From the Executive Director
Back in January, President Trump issued his Executive Order on Reducing Regulation and Controlling Regulatory Costs (EO 13771
This is where he mandated that for every new regulation issued by a government agency, two old ones must be repealed. The net estimated fiscal impact on the economy of this one-for-two arrangement has to be positive or zero. Like most people, my immediate reaction was, “Yes!” Then I thought, “What about final market-rate-of-return regs for cash balance plans? Or that update to Rev Proc 2000-40?” After some review, I think we have to worry about not getting guidance from IRS because of this order. The question is whether we will see any impact on IRS regulations at all.
Like most things in Washington, we won’t know for sure until we see how it plays out in practice. In the meantime, there is some guidance available in the form of a couple of memos issued by the Office of Information and Regulatory Affairs (OIRA) to help the agencies implement the order. (Yes, even an order to reduce regulations requires guidance to implement it.) There was interim guidance
issued in February for the remainder of the 2017 fiscal year ending Sept. 30, with the final version
issued in April.
The guidance didn’t exactly make it all crystal clear to me, but it says two things:
1. Regulations required by law are exempt, as is internal guidance such as the memos issued by OIRA to provide guidance on the EO.
2. Only “significant” regs or other guidance are covered.
Non-regulatory guidance is significant if it has a net cost. EO 12866
section 3(f) is referenced for the definition of “significant,” stating, “Significant regulatory action means any regulatory action that is likely to result in a rule that may:
- have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities;
- create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;
- materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or
- raise novel legal or policy issues arising out of legal mandates, the President’s priorities, or the principles set forth in this Executive order.”
What you won’t find in this guidance or the EOs is that IRS and Treasury apparently have an agreement with OMB that regs interpreting the IRC are not “significant” because any cost is really a result of the underlying law, not the regulation itself. (If you look at the preamble to recent proposed and final IRS regulations, there will be a statement that it is not subject to EO 12866.) If a regulation is not “significant” per the EO 12866 definition, it isn’t covered by the recent one-for-two EO. The details of the IRS and OMB’s position, and the argument for subjecting the updated mortality tables to the EOs, is laid out very well in a March letter to the IRS
from the American Benefits Council (ABC) and the ERISA Industry Committee (ERIC).
Updated mortality table guidance could provide the first indication we get as to whether or not the one-for-two rule has any impact on IRS regs. It’s hard for me to believe that President Trump did not intend to stand in the way of the “anticipated amendments” to 401(a)(9) promised by Notice 2015-49
And the cost of implementing recent proposed modification to 417(e) could in reality be “significant” if the final version doesn’t include changes proposed in our comment letter
But reality and intention aren’t necessarily related.
ARA GAC leadership, including ACOPA representatives, is meeting with agencies in DC on June 12, and this EO will likely be on our agenda. Next month I expect to report on our GAC meetings with IRS and PBGC. Hopefully they will shed some light on this and other issues.
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