WRITTEN SUMMARIES
On April 2, 2019, the House Ways & Means Committee advanced the “Setting Every Community Up For Retirement Enhancement Act of 2019,” or SECURE Act, paving the way for what will likely be the most transformative legislation to affect the DC industry since the Pension Protection Act of 2006.
In this brief audio recording, Drew Carrington breaks down the latest developments out of Washington D.C. and how bipartisan and bicameral support may lead to legislative change this year.
Audio Transcript
Hi, it's Drew Carrington with Franklin Templeton Investments, the head of Institutional Defined Contribution. We're sending along a couple of summaries of recent regulatory and legislative updates regarding defined contribution plans, but I thought I might add a little background and context on the changes which are likely to be the most transformative for the DC industry since the Pension Protection Act of 2006.
Late last summer, President Trump issued an executive order with the idea that the Department of Labor (DOL) could issue guidance that would expand coverage and access to retirement plans, similar to the health plan regulations that they had issued earlier in the summer—these were the Association Health Plans (AHP). The DOL followed up on this and issued a proposed regulation on association retirement plans in October, took comments and we were all waiting on them to submit a final regulation to OMB (United States Office of Management and Budget). However, a recent court case filed by several states’ attorney generals found the health plan regulation unlawful and the basis of that ruling also threatens the basis for the DOL’s association retirement plan proposed regulation.
In the meantime, however, Congress has taken action on the retirement front, much more action and moving much more rapidly than many of us expected. Over in the House of Representatives, Chairman Richard Neal of the House Ways and Means Committee moved to the SECURE Act, setting every community up for retirement enhancement out of the Ways and Means Committee unanimously.
The SECURE Act has many of the elements from 2016’s Retirement Enhancement and Savings Act (RESA) bill, as well as 2018’s Family Savings Act. These include expanding coverage and access with multiple employer plans—or as the bill refers to them, pooled employer plans—changes to required minimum distributions to allow individuals to delay claiming their required minimum distributions and an expansion of a lifetime income within retirement plans. A safe harbor for fiduciaries, improved lifetime income portability and disclosure to participants regarding the lifetime income equivalent of their current balance. Over in the Senate, Chairman Chuck Grassley, who replaced Orrin Hatch, who retired, re-introduced Hatch’s RESA bill, which includes, as we noted earlier, many of the same proposed changes to the system as the SECURE Act.
The implication of these proposals is that we have the rare bipartisan and bicameral support for dramatic changes to the DC system and given that level of support, we should expect some kind of legislation, probably later this year. Furthermore, this may be the tip of the change iceberg, as neither of these bills include a number of additional proposed changes to the DC system, such as those included in Senators Rob Portman and Ben Cardin's proposed bill, which was introduced in the lame-duck session in January.
What we've included is a summary of the AHP court case ruling and its implications for Association Retirement Plans as well as a write up about the progress of and elements within both the SECURE Act and the RESA bills. If you have additional questions, please reach out to your Franklin Templeton representative and in closing, buckle up change is coming.
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