What Does Sen. Hatch’s Departure Mean to the Retirement Industry?
Sen. Orrin Hatch (R-UT), one of the longest-serving U.S. senators and current chairman of the powerful Finance Committee, announced Jan. 2 that he will be retiring at the end of the current Congress.
“I’ve always been a fighter … but every good fighter knows when to hang up the gloves, and for me, that time is soon approaching,” Hatch said in a video posted on Twitter.
Now in his seventh term, Hatch is the most senior Republican in the Senate and has served on the Finance Committee for the past 27 years, the last three as chairman. He was a major force in shepherding the Tax Cuts and Jobs Act — the most significant overhaul of the federal tax code since the Tax Reform Act of 1986 — through the Senate last month.
Hatch’s announcement raises two key questions going forward:
- Will he continue to be engaged on retirement issues before he retires, and in particular, will he seek action on his Retirement Enhancement and Savings Act (RESA)?
ARPA, RESA, RPSEA and SAVE
- Who will take over as Finance Committee chairman in the next Congress?
In the last Congress, the Finance Committee approved Hatch’s RESA legislation in September 2016, but the full Senate never considered the bill before adjourning. RESA contained more than 30 retirement-related provisions that had the support of both parties.
RESA is considered by many to be a foundational piece of legislation that policymakers from both parties and the industry could rally around. Thus, it could serve as a starting point for broader retirement reforms, as an update to the Pension Protection Act of 2006.
With tax reform now completed, many in the retirement industry have been anticipating that Congress will pivot to retirement issues. While Hatch has not yet reintroduced his legislation in the current session of Congress, he could still call it up at any time as chairman of the committee.
Hatch’s announcement, however, increases the level of uncertainty that there will be action on retirement issues in 2018. In addition, Hatch’s Finance Committee staff just lost the service of its highly regarded Benefits Tax Counsel, Preston Rutledge, who was confirmed Dec. 21 as Assistant Secretary of Labor for the Employee Benefits Security Administration.
In the meantime, several bills were introduced in the House in late 2017 that seek to encourage small businesses to offer retirement plans and make a variety of other changes to existing retirement law.
Rep. Richie Neal (MA), who is currently the ranking Democrat on the House Ways & Means Committee, on Dec. 1 introduced the Retirement Plan Simplification and Enhancement Act of 2017 (RPSEA) and the Automatic Retirement Plan Act of 2017 (ARPA).
The ARPA and RPSEA seek to implement automatic 401(k)s and simplify administration and improve retirement savings opportunities across the spectrum of plans, including both DB and DC plans. Moreover, the RPSEA pulls together many of the bipartisan pieces of legislation that have been stalled on Capitol Hill for the last several years, including several provisions from Sen. Hatch’s RESA bill.
In addition, Reps. Ron Kind (D-WI) and Dave Reichert (R-WA), senior members of the House Ways & Means Committee, reintroduced their Small Businesses Add Value for Employees (SAVE) Act (H.R. 4637) on Dec. 13.
Among other things, H.R. 4637 would make changes to existing SIMPLE IRA and SIMPLE 401(k) retirement plans, allow for open multiple-employer plans (MEPs) and ease other requirements to make it easier for small businesses to offer plans to their employees. The SAVE Act also includes similar provisions in Rep. Neal’s RPSEA and Sen. Hatch’s RESA legislation.
What does this all mean for the prospects for retirement legislation in 2018? It’s hard to predict at this point. Hatch has demonstrated a willingness to work with members of the opposite party, but that prospect seems less certain, particularly in a highly charged election year environment, in which control of both houses of Congress may be at stake. Any attempt at moving legislation would need the support of Democrats, mainly in the Senate, where it would take 60 votes for legislation to proceed. Following the swearing in of Sen. Doug Jones (D-AL) on Jan 3, the current party split is 51 Republicans, 48 Democrats and one independent who caucuses with the Democrats.
Meanwhile, House Ways & Means Committee Chairman Kevin Brady (R-TX), fresh off the tax reform victory, has yet to provide a detailed agenda for his committee in 2018. In addition, the Treasury Department tax policy staff, which serves as a resource for drafting legislation, will likely be inundated with drafting regulations to implement the changes under the Tax Cuts and Jobs Act.Who Will Be the Next Finance Committee Chairman?
Looking further down the road, Sen. Charles Grassley (R-IA), who has previously served as Finance Committee Chairman, is next in line to replace Hatch. Grassley currently is Chairman of the Judiciary Committee and would have to give up that post to serve as Finance Chairman. Should Grassley turn down the Finance slot, Sen. Mike Crapo (R-ID) is next in line, but he would have to give up his chairmanship of the Banking Committee.
This, of course, also depends on whether the Republicans maintain control of the Senate following the 2018 mid-term elections. Should Republicans lose control, Sen. Ron Wyden (D-OR), who previously served as chairman in 2014 and currently serves as the Ranking Democrat, would presumably become the next chairman. Wyden has been known to work across the aisle, but he also brings a sharp populist viewpoint.
Why is this important? Because the Finance Committee has jurisdiction over federal tax issues, including pension and retirement-based tax provisions, Social Security, health programs under the Social Security Act, such as Medicare and Medicaid, and international trade matters, among other issues.