By Susan J. White and Jonah Mainzer, Susan J. White and Associates, Inc.
Washington is bogged down. Funding for the federal government has not run out only because Congress passed a Continuing Resolution through November 16 to fund all departments and activities. In addition to disagreement between the White House and Congress on funding priorities, the President recently vetoed the State Children's Health Insurance Program (SCHIP)-a bi-partisan agreement that had been hammered out by Congress over many months. As a result, many other issues and priorities have been put off until these are solved and there is no end in sight. Many in Washington believe that the outstanding budget issues will only be resolved through a large omnibus funding package in mid December.
Defined Contribution Plan Fees: Harris and Marsh Visit Capitol to Discuss Recent NAGDCA Survey and NAGDCA Called on to Testify before House Panel
In spite of the stalemates on a number of fronts, Congressional interest regarding fees in defined contribution plans, especially 401(k) plans, continues. As reported earlier this year, Representative George Miller (D-CA), Chairman of the House Committee on Education and Labor held its first hearing on H.R. 3185, the 401(k) Fair Disclosure for Retirement Security Act of 2007. He recently held another hearing and the focus of his interest is on disclosure and the adequacy of disclosure of administrative and investment fees.
Miller has stated that if plan participants knew of all the fees that were being charged to there plans they would not be willing to pay them. H.R. 3185 would require plan sponsors to disclose fees that they plan on charging before they contract with the sponsor and to disclose any potential conflict of interest. In addition the bill would require employers to offer at least one low-cost index fund as an investment option to employees participating in 401(k) plans.
Representative Charles Rangel (D-NY) and Chairman of the House Committee on Ways and Means is also planning a hearing that will focus on administrative and investment fees. NAGDCA has been asked to testify and Mindy Harris, the association's current President, will present NAGDCA's recent survey on fees before the Committee on October 23. The Committee is interested, not only in disclosure, but in the "reasonableness" of fees. Rangel is planning on drafting legislation that will ultimately be joined with a Miller Education and Labor measure.
Mindy Harris, NAGDCA President and Ralph Marsh, NAGDCA's Legislative Committee Chair, made a round of visits on Capitol Hill on October 12. They met with House Ways and Means Committee counsel, House Education and Labor counsel and with the offices of two of the key sponsors of National Save for Retirement Week-Representative Schwartz (D-PA) and Senator Smith (R-OR). Harris and Marsh shared the NAGDCA fee survey findings with these key offices and discussed upcoming hearings and plans for legislation.
NAGDCA has also been in touch with the Senate committees-the Senate Committee on Finance, and the Senate Committee on Health, Education, Labor and Pensions. Although these committees have an interest and may well hold hearings, it is likely that they will monitor the House hearings first. The exception to this rule is the Senate Special Committee on Aging which has scheduled a hearing on these matters for Wednesday, October 24.
National Save for Retirement Week
Following the success of last year's Save for Retirement Week, NAGDCA worked with Congress to pass a resolution in both the Senate and House this year. A number of events are planned for the date, as called for in the two congressionally approved resolutions- October 21-27. In the meantime, NAGDCA is working with the House and Senate ensure continuance of National Save for Retirement Week-either through new resolutions for 2008 or legislation to declare National Save for Retirement Week-permanently.
Could Expansion of Defined Contributions Option such as a Roth 457 be Possible this Year?
The Senate Committee on Finance has recently unanimously passed the "American Infrastructure and Investment Act of 2007", H.R. 3540 and the Senate bill includes a provision authorizing a Roth 457 option for state and local government employees. Earlier this year a similar provision had been attached to the Iraq supplemental funding legislation. However, in an effort to send a cleaner bill to the President, Congress dropped the tax package, including the Roth 457 provision.
Senator Hillary Clinton Announces (D-NY) Retirement Plan
Senator Hillary Clinton recently unveiled her plan to help more middle class Americans save for retirement. She emphasized that her proposal is aimed at giving individuals more choices in saving for retirement and at keeping Social Security solvent. She stated that by offering more savings vehicles her plan augments Social Security. Highlights of the proposal include offering matching in the form of tax credits to American Retirement Accounts, as the Senator is calling them, which are similar to 401(k) plans, to encourage savings; encouraging all employers to offer direct deposit into the accounts; reducing disincentives by removing asset-tests; and, freezing the estate tax at 2009 levels to pay for the matching credits.
Senator Gordon Smith (R-OR) Legislation
Senator Gordon Smith, one of the sponsors for Save for Retirement Week, continues to be very active in the retirement arena and this year has introduced several bills of interest to NAGDCA. S. 1288, the Woman's Retirement Security Act of 2007 was introduced in May and sent to the Committee on Finance. The bill would increase retirement savings through automatic IRAs, expansion of access to IRAs expanding the Saver's Credit, and Flexible Savings Account transfers for public and private employees. There are also provisions to preserve income, including incentives for lifetime payments, study of spousal consent for distributions from defined contribution plans and longevity insurance. This bill was originally introduced at the end of the 109th Congress but as no action was taken it had to be reintroduced this year. As of this time no action has been taken on the bill and it is doubtful that the bill will be acted on this year.
He also continues to work on legislation for older workers. Provisions of his legislation include expanding the eligibility of the Work Opportunity Tax Credit (WOTC) to allow the credit for employers hiring older workers; improving the Workforce Investment Act for older workers; updating the minimum required distribution rules in a number of ways, including raising or indexing the age at which minimum distributions must begin; removing the penalty under the Civil Service Retirement System for part time services.
The Senator is considering a number proposals to address long term care insurance needs, including allowing tax-free distributions to participants from defined contribution plans to purchase qualified long-term care insurance. He is also proposing to create a National Resource Center on Aging and the Workforce to serve as a national clearinghouse on older workers and workforce issues that include solutions affecting planning for older workers that would serve employers, community and government organizations and public and private agencies.
NAGDCA has been serving on the kitchen cabinet for the older workers legislation.
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