Senator Orrin Hatch, R-Utah, incoming chairman of the Senate Finance Committee, said Monday that he plans to reintroduce in 2015 his Secure Annuities for Employee Retirement (SAFE) Act, which includes language that would stop the Department of Labor from writing fiduciary rules for individual retirement accounts.
“We shouldn’t have DOL writing these sort of things,” Hatch told reporters after his comments at an event held Monday in Washington by the Financial Services Roundtable, when asked about DOL’s planned re-release of its rule to amend the definition of fiduciary under the Employee Retirement Income Security Act.
Hatch’s SAFE Act prevents DOL from “over-regulating IRA investment advice,” and would restore jurisdiction for IRA prohibited transaction rules to the Treasury Department and also requires Treasury to consult with the Securities and Exchange Commission in prescribing rules relating to the professional standards of care owed by brokers and investment advisors to IRA owners.
The Act also restores “joint jurisdiction” for transaction rules that are prohibited by retirement plans to Treasury and DOL.
Hatch said that the likelihood of the SAFE Act’s passage in 2015—which he said is bipartisan legislation–is “pretty good,” and that he’d likely reintroduce the SAFE Act early in Congress’ new session.
An updated regulatory notice posted on the Office of Management and Budget’s website recently states that DOL plans to release in January a redraft of its rule to amend the definition of fiduciary under ERISA.
The Senate Finance Committee’s other priorities next year, Hatch told attendees at the FSR event titled, “Retiring Around the Globe: How the U.S. Compares with the Rest of the World,” includes updating the nation’s trade policies, which Hatch said would “take up much” of the committee’s agenda, as well as tax reform.
Hatch said that as Congress undertakes tax reform next year, such reform should include principals such as economic growth, fairness and simplicity, as well as permanence. “We need a tax system that no longer threatens to change from year to year,” Hatch said. “Tax reform is no longer optional,” he said. “It’s essential if we’re going to get our economy going again.”
The U.S. also needs “competitiveness” in its tax code, as the U.S. has the highest corporate tax rates. “Tax reform should reduce the high tax rates on businesses, … placing U.S. companies on a level playing field” with their international competitors, Hatch said.
“You wonder why you have [corporate] inversions?” Hatch asked. “Hey, it’s not their fault they leave. It’s our stupid tax laws. I can’t blame any company that wants to do the best for their shareholders if they have to move.” The best way to stop inversions, he continued, is corporate tax reform.
While the private retirement system, which includes 401(k) plans and IRAs, has been the “greatest wealth creator” for the middle class, the “bad news,” Hatch said, is that the retirement of baby boomers is putting “enormous pressure” on public programs like Social Security and Medicare, and some lawmakers on Capitol Hill are trying to find revenue to pay for increased spending in these areas and have proposed lowering the amounts that can be contributed to 401(k)s and IRAs. “That is, in my view, shortsighted, foolish and downright stupid,” Hatch told FSR attendees. “Congress has already examined this issue and is decidedly against contribution reductions.”
In 2015, Hatch said, “we can, and in my opinion we should, go on offense” in terms of retirement policy. “Toward that end, we must encourage employers who don’t offer [an employer plan] to set them up.” He said his Starter 401(k)s, which is part of the SAFE Act, is a “new kind” of retirement savings plan that allows employers to have a plan without the big contribution limits and doesn’t come with burdens and expenses of other plans. The plan, he said, allows participants to contribute $8,000 to $10,000 per year, “a bit less” than what’s allowed under traditional 401(k) but more than what’s allowed under an IRA.
As to the provision in the CROmnibus spending bill regarding multi-employer pension plans that was passed by the Senate on Saturday, Hatch said the provision giving pension plan trustees the power, in “extreme cases,” to cut earned pensions to mitigate plan insolvency and larger cuts later, “is a wake-up call” and a “sobering moment” for the pension plan community.