Biparty aura around retirement savings darkens in reconciliation
Partisan tensions have surrounded most of the problems in Washington, DC in recent years, with a few notable exceptions. One of them was the retirement savings policy.
At the moment, “was” is the key word due to a massive bill that creates shaky politics on Capitol Hill.
Democrats are pushing $ 3.5 trillion legislation which contains a range of spending for health care, education and climate programs as well as tax cuts for some Americans and tax increases on businesses and the wealthy to pay them. Also known as the Build Back Better Act, it basically contains the economic agenda.
Democrats are using a parliamentary maneuver known as budget reconciliation to pass the bill to avoid Republican obstruction in the Senate. No Republican is going to support the measure. Some centrist Democrats in the Senate and House are also hesitant.
When legislation as important as the Reconciliation Train passes through Congress, lawmakers want to put their favorite ideas on board. This was the case with regard to the retirement provisions in the finance bill – and this is what is causing a breakdown in cooperation on retirement savings.
The House Ways and Means Committee’s contribution to budget reconciliation included a provision on retirement policy that President Richard Neal, D-Mass., Has been advocating for years. This would require companies that do not offer a pension plan to establish an automatic 401 (k) enrollment account or an individual retirement account for their employees. It would provide a tax credit to help pay for the plans, but would also impose an excise tax on non-compliant businesses.
During an appearance at the Institute of Insured Retirement annual conference online On September 28, Neal touted the auto-IRA legislation and other savings provisions in the Reconciliation Bill for their potential to add $ 7 million in retirement savings and $ 62 million in new retirement savers over the next 10 years.
“It was a big deal,” Neal said.
His Republican colleagues on the committee, however, thought it was a raw deal. For years, they have opposed Neal’s self-IRA legislation, calling it an expensive mandate for small businesses. During the committee vote on the reconciliation bill, they criticized the tax penalty.
The Republican ranked in the panel, Rep. Kevin Brady, R-Texas, said Neal’s approach to the retirement provisions of the Reconciliation Bill contrasted sharply with bipartisan support earlier this year for SECURE 2.0. , which builds on landmark Congress-approved retirement legislation. in 2019.
The legislation, which was unanimously approved by the Ways and Means Committee, raises the minimum age requirement for distributions from retirement accounts from 72 to 75 and includes a number of provisions aimed at strengthening the coverage of pension funds. retirement and savings.
But Brady recently told Roll Call, a Capitol Hill post that Republicans “reconsider our support” for SECURE 2.0.
In his remarks to the IRI conference, Neal expressed confidence that the entire House would approve the bill by the end of the year.
“I am very optimistic that SECURE 2.0 will cross the finish line very soon,” said Neal.
But then he would have to navigate the Senate, which is split evenly between Republicans and Democrats. The chief tax-writing senator is also pushing retirement savings ideas that Republicans are likely to oppose.
Senate Finance Chairman Ron Wyden, D-Oregon, praised the House Ways and Means Reconciliation Bill for including provisions to limit IRA accounts that exceed $ 10 million.
“It’s important now to master tax planning strategies for those who – you could call them almost the wealthiest – who take advantage of the tax benefits for retirement savings to create what is truly a huge treasure chest,” he said. Wyden said at the press conference. IRI Conference.
Cutting large IRAs down to size is probably not on the Republicans’ agenda. The best chance for this idea to gain congressional approval is through a reconciliation process with only Democratic votes.
The question now is whether partisan battles over reconciliation will stop SECURE 2.0. The Insured Retirement Institute supports both the Neal auto-IRA and SECURE 2.0 legislation, saying they complement each other to increase retirement savings. The bills also include provisions to promote annuities in pension plans, a priority of the IRI.
“Bipartyism still prevails over most retirement security issues,” said Paul Richman, IRI director of government and policy affairs.
He acknowledged that there may be policies Democrats and Republicans disagree on, but these differences will not set SECURE 2.0 back. He said the insurance industry supports Neal’s self-IRA effort.
“We hope that Mr. Neal’s Republican colleagues would see the benefit that could be provided to many more low and middle[income] workers to have access to retirement savings during their working years, ”Richman said.
Republicans are unlikely to change their mind about the auto-IRA provision. But when the deeply partisan reconciliation process comes to an end, both sides can seek a comprehensive victory and return to SECURE 2.0 together.