While this Congress has been doing nothing (just like every other Congress) both parties did manage to propose changes to retirement plans. Surprisingly some of the points proposed (not all) are pretty good. Since there is so much negativity around politics, let’s focus on the good parts:
The Brady Bill aka “The Butch Lewis Bill” (Named to honor a Cincinnati labor organizer) brought to us by the Democrats, led by Ohio’s Sherrod Brown did not make it onto the 2018 Budget. Brown, however, was charged with coming up with a solution to the Nation’s failing Pensions by November 2018. Well, the Lewis bill had some interesting solutions.
First the problem. According to Pension Consultant Russ Kemp 114 Multiemployer pension plans are critical or endangered of default in the next 20 years. 1.3 Million workers are in peril now, as the PNGC says the underfunded amount is $36.4 Billion.
The Butch Lewis bill proposed to shore up the PBGC with the establishment of the Pension Rehabilitation Administration which will make loans to insolvent Pensions funded by Treasury Bonds approved by the Treasury to secure those pensions for 30 years. Since most proposals don’t see the light of day, it remains to be seen what happens in late November.
On the other side of the aisle, the Republicans are proposing changes to 401k Plans and IRAs, some of which sound good. For instance, the expansion of the availability of Multiple Employer Plans (MEPs) would allow small employers the ability to band together to form 401k Plans, decreasing their costs, while increasing enrollments. It is based on the already proposed Retirement Enhancement and Security Act, and backed by an Executive Order (whatever that is). The proposal includes a tax credit of $500 to employers to defray startup costs on new 401ks and IRAs. Nothing for Participants, though. It includes plan loans through credit cards (a bad thing), and prohibiting transactions in liquor stores, casinos and adult entertainment shops. Sorry, Vegas.
The Bill proposes more disclosure on what you can get in retirement. Hopefully you’ll be able to read and understand it. I can see false expectations and lawsuits or so much legalese dancing around to prevent lawsuits that there is no substance. Insulating Plan Fiduciaries and Sponsors from liabilities for actions (mostly) of lifetime Income funds (Read: “annuity”). Not the brightest bulb in the proposal icebox. The proposed legislation would modify the nondiscrimination rules with respect to closed plans to permit existing participants to continue to accrue benefits. The modification will protect the benefits for older, longer- service employees as they near retirement. It also includes benefits for Volunteer Firefighters and Emergency Medical Responders. (Sounds like a good thing.)
Finally, the distribution timetable for beneficiaries of deceased retirement plan owners with $450,000 or more would be modified so as to allow a quicker payoff.
It’s Congress. The options are:
NOTHING PASSES. LIKELY.
A CAMEL PASSES. EVEN MORE LIKELY.
SOMETHING ELSE ENTIRELY PASSES, OR NOT.