.R. 2317). Senators Johnny Isakson (R-GA) and Chris Murphy (D-CT) introduced a companion bill (S. 1317) in the Senate.