Bipartisan Retirement Bill Introduced in Senate

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Senators Orrin Hatch (R-UT) and Ron Wyden (D-OR), respectively the Chair and Ranking Minority Member of the Senate Finance Committee, re-introduced the Retirement Enhancement and Savings Act (RESA) of 2018 on March 9.  The bill is an updated version of legislation that was unanimously reported by the Senate Finance Committee during the last Congress, in 2016.

Some highlights from the bill, as introduced, are as follows:

  • Multiple Employer Defined Contribution Plans (MEPs): The bill would eliminate certain regulatory barriers to using MEPs and include reforms intended to improve the quality of MEP service providers.  The goal is to help small employers leverage MEPs to improve investment results and obtain less expensive investment management and other plan administrative services.
  • Eliminate Auto Enrollment Safe Harbor Cap: The bill would eliminate the 10% cap on automatic escalations of employee deferrals under an auto enrollment safe harbor plan.
  • Simplify 401(k) Nonelective Contribution Safe Harbor: The bill would eliminate the safe harbor notice requirement, but still allow employees to make or change an election at least once per year.  Amendments to nonelective status also would be permitted any time during the first 11 months of the plan year, and after the 11th month if certain requirements are satisfied.
  • Prohibit Plan Loan Distributions Through Credit Cards: The bill would prohibit plans from distributing plan loans through credit cards or similar arrangements, except under existing arrangements available before September 21, 2016.  Grandfathered arrangements would be subject to new restrictions, including forbidding transactions of $1,000 or less and transactions of any amount at liquor stores, casinos, gaming establishments, or adult-entertainment establishments.
  • Make Lifetime Income Options Portable: Qualified defined contribution plans, including 403(b) plans and governmental 457 plans, would be permitted to make direct trustee-to-trustee transfers of lifetime income investments (or distributions of a lifetime income investment in the form of a qualified plan distribution annuity) to another qualified plan or IRA if the lifetime income investment option is no longer permitted under the plan’s terms.
  • Combined Annual Reports: Employers sponsoring similar defined contribution plans would be permitted to file a consolidated Form 5500 if certain requirements are satisfied.  Specifically, the plans would need to have the same trustee, named fiduciary, and same administrator; the plans also would need to use the same plan year and provide the same investments or investment options.
  • Lifetime Income Disclosures: Defined contribution plan benefit statements would need to include a lifetime income disclosure at least once during any 12-month period.  The disclosure apparently would be required even if the plan does not offer a lifetime income option.
  • Lifetime Income Provider Fiduciary Safe Harbor: The bill would create an optional fiduciary safe harbor for selecting lifetime income providers.  Under the safe harbor, fiduciaries would be protected from losses that may result from an annuity provider becoming unable to satisfy its financial obligations in the future.
  • Nondiscrimination Rules for Certain Closed Plans: The bill would modify the nondiscrimination rules for certain closed plans to permit existing participants to continue accruing benefits.
  • Increased Penalties for Failing to File Form 5500: The bill would increase the penalty for failing to file a Form 5500 to $100 per day, up to $50,000.

Given Senators Hatch and Wyden control the Finance Committee’s agenda it seems likely that Committee will take up and favorably report the bill this year.  But whether it will be taken up by the full Senate and/or the House remains very much an open question.

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