As the new year approaches, advisors are bracing for a passel of new rules and laws coming out of Washington — namely the Securities and Exchange Commission’s Regulation Best Interest, an anticipated modern version of the SEC’s advertising rule as well as potentially new sweeping retirement-related tax policies emanating from the Setting Every Community Up for Retirement Enhancement (Secure) Act.
The Secure Act, which passed the House earlier this year, was volleyed about the Senate floor in November as the deadline to fund the government loomed.
Senate Majority Leader Mitch McConnell, R-Ky., failed twice in mid-November to get senators to pass the Secure Act under a unanimous consent (UC) vote.
Sen. Rob Portman, D-Ohio, said on the Senate floor in early November that “a live UC was tried. It was an attempt to get a vote on the Secure Act,” adding that he supported the five amendments offered by Republicans.
For the past five and a half months, Portman continued, “some of us have been trying to get this legislation done, and there have been concerns on both sides of the aisle. But we’re at a point now where we know, having raised this live UC, that we continue to have this stalemate. And after five and a half months, it’s time for us to move forward on these reforms.”
Industry officials and lobbyists have anticipated that a continuing resolution — as opposed to an omnibus spending bill — would be passed to fund the government until Dec. 20, and that Secure would not be attached to a CR.
There’s “bipartisan, bicameral support for attaching Secure” to a must-pass bill, specifically a spending bill, but Congress “is more likely to go with a continuing resolution” to fund the government through the end of the year, said Judi Carsrud, NAIFA’s assistant vice president for government relations.
The CR “is far less likely to have any attachments, because Congress likes ‘clean’ CRs to avoid the politics of which bills it could or should attach,” Carsrud says.
There’s likely “a little less than 50/50” chance that Secure Act passes this year, Brad Campbell, former head of the Labor Department’s Employee Benefits Security Administration, said on a recent call. Passage is “certainly a possibility, and it’s something there’s a lot of people working to try to get the Senate to make some forward progress on.”
If the Secure Act is going to get passed, “it probably needs to happen this year,” said Campbell, who’s now a partner at Drinker Biddle in Washington, given that “next year becomes more and more about the [presidential] election and that kind of fighting.” But whatever happens, the bill’s “concepts … have gotten bipartisan approval, so they’re going to hang around,” Campbell opined.
The bill’s package of retirement-related tax provisions increases the auto-escalations safe harbor to 15%, changes the required minimum distribution age to 72, gets rid of the age limit for contributions to IRAs, and puts in place a safe harbor for selecting an annuity provider for workplace retirement plans.
A couple of Secure Act provisions “have raised some eyebrows,” according to Campbell, including one that says that employees who work 500 or more hours for a company in three consecutive years are eligible to join its retirement plan. “That’s raised some questions about compliance and other issues.”
If there’s another tax bill next year, and “if there is another opportunity after the presidential election and the next congressional election and the next Congress, we’ll see these ideas [in Secure] stay and some of them will make it through; the question is what’s the vehicle and what’s the timing?” he added.
Will Reg BI Compliance Date Stick?
Meanwhile, attorneys prognosticated in late October whether Regulation Best Interest’s June 30, 2020, compliance date would actually kick in, given the lawsuits lobbed against the agency’s controversial rule this year.
The recent lawsuits filed against the Reg BI by seven states are “more political posturings” than “credible, legal maneuvers” and are unlikely to succeed, Campbell said on Drinker Biddle’s Inside the Beltway webcast.