The new House of Representatives has reinstated a pay-as-you-go rule that was in place during the 111th Congress, requiring any legislation introduced be revenue-neutral. That means any legislation moving through the House that would increase spending, cut taxes or decrease government coffers in any way would have to be offset by some other spending cut or tax increase. When the government re-opens, that could raise the hurdle for legislation that encourages retirement savings, including the efforts to help bring employer-based retirement plans to smaller businesses.
“The challenge you face with retirement legislation is, especially if people are putting money in on a pre-tax basis, it means revenue lost today,” said David Levine, principal at Groom Law Group.
In September, President Trump issued an executive order directing the Treasury and Labor departments to assess and possibly increase workers’ access to multiple employer plans, or MEPs.
Open MEPs, which have had bipartisan support, are designed to give small businesses the benefits of retirement plans and spread costs across a number of employers. Put simply, open MEPs are a way to “close the retirement gap” between large and small employers, Labor Secretary Alexander Acosta said.
“Multiple employer plans are seen as many as a way to get small employers to start participating because it’s less burden on them,” Levine said. “You’re outsourcing it on someone else running the plan. The problem with that is, that means more people than are currently saving are going to be putting money into retirement plans. If more people are putting money away, that means less tax revenue.”
Several bills with MEP provisions have worked their way through Congress. But legislators will have to start over, with the new Congress. Retirement savings advocates are hopeful about Representative Richard Neal (D, Mass.), the new chairman of the House Ways and Means Committee.
At the end of 2017, Neal introduced the Automatic Retirement Plan Act of 2017, which would modify rules related to multiple employer plans, as well as the Retirement Plan Simplification and Enhancement Act, which simplified retirement rules.
In September, the House passed the Family Savings Act, which included a provision to open up MEPs. (The bill didn’t get through the Senate before the Congressional session ended.) That bill estimated MEPs would cost nearly $3.7 billion over 10 years, due to more people participating in retirement plans and deferring income. Another provision in the bill, which introduce a new savings vehicle called Universal Savings Accounts, would cost $8.6 billion, and an exemption from the required minimum distribution rules for individuals with certain account balances would cost $6.2 billion.
With such high costs to government, those provisions will not go over well under the new PAYGO rule.
“These (PAYGO) rules do reflect the desire of the Democratic caucus—especially on tax policy—of moving legislation that either at minimum is revenue-neutral or would raise revenue from a tax perspective,” said Andrew J. Remo, director of legislative affairs, American Retirement Association.
There are workarounds to PAYGO, Remo said. Congress could waive PAYGO for a particular bill with the support of 60 senators and the majority of the House. In addition, legislation is exempt from the rule if it’s deemed an emergency situation.
“If there’s a widespread consensus on something that needs to be done in the multiple employer bill and there’s a bipartisan deal that’s struck, I would envision—because this is an emergency situation—I can envision some sort of workaround there to not have that PAYGO be tripped up,” Remo said.