National Association of Plan Advisors (NAPA) parent the American Retirement Association (ARA) is among a broad coalition of trade groups calling on the Senate to quickly approve the Setting Every Community Up for Retirement (SECURE) Act.
The ARA and 21 other organizations signed a June 17 letter sent to each member of the Senate, stating “now is the time to pass this comprehensive bill that will help the families of veterans, small businesses, retirement plan sponsors, cooperatives, religious organizations and workers.”
After the House sent the retirement reform-centered SECURE Act to the Senate with an overwhelming 417-3 bipartisan vote on May 23, there was hope it would be fast-tracked through the Senate via unanimous consent.
That didn’t happen, as some Senators including Ted Cruz put “holds” on the bill that prevent it from coming up for a vote on the Senate floor due to concerns over specific provisions either in the bill or removed from it at the last minute before the House vote.
While Cruz’s concern lies in the removal of the bill’s 529 plan provisions that would have expanded the use of 529 funds to pay for things like home schooling and therapy for children with disabilities, others have expressed concern over a provision involving a reduction in the amounts some community newspapers would need to fund their retirement programs.
There are some other minor concerns, including over one provision that would reverse a Trump tax law provision that imposed unexpected taxes on military families receiving survivors’ benefits, and another regarding lower payment burdens for charities and cooperatives, which somehow provides a “special interest” perk to the Boy Scouts of America.
Annuity provisions still a factor
You might think these relatively minor issues could be resolved and wouldn’t be enough to stall a bill with such unusually strong bipartisan support in the House, but other factors may well be at play.
There is speculation that the minor sticking points are serving as a temporary roadblock to passage while some Senators take a closer look at one of the SECURE Act’s major provisions which would encourage the use of annuities within 401k plans.
Section 204 of Act offers 401k plan sponsors a safe harbor from litigation if they give employees the choice of an annuity from a provider that ends up going out of business or defrauding workers. The lack of a safe harbor is the primary reason annuities aren’t offered in 401(k) plans currently.
The Consumer Federation of America’s Micah Hauptman is quoted in a June 28 article on Barron’s as saying that the legislation’s language is too broad and may allow for the inclusion of high-cost annuities.
“The provision doesn’t apply to a narrow segment of annuities. It applies to all annuities. Some are consumer friendly, but there are other types that are complex with high costs and are not in the consumer’s best interest,” Hauptman said.
Barron’s notes that CFA, along with the Center for Economic Justice, sent a letter to the Senate seeking to change some of the annuity provision language. It includes recommendations to revise the definition to include only “simple fixed annuities’’ and not variable and fixed indexed annuities, and adding a requirement for employers to review insurers’ financial strength ratings.
Meanwhile, annuity advocates are well-represented among the 22 organizations in the coalition that sent the June 18 letter to all members of the Senate urging passage of the SECURE Act as presented.
About a third of them, including the Insured Retirement Institute (IRI), the National Association for Fixed Annuities and the Committee of Annuity Insurers, are from insurance and annuity industry advocacy groups.
Paul Richman, chief government and political affairs officer at IRI, told CNBC recently that the organization is talking to all Senators about trying to advance the legislation while the National Association of Insurance and Financial Advisors (NAIFA), another one of the signers on the letter, has recently set up a grassroots effort in Texas to try to sway Cruz to let the bill come up for a vote.
“There isn’t really a process right now for the Senate to pick up their whole package and do some sort of reconciliation,” said Judi Carsrud, NAIFA’s assistant vice president of government relations. “So I think it is the SECURE bill, the way it has passed the House, or nothing.”
For his part, Cruz has remained publicly silent on his “hold” with the exception of a brief statement to CNBC from a Cruz spokesperson:
“The retirement bill that unanimously passed in the House Ways and Means Committee included the expanded 529 savings plan package. Unfortunately, at the behest of special interest groups, Speaker Pelosi removed the 529 expansion from the bill before sending it to the Senate. Senator Cruz believes we should add it back in and pass a retirement bill that includes both the Gold Star tax fix and the 529 expansion.”
Members of the coalition remain hopeful the SECURE Act will pass the Senate before Congress breaks for its August recess.
“We appreciate your commitment to enhancing the retirement security system, and we urge you not to miss this opportunity to pass legislation that would provide retirement security to millions of Americans and honor our nation’s heroes,” the coalition letter concludes.