Expect Secure 3.0 and a Major Tax Bill Next Year

News November 22, 2024 at 02:11 PM
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What You Need To Know

  • A tax bill will likely be fast-tracked since Republicans control the White House and Congress, former Labor official Preston Rutledge says.
  • Expect a clamor for revenue-raisers to offset the $4.5 trillion renewal of the 2017 tax cuts.
  • Efforts to derail the DOL fiduciary rule will likely not be part of the budget process.
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A double whammy is on its way: a major tax bill and another big retirement bill — Secure 3.0, a former Labor Department official says.

The tax legislation — which will be part of the budget bill — will be fast-tracked in 2025 via reconciliation because the Republicans control the White House, Senate and House, Rutledge, a former head of Labor’s Employee Benefits Security Administration, said on a recent webcast.

Reconciliation limits amendments and eliminates the filibuster, allowing a bill to pass the Senate with a simple majority vote. It is allowed when legislation affects only the budget.

This type of bill has several qualifiers, Rutledge explained: The bill raises or cuts taxes or it increases or decreases federal spending.

Next year, there will be “an even more intense need for pay-fors because in order to extend the individual tax rates that are expiring at the end of 2025, and keep them the way they’ve been since 2017, the scorers in Congress have said that will cost $4.5 trillion,” said Rutledge, who now leads a government affairs consultancy.

By contrast, the 2017 tax law passed without pay-fors and cost $1.5 trillion.

The estimated $4.5 trillion doesn’t account for the tax cuts — including eliminating taxes on tips and overtime pay — that President-elect Donald Trump spoke about on the campaign trail, Rutledge said during the webcast, which was hosted by the Worldwide Employee Benefits Network.

“Rough estimates are at least another $3 or $4 trillion,” he added.

Congress "will be ravenous for revenue," agreed Mark Iwry, the former head of national retirement policy during the Obama-Biden administration, who's now a nonresident senior fellow at the Brookings Institution in Washington.

"In fact, the kinds of tax cuts some are hoping for could well exceed even the roughly $4.5 trillion price tag for reupping the 2017 cuts," Iwry said in an email. "Expect renewed interest outside the retirement community in more extensive Rothification. It remains to be seen whether the incoming President will tweet that idea dead in its tracks as he did when House Republicans considered it in 2017.”

Secure 3.0 Taking Shape

A Secure 3.0 package is “beginning to form,” Rutledge said. “That plays into the calculus of how hard the retirement industry will fight off, [or] try to fight off, using retirement pay-fors for the tax bill that will have to be paid for next year.”

Sens. Tim Kaine, D-Va., and Bill Cassidy, R-La., are a bipartisan pair who are beginning to introduce retirement related bills that could become part of a Secure 3.0 package.

This includes the Helping Young Americans Save for Retirement Act, which would lower the age for participating in a retirement plan to 18.

"Many plan sponsors and their providers and advisors are still digesting Secure 2.0, and aren’t especially keen on having to process another round of retirement changes too soon," Iwry added.


"At the same time, others among us in the retirement community have developed drafts of various improvements to the system that could be proposed for Congress to consider as part of a bipartisan retirement package riding on a 2025 tax bill,” Iwry said.


The Setting Every Community Up for Retirement Enhancement Act and the Secure 2.0 Act were included in spending bills and started with “individual members of Congress introducing bipartisan bills to amend pension policy,” Rutledge said.

Efforts to derail the Labor Department’s 2024 fiduciary rule will not be part of a budget bill, Rutledge said. “The ball game right now with [the] fiduciary [rule] are the court cases.”

When the Trump administration takes over in January it "will probably not do anything about the Retirement Security Rule immediately because it’s tied up in court right now; they will wait to see if the rule is vacated," Rutledge said.

"If the rule is not vacated, there may be another process of tweaking it again and we might go back to the long saga of fiduciary rulemaking again."

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