From the Executive Director
Nothing boring about 2017 in Washington. Many practitioners, and plan sponsors, are hoping Trump appointees will pare back, or throw out, regulations and other administrative actions initiated by the previous administration. Most of us will be surprised if there isn’t an executive order on day one halting work on regulations that are not finalized. It’s more difficult to guess what will happen, if anything, to halt or delay implementation of the conflicted advice rule before April 10. And whether or not those monstrous 5500 revisions proposed for 2018 plan years will be pursued by the new leadership at DOL and IRS.
One thing that we can feel pretty certain of is the prospects for tax reform. The “threat” of tax reform must seem like ASPPA PAC crying wolf, sometimes. The Chairs of the House Ways and Means and Senate Finance Committees always want to make it happen. Remember the Camp proposal back in 2014? The Senate Finance Committee working groups that same year? When Paul Ryan took over Ways and Means, before moving up to Speaker, he had his own proposal. It’s one of those things everyone in charge of a tax committee dreams of doing, and we always need to take it seriously, then it dies on the vine.
Guess what? This year, or at least this Congress, I would put the chance that tax reform gets done at well over 90%. It’s not “if,” it’s “when.” The stars have aligned – President, House and Senate all in Republican control, and all the key players agreeing it’s time. If the 2018 budget includes “reconciliation” instructions, 50 votes will do in the Senate, and it’s extremely likely Republicans will reach agreement amongst themselves, even if no Democrats jump on board.
So what will it look like? How will it affect us? That’s a lot harder to answer with much certainty, but we do have a “Blueprint” put out by Ways and Means Republicans that gives some good clues. If tax reform follows that Blueprint, there will not be a frontal assault on the tax incentives for retirement savings, but cutting marginal rates by its nature reduces value of tax deferral. You can rest assured that ARA GAC staff is and will be up on the Hill reminding policymakers how important it is to make sure sponsoring a qualified plan comes with a more valuable incentive for the decision maker than saving outside of a qualified plan. Workers are 15 times more likely to save for retirement with a workplace plan. If there is not a meaningful incentive for a business owner to set up and maintain a workplace program, it’s rank-and-file workers who will be less secure in retirement.
A qualified plan may exist because the plan sponsor believes providing employees with the opportunity for a secure retirement is important, or because the small business owner wants the tax deduction, or for a combination of these and other reasons. But the reason Congress has provided special tax incentives for employer-sponsored plans is retirement security for employees. The ARA would not be as successful at preserving the incentives for employer-sponsored plans as we have been if there were not good outcomes for employees as a result of these incentives.
I wish you all a healthy, prosperous 2017. And I wish our employer-sponsored voluntary retirement system the same.
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