By Susan J. White and Jonah Mainzer, Susan J. White and Associates, Inc.
Economy
With the completion of health care reform, Congress has transitioned into jobs based measures and major financial regulatory reform legislation—all which had waited for the completion of federal health reform.
The economy is now the Administration’s number one priority and a number of jobs bills have been worked on in the House creating H.R. 4213 (The American Jobs and Closing Tax Loopholes Act of 2010). Due to cost concerns among Blue Dog Democrats, a number of provisions were stripped from this bill to ensure passage. The Senate is currently debating the measure and Majority Leader Reid (D-NV) is trying to pull together a coalition allowing him to put the omitted provisions back into the bill. A number of Democrats have indicated that they may not support the bill and even if Majority Leader Reid can get yes votes from all the Democrats he would still need at least one Republican to vote yes to avoid a filibuster. A number of moderate Republicans have supported jobs based legislation in the past but the cost of this bill has them wary and at this time they have not committed to vote either way.
National Save for Retirement Week
Both Representatives Schwartz (D-PA) and Johnson (R-TX) have committed to sponsoring the National Save for Retirement Week resolution and NAGDCA is working closely with their offices to work out final language so that the Resolution can be introduced soon. The Resolution would follow the same timeline as last year and allow ample time for planning events during the week of October 17-23.
The Senate has been mired down in a number of other issues, including scheduling hearings for Supreme Court nominee Elena Kagan, but staff for Senate Committee on the Budget Chairman Kent Conrad (D-ND) and Senate Committee on Health, Education, Labor and Pensions (HELP) Ranking Member Mike Enzi (R-WY) have indicated that they will sponsor a Senate Resolution this summer.
Roth 457
NAGDCA continues to advocate for a Roth 457 option for state and local government employees and it was originally included in draft for H.R. 4213. However due to political considerations the measure was dropped in the House and it is unlikely that the Senate will attempt to put the provision back in for any possible conference with the House.
The Senate Committee on Finance has supported this provision for a number of years, as it sees the Roth as an important additional savings tool. Importantly, in the current tight federal budget climate, the Roth 457 provision also raises federal revenue over a ten-year period and although the number is not as large as other measures there are few measures available that would raise money and Roth 457 is one of them. This fact alone will ensure that Roth 457 will remain on people’s radars and it should eventually become law.
Financial Regulatory Reform
After the economic downturn and failure of a number of banks, Congress turned to legislation aimed at reforming the financial regulatory system. Both the House and the Senate have passed bills and they are currently in conference, with a conference report expected shortly. It is likely that once a conference report is agreed to, it will then pass the House and Senate in short order sending it to the President for his signature.
NAGDCA is concerned that the definition of swaps in the Restoring American Financial Stability Act of 2010 may have a serious and unintended detrimental impact on stable value investment options offered through state and local government defined contribution plans. In a letter to conferees, NAGDCA proposed that that benefit responsive investment wrap contracts issued with respect to stable value funds offered through Section 457 eligible deferred compensation plans, 401(k) and 403(b) plans be excluded from the definition of a swap. NAGDCA is concerned that failure to exclude wrap contracts from the definition of a swap in the bill will result in higher costs for the protection provided by wrap contracts and a commensurate lower return for investing plan participants.
We continue to work with House and Senate conferees to bring attention to the issue.
Fee Disclosure
The House Committee on Education and Labor, led by Chairman George Miller (D-CA) passed H.R. 2989, the 401 (k) Fair Disclosure for Retirement Act of 2009. No movement had occurred on that bill since the bill had passed out of committee, but parts of it were added to the tax extender/jobs legislation that passed the House recently. These sections would require more disclosure to both plan administrators and participants. In particular these provisions would require a written statement to the plan administrator describing the services to be provided and the total annual revenue to be collected by the service provider. For plan participants this would require the plan administrator to provide employees with a notice describing the plan and characteristics of each investment option. Included in this notice would be a plan fee comparison chart. Plan administrators must also provide employees with a quarterly benefit statement that includes information on each investment option that the employee is invested in. Small plans are only required to provide annual statements.
The Senate is currently debating H.R. 4213 and Majority Leader Reid removed these provisions from his Manager’s Amendment. It is unclear whether the Senate will put these provisions back into the bill or whether the House would fight in conference to ensure that these provisions are included in the final bill.
Draft Legislation
NAGDCA has been working with Representative Schwartz’s staff on legislation she is in the process of drafting. Provisions of the proposed legislation include: financial literacy grants, auto-Consolidation of 401(k) accounts, a federal match for 401(k) contributions, a temporary deduction for retirement account losses and one free yearly credit score. The federal match for the 401(k) contributions is meant to be an expansion of the saver’s credit.
Legislative Webcast
NAGDCA recently held its annual legislative webcast and we were pleased that Kevin O’Connor, Assistant to the General President for Governmental Affairs and Public Policy, International Association of Firefighters (IAFF) was able to join us and present on issues of concern to IAFF. The discussion was also focused on NAGDCA’s legislative priorities as well as where Congress was headed with legislation this year and National Save for Retirement Week.
Industry Roundtable
On April 23rd, NAGDCA held it’s sixth Industry Roundtable. Speakers that participated on the Legislative Panel included the Associate Benefits Tax Counsel at the Department of the Treasury, Majority Senior Benefits Counsel to the Senate Committee on Finance and Minority Tax Counsel to the House Committee on Ways & Means. Issues that that were covered included the Saver’s Credit, Roth 457s and fee disclosure.
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