Washington Update: 2014 Midterms

Transcription

1 Washington Update: 2014 Midterms Brian Graff Executive Director, ASPPA Jim Dornan Political Director, ASPPA 2014 Election Overview 1

2 House Leadership 114 th Republican Majority: (16 Races Outstanding) 113 th Republican Majority: (3 Vacancies: Cantor, Andrews, Watt) Republicans retain control of the House and growing their majority to its largest level in nearly 100 years. Republicans gained a net 13 seats in the House, with more pick-ups possibly on the way, as 16 races remain uncalled. The GOP currently controls 243 seats in the House, compared to 176 for the Democrats. House Leadership Speaker Boehner remains Speaker Rep. Kevin McCarthy remains Leader Rep. Steve Scalise remains Majority Whip 2

3 House Committee Chairs House Ways and Means Paul Ryan House Education and Workforce John Kline House Financial Services Jeb Hensarling (although he is expected to be challenged.) Senate Republicans regained control of the Senate for the first time since th Republican Majority: (2 Independents: King, Sanders) (3 Races Outstanding: Alaska, Louisiana, Virginia) 113 th Democratic Majority: (2 Independents: King, Sanders): GOP wrestled control of Senate seats from the Democrats in Arkansas, Colorado, Iowa, Montana, North Carolina, South Dakota and West Virginia. Republicans also maintained control in Georgia and Kentucky, giving them at least a seven-seat advantage in the upper chamber. Senate races in Alaska and Virginia are still too close to call, while Democrats held Michigan, New Hampshire, and the other seats they had up. LA SEN: Sen. Mary Landrieu (D) and Rep. Bill Cassidy (R) are headed for a Dec. 6 runoff election. 3

4 Senate Leadership Senator Mitch McConnell, Majority Leader Senator John Cornyn, Majority Whip The Senate will see a major reshuffling of power and legislative agendas with current Democratic committee chairmen becoming ranking members and current Republican ranking members becoming chairmen. By and large, the Senate follows seniority rules for chairmanships. Because of outstanding elections in Louisiana and Virginia, we do not expect committee ratios to be decided for some time. Senate Committee Chairs Senate HELP (Health, Education, Labor, and Pension) Senator Lamar Alexander Senate Finance Committee Senator Orrin Hatch Senate Banking Committee Senator Mike Crapo 4

5 Looking Forward. Senate Seats up in 2016 Vox.com November, 6,

6 Governors Races GOP won Democratic-held seats in Arkansas, Illinois, Maryland and Massachusetts Democrats picked up a seat in Pennsylvania Contests in Alaska are still too close to call What Election Results Mean for Us 6

7 Tax Reform Tax Reform high on the GOP Congressional agenda Very LIMITED window of time to pass reform: It would have to be done in early 2015, before the 2016 Election year and presidential campaigning starts Many GOP legislators, both conservative and moderate are calling for it But tax reform means different things to different people Tax Reform: House Paul Ryan, Chair Ways and Means (Committee of jurisdiction for federal tax reform) has already been preparing way for tax reform in 2015 with a focus on: Lowering the baseline for tax revenues Implementing dynamic scoring for tax legislation. Typically tax reform in history has been led by presidents, 86 is a perfect example, he said, referring to the 1986 tax overhaul achieved by President Reagan and a Democratic-led House. That won t be the case this time if we get it in the next two years. It will have to be led by Congress, and we ll see what we can get. 7

8 Tax Reform: House Other House GOP and Leadership ready for federal tax reform Speaker Boehner listed tax reform as top legislative priority for 2015 Tax Reform: Senate...We re going to want to see what kind of things we might be able to agree on with the President I ll give you a couple of examples where there may be areas of agreement: comprehensive tax reform and trade agreements. Senator Mitch McConnell, November 3, 2014 The president has indicated he s interested in doing tax reform we all know that having the highest corporate tax rate in the industrialized world is a job killer. He s interested in that issue and we are too. Senator Mitch McConnell yesterday at a news conference in Kentucky 8

9 Tax Reform: Senate Senator Orrin Hatch on his work for federal tax reform has sponsored S. 1270, the SAFE Retirement Act of 2014, Title II of which adopts ASPPA proposals In September 2014: One of the major goals of comprehensive reform should be to fundamentally change this system and anything we do in the interim should move us further down that path. Other Leaders on Tax Reform Sen. Rob Portman called on Congress to pass comprehensive tax reform to boost the economy. Our onerous and outdated tax code continues to force businesses to leave the U.S., taking American jobs with them. We can and must reform our tax code again so that we keep businesses and jobs here at home and provide relief to all Americans. He also said: We can t wait for the next president. We can t wait for the next Congress. We need to act and act now. Sen. Rand Paul: Tax reform should lead GOP s 2015 priorities in a Republican-led Senate. We could have a boom like we haven't seen in years," Paul said on CBS's Face the Nation this week that he would urge Sen. Mitch McConnell to take up tax reform in January. "The longer you wait after an election, the less your mandate is. And it takes a while for things to work," he said. Chairman Darrell Issa: America s tax code is broken. The federal tax system is too intrusive, complicated and sometimes counterproductive. We must work to simplify it to reduce the tax burden, ease the cost of compliance, and create a more competitive tax structure so that our small businesses can invest and hire again. 9

10 Voters Support Tax Reform Republican polling firm Public Opinion Strategies is out with a poll this week showing that Americans can agree on tax reform: The tax code is a mess and needs fixing and both parties should work together to get it done. Among the findings: 95 percent said Republicans and Democrats need to work together to update the tax code. 93 percent said the tax code needs to be updated to help families and businesses. Republicans and Democrats alike agree that simplifying the tax code would spur economic growth. Vehicle for 2015 Tax Reform Bipartisan bill that the President would sign or GOP goes in %100 on a bill and force President Obama to veto Reconciliation 10

11 Threats and Opportunities from Tax Reform Tax Reform Threats: Camp s Draft Double taxation on retirement savings: Small business owners could pay a new 10% surtax on all contributions made to a qualified retirement plan today, then pay tax again at the full ordinary income tax rate when they retire. Freeze contribution limits at the current rate (not even allowing indexing for inflation) for 10 years, until

12 Tax Reform Threats: Camp s Draft The problem with these tax reform proposals is that they are now a marker for future tax or spending proposals, as they have been scored by the Joint Committee on Taxation to give back over $63 billion to the Treasury, if enacted. They also completely ignore the fact that retirement contributions are already taxed deferred, and subject to ordinary income tax when they are withdrawn after retirement. Opportunities for Tax Reform 12

13 Hatch SAFE Retirement Act S1270 Title I Public plan reforms Structure for purchase of individual annuity contracts to replace traditional DB plans Title II Private plan reforms Title III Fiduciary rule jurisdiction Give IRS jurisdiction over investment advice related to IRAs SAFE Retirement Act 1) Starter 401k safe harbor Elective deferrals only $8,000 limit (plus catch up) No other qualified plan during the plan year of initial adoption. Mandatory auto enrollment of between 3%- 15%. No Form 5500 required. 13

14 SAFE Retirement Act 2) Multiple employer plans Open MEPS permitted One bad apple rule eliminated for MEPS with commonality or open MEPS with a designated plan provider who registers with the IRS and consents to IRS audits; and is designated under the plan as the person responsible to perform the necessary administrative duties (as determined by IRS regulations) SAFE Retirement Act 3) E-delivery default permitted for all required disclosures 4) More effective benchmarking of TDFs DOL to permit the use of a blended benchmark for DIAs that use a mix of asset classes in comparative investment chart. 14

15 SAFE Retirement Act 5) Secure Deferral Arrangement - 401(k) automatic enrollment safe harbor alternative. Auto enroll at 6%-10%, rise to at least 8% in the second year and at least 10% thereafter. NHCE matching contributions equal to 50% on the first 2% of pay plus 30% match on deferrals between 2% and 10% of pay (for a maximum of 3.4%). Exempt from top-heavy and ADP/ACP testing. Tax credit equal to 10% of the NHCEs contributions, to a max of $10,000 per year for the first 3 years Legislative Landscape Due to the looming presidential election in 2016, the window for impactful legislation during the upcoming Congress is incredibly small. But there will be legislative vehicles that could be used to enact pension reform, in the absence of comprehensive tax reform. The expiration of the multi-employer pension funding rules could provide an opportunity to enact broader pension reforms. Renewing the over 100 various expired tax provisions in the tax code, dubbed tax extenders, could be another opportunity to make retirement policy changes. 15

16 Definition of Fiduciary workers contemplating investing through an IRA (401k) should be able to trust their advisers and rely on the impartiality of their investment advice. - Phyllis Borzi Phyllis Borzi, Department of Labor Assistant Secretary for Employee Benefits Security Definition of Fiduciary - Where Things Stand In May 2014, the Department of Labor updated its regulatory agenda to postpone the expected release of its fiduciary rule re-proposal from August 2014 to January In the past few months, White House staff have led an outreach effort to meet with all the stakeholders impacted by the proposal as the Obama Administration tries to figure out what to do in this area, if anything. During these meetings with industry, the Obama Administration has indicated that a rule is not imminent and that they are working to get more information from industry in order to develop appropriate prohibited transaction exemptions (PTEs). The Obama Administration remains concerned about rollover advice and any reproposed will likely focus on that issue. Should the Obama Administration proceed with a re-proposal that industry opposes there are opportunities to prevent the implementation of the rule through the appropriations process in a Republican controlled Congress. 16

17 The Impact of the Election on State Initiatives The Impact of the Election on State Initiatives There have been shifts in executive power in three key states that have or are considering state-run retirement plans: Illinois, Maryland and Massachusetts. In Illinois, the Republican challenger ousted the Democratic incumbent for Governor. This will likely deter the Illinois State House from considering State Senator Biss s bill, the Illinois Secure Choice Savings Program Act, in the current legislative session, which ends this year. In Maryland, the Republican challenger ousted the Democratic incumbent for Governor. The current Governor signed an executive order that created a Maryland Retirement Security Task Force. That task force will now expire at the end of the current Governor s term early next year. Massachusetts enacted legislation in 2012 that created a state-run defined contribution plan for small non-profit employers. The plan is currently awaiting approval from the IRS and is not yet in operation. 17

18 ASPPA PAC Questions? 18