ARA Washington Update Highlights New Hill, Reg Priorities

In his First Quarter 2019 Washington Update, Robert Kaplan, the American Retirement Association’s Director of Technical Education, provided an overview of the new climate on Capitol Hill as well as recent regulatory developments affecting retirement plans.

On the Hill

With the changes that took place in Washington because of the November 2018 mid-term elections — particularly the Democrats’ takeover of the House of Representatives — the climate for legislative action affecting retirement plans is different now.

Kaplan highlighted the ascent of Rep. Richie Neal (D-MA) to the chairmanship of the House Ways & Means Committee. “He is no stranger to the retirement plan world,” said Kaplan, noting that retirement policy has always been a high priority of Neal’s. “Clearly, Mr. Neal is a good one to have in that position” to move legislation that would support retirement plans forward, said Kaplan.

Kaplan cited legislation that is now pending in the House and Senate:

• The Retirement Enhancement and Savings Act, introduced in the House by Reps. Mike Kelly (R-PA) and Ron Kind (D-WI);
• The Rehabilitation for Multiemployer Pensions Act, introduced in the House by Rep. Neal;
• The Retirement Security Act, introduced in the Senate by Sens. Susan Collins (R-ME) and Maggie Hassan (D-NH); and
• The SIMPLE Plan Modernization Act, introduced in the Senate by Collins and Sen. Mark Warner (D-VA).

Kaplan also added a caveat, reminding attendees that there is divided government in Washington now, and that legislation has to pass not only the Democrat-controlled House, but also “for it to go anywhere, it has to go the Republican-controlled Senate and a Republican president.”

Regs Aplenty

Hill lawmakers are not alone in taking actions that will affect retirement plans, Kaplan indicated. The regulatory activities he highlighted include the following:

Treasury Guidance Plan. Kaplan noted that the Treasury’s Priority Guidance Plan for 2018-2019 calls for action on the following:

• extended rollover period for qualified plan loan offsets;
• updating ESOP rules;
• regulations on the required minimum distribution (RMD) life expectancy and distribution tables;
• timing of amendments to 403(b) plans;
• the universal availability requirement under 403(b);
• RMD use of lump sum payments to replace lifetime income being received by retirees;
• hardship regulations (Proposed were released); and
• missing participants.

But Kaplan reminded attendees that simply being on the list is not a guarantee that the Treasury actually will take action on a particular matter. “They just provide the list. We’ll have to wait and see,” he said, adding, “Some of these items carry over from year to year.”

COLAs for Penalties. Kaplan reminded attendees that for 2019, the penalties for failing to file a Form 5500, auto contribution notices, blackout or diversification notices and recordkeeping or reporting for participants under ERISA Section 209(b). “Some of these failures can be rather significant and can add up,” he cautioned.

Hardship Distribution Rules. Kaplan outlined proposed changes to the rules governing hardship distributions. “We’re looking for clarity,” said Kaplan. He told attendees that steps that can be taken concerning changes to these rules include:

• update administrative systems;
• communicate rules to plan administrators;
• communicate rules to plan participants;
• retrain employees on new rules;
• adopt the interim amendment; and
• track administrative practices during the transition period so it is possible to update documents later or be prepared in case of a future audit.

State Activity

And don’t think the federal stage is the only one on which activity relevant to retirement saving and plans is happening — Kaplan also noted that legislative activity in the states is increasingly widespread, and has already been enacted in some states. In addition, he cited a proposal in Nevada for a fiduciary standard. “Sometimes the rules put in place have unintended consequences,” he said of that proposal.

ARA Action

The ARA is actively representing and pursuing the interest of its members and the industry that serves plan participants, as well as the participants themselves, Kaplan reminded attendees. For instance, he cited recent comment letters the ARA sent:

to the IRS on Jan. 14 concerning proposed regulations on hardship distributions;
to the Department of Labor (DOL) on Dec. 21, 2018 supporting a proposed exemption that would facilitate auto-portability; and
to the DOL on Dec. 12 supporting electronic disclosure. Kaplan said that he thinks that the letter’s suggestion that electronic disclosure be a default form of disclosure “is very important for storage and search functions.”

Kaplan also emphasized the importance of the private sector and employer-based plans. “If they [employees] have access to an employer-based plan, they are more likely to save,” he remarked.