Ways and Means approves retirement legislation

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April 2, 2019
2019-0677

The House Ways and Means Committee on April 2, 2019, approved by unanimous voice vote the Setting Every Community Up for Retirement Enhancement Act (the SECURE Act, H.R. 1994), which includes provisions to facilitate smaller employers banding together in multiple employer plans with lower management expenses, and a fiduciary safe harbor for the selection of a lifetime income provider.

The latter provision satisfies a prudence requirement for the selection of insurers to provide a lifetime income stream through an annuity and protects plans from liability for any losses that may result to the participant or beneficiary due to an insurer's inability in the future to satisfy its financial obligations under the terms of the contract.

Additional provisions include requiring benefit statements to include a lifetime income disclosure that would convert a participant's current account balance into a monthly annuity at retirement age. The bill would also repeal the prohibition on contributions to a traditional IRA by an individual who has reached 70 ½ and increase the required minimum distribution age from 70 ½ to 72.

A substitute amendment added the Open Multiple Employer Plan provision and the CSEC provision dealing with the PBGC premiums paid by cooperatives or charities, which had been introduced separately.

Chairman Richard Neal (D-MA) introduced the bill with cosponsors Rep. Kevin Brady (R-TX), Rep. Ron Kind (D-WI), and Rep. Mike Kelly (R-PA), and it largely reflects the Retirement Enhancement and Savings Act (RESA) sponsored by Kind and Kelly. The Neal/Brady bill also includes seven new provisions that have not previously been included in RESA, including the increase in the RMD age, making long-term part-time employees eligible for retirement plan participation, easing funding rules for community newspaper defined benefit plans, and expanding 529 plans to cover home-schooling and vocational training.

In an opening statement, Chairman Neal said the bill would not be the Committee's last word on the issue. "Over the coming months, the Ranking Member and I plan to put together another bill that will close the coverage gap, simplify the retirement system, and help Americans preserve their assets in retirement. I hope that our committee colleagues- both Democrats and Republicans — will come to us with ideas. My goal is to mark up this second retirement bill before the August recess."

The principal revenue-raising provision in the SECURE Act would curtail inherited IRAs and qualified plans and represents one significant difference between the House bill and the RESA bill introduced by Senate Finance Committee Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR) on April 1. While both bills use the stretch IRA, they differ in how it is constructed. Both bills would exclude amounts paid to spouses, minor children, chronically ill or disabled individuals, and beneficiaries who are not more than 10 years younger than the decedent from the new pay-out requirements. The House bill would require those amounts not paid to eligible individuals to be paid within 10 years of the accountholder's death. The Senate bill, however, provides a $400,000 per beneficiary exclusion for individuals not among the eligible individuals.

During the markup, some Republican members criticized the community newspapers; provision, which would increase the interest rate to calculate their funding obligations to 8% and provide for a longer amortization period of 30 years from 7 years. Rep. Dave Schweikert (R-AZ) said the provision would compromise retirement security for newspaper workers by allowing underfunding of their plans and said the discount rate used by plans was an issue on the multiemployer committee he was part of. Rep. Jodey Arrington (R-TX) also expressed concern about the provision. Chairman Neal said he intends to address the multiemployer issue before year end and said he has received acknowledgment from Treasury that such a move is necessary.

The markup also included consideration of an IRS reform bill (H.R. 1957) and the BRIDGE for Workers Act (H.R. 1759), which would allow states to use Reemployment Services and Eligibility Assessment (RESEA) grants to serve any worker receiving earned unemployment benefits who could return to work more quickly if provided additional support, instead of narrowly defining worker eligibility. Members also addressed issues beyond the scope of the markup. Rep. Bill Pascrell (D-NJ) urged the Committee to take up his bill (H.R. 1142) to repeal the state and local tax (SALT) deduction and restore the 39.6% individual income tax rate bracket. Chairman Neal said he has directed Select Revenue Measures Subcommittee Chairman Mike Thompson (D-CA) to convene a working group for members concerned about the issue.

Following is a chart indicating provisions included in the SECURE Act versus the Senate RESA.

Provision	House SECURE Act, as reported	Senate RESA
Facilitating multiple employer plans, including relief from disqualification of plan if one employer fails to meet requirements	X	X
Modification of PBGC premiums for CSEC plans	X	X
Simplification of safe harbor 401(k) rules	X	X
Increase credit limitation for small employer pension plan start-up costs	X	X
Small employer auto enrollment credit	X	X
Treating certain taxable non-tuition fellowship and stipend payments as compensation for IRA purposes	X	X
Repealing maximum age for traditional IRA contributions	X	X
Prohibiting qualified employer plans from making loans through credit cards and other similar arrangements	X	X
Portability of lifetime income options	X	X
Permitting an employer that terminates a 403(b) plan to distribute the account assets in kind to the new custodial account of the participant or beneficiary	X	X
Clarifying retirement income account rules relating to church-controlled organizations	X	X
Allowing plans adopted by filing due date for year to be treated as in effect as of close of year	X	X
Combined annual reports for group of plans	X	X
Disclosure regarding lifetime income	X	X
Fiduciary safe harbor for selecting lifetime income provider	X	X
Modifying nondiscrimination rules to protect older, longer service participation	X	X
Benefits for volunteer firefighters and emergency medical responders	X	X
Stretch IRA revenue provision	Requires those amounts not paid to eligible individuals to be paid within 10 years of the accountholder's death	$400,000 per beneficiary exclusion for individuals not among the eligible individuals
Increased penalty for failure to file	X	X
Increased penalties for failure to file retirement plan returns	X	X
Increased information sharing to administer excise taxes	X	X
Increasing required minimum distribution age from 70 ½ to 72	X
Allowing long-term part-time workers to participate in 401(k) plans	X
Allowing penalty-free withdrawals from retirement plans for individuals for birth or adoption	X
Community newspapers pension funding relief	X
Treating excluded difficulty-of-care payments as compensation for determining retirement contribution limitations	X
529 education savings accounts to cover costs associated with registered apprenticeships; homeschooling; up to $10,000 of qualified student loan repayments (including those for siblings); and private elementary, secondary, or religious schools	X
Benefits relating to United States Tax Court		X

Opening statements by Reps. Neal and Brady are attached, along with a JCT revenue estimate.

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Contact Information
For additional information concerning this Alert, please contact:

Washington Council Ernst & Young
• Any member of the group, at (202) 293-7474.

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ATTACHMENT

Neal Statement

Brady Statement

JCT revenue estimate