U.S. Senator Rob Portman (R-OH) urged his colleagues to take action on a trio of stalled retirement-focused bills during remarks on the Senate floor on Wednesday evening, remarks that hopefully didn’t fall on deaf ears as the House’s impeachment inquiry took center stage in Washington this week.
Portman pointed out the urgency of acting on one bill in particular—his Retirement Security Preservation Act (RSPA)—which would reform pension nondiscrimination laws to prevent more than 450,000 Americans from having their pensions frozen at the end of the year.
That bill is included in the House-passed SECURE Act, for which Portman also voiced his support and pushed for Senate approval.
“There is a small provision I want to mention tonight that has been introduced separately, also is in the SECURE Act that is an urgent thing to pass because there are a bunch of people that are going to lose their retirement benefits unless we pass it very soon,” Portman said, referring to the RSPA.
The affected group are (typically older) people in pension plans working for businesses that have shifted from a DB plan to a DC plan like a 401k. “Now what happened in some of these businesses is they said, ‘But if you’re already in a defined benefit plan, you can stay in it. We’re going to freeze your plan going forward, so new employees can’t go into it, but you can stay in your plan.’ And I think that’s fair. Let people who are in the plan, who paid in all these years continue to stay in that defined benefit plan as they retire,” Portman said.
The problem is that rules with regard to pensions are tripping this group up because of nondiscrimination income testing, which could force them to lose their benefits if the rules are not reformed via action such as the RSPA.
“They can’t continue to accrue benefits. That’s just wrong,” Portman said. “These are people who have played by the rules, done everything right, through no fault of their own, but through this quirky regulation, which was never meant to address this kind of an issue, they’re facing the very real possibility… that they’re going to lose their benefits.”
Portman pointed out that there is bipartisan agreement that this should be fixed, and reiterated that the RSPA was introduced separately in addition to being part of the SECURE Act to underscore the urgency.
SECURE Act still ‘held’ up
Speaking of the SECURE Act, stalled by a few “holds” in the Senate since being approved 417-3 in the House back in May, Portman made an appeal for it to be voted on as well, even if it requires some amendments rather than being passed by unanimous consent.
“I support bringing it up and passing it,” Portman said. “I do think that we ought to allow a couple amendments on each side because this SECURE Act that passed the House has not been voted on on this floor before.”
He noted that to date, the Senate hasn’t debated or deliberated on provisions of the SECURE Act, even though essentially the same thing came out of committee back in 2016.
“Why not allow a few amendments on it on each side? Democrats probably have a few amendments they’d like to offer. Republicans probably have a few they’d like to offer. But the point is, let’s get that bill up and get it passed,” Portman said, after alluding to its overwhelming bipartisan support in the House.
With no recent movement and the Senate adjourning Sept. 30 for a two-week work period, it looks like the SECURE Act will not end up getting attached to the must-pass appropriations bills that fund the federal government for fiscal year 2020 which starts Oct. 1, as it appears Congress will instead approve a “clean” short-term funding bill without attaching any ride-along legislation.
It appears unlikely the SECURE Act will be brought to the floor this fall by Senate Majority Leader Mitch McConnell (R-KY), who has said he will not do so unless all the “holds” have been lifted.
That leaves one other option in that the SECURE Act could find its way onto another spending bill facing Congress as the year draws to a close to continue funding the government in 2020.
Portman on RSSA
Portman spent most of his time on the Senate floor Sept. 25 talking about a “larger bill that does more than the SECURE Act,” introduced May 14 by Portman and Senator Ben Cardin (D-MD), referring to the Retirement Security & Savings Act.
That retirement bill, still in committee, includes a broad set of reforms—57 specific provisions—designed to help more Americans save for their retirement, including raising the age for required minimum distributions to age 72 in 2023 and to age 75 by 2030.
It also focuses on expanding the availability of 401k plans to employees of small businesses and part-time employees, something Portman said is “incredibly important right now” to the people he represents.
He said less than half of employees of businesses with less than 50 workers have access to a retirement plan, only 22% of part-time workers are in plans, and added that only 22% of low-income families are participating in retirement plans. He also mentioned the problem of people outliving their retirement savings before noting that the provisions in the RSSA addresses all of the aforementioned issues.
“Our new Portman-Cardin retirement legislation has the potential to fundamentally reshape for the better how a large number of American folks approach their retirement planning,” Portman said. “That’s a good thing, and I look forward to getting it passed through the Finance Committee and sent to this Senate floor for a vote.”
Key RSSA provisions
Here are a few excerpts directly from Portman’s comments on some of the key RSSA provisions:
- “First, to increase this low 22% coverage among low-income workers, it expands what’s called the Savers Credit… so it’s more usable and we make it refundable not to individuals but to a retirement account… In addition it increases the credit amount available to a lot of low-income savers.”
- “The bill also addresses the problem of only 22% of part-time workers being in a plan. It requires employers to allow part-time workers who have completed two years of service to participate in a 401k plan.”
- “It allows employers to make matching contributions to the 401k accounts of employees who are paying off student loans who otherwise wouldn’t receive a full match. Why? Because they have to choose between paying down the student loan debt they’ve got and saving for retirement… I think this will really help with people who are coming into the work force. They’ve got the student loans so they’ve got to pay off that debt. They can’t afford to put money against 401ks. This enables them to put that money into the match and help them to be able to get started on retirement.”
- “To get at this problem we talked about a few small businesses having plans, Portman-Cardin increases the tax credit that small businesses receive for starting a retirement plan. It’s $500 now. We take it up to $5,000, a tenfold increase that would really help small businesses… It also provides an innovative tax credit idea. Small businesses will get a tax credit who automatically enroll their employees into plans at least every three years… If you have auto enrollment in your company, your participation rate goes up to 95% from about 75%… [Employees] like it and stick with it… If at least every three years you have to automatically enroll your employees, what happens? You get people into these plans and they stay in these plans.”
- “For small businesses, our bill also reduces some of the burdensome and duplicative regulations that are associated with administering the plan.”
- “To help folks who have accumulated retirement savings preserve those nest eggs, the bill actually changes… the minimum distribution rules… We changed that from 70 and a half to 75. We do it over a few years because it is an expensive provision frankly in this bill. We pay for it through other means. But the idea is, you want to let people keep that money in their nest egg. And by the way, if your nest egg is $100,000 or less, there’s no minimum required distribution anymore under our bill.”
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
