Washington Update NAGDCA Annual Conference September 19, 2016

Transcription

1 Washington Update NAGDCA Annual Conference September 19, National Retirement Security Week 2015 Senate Resolution 263 passed in the Senate September 22, 2015 Co-sponsored by Senators Cardin (D-MD) and Enzi (R-WY) Members, Senate Committee on Finance House Resolution 488 introduced October 22, 2015 Co-sponsored by Representatives Polis (D-CO), Roe (R-TN), Wilson (D-FL), Stefanik (R-NY) House rules do not allow passage of commemorative resolutions 2 1

2 National Retirement Security Week October 16-22, 2016 Senators Cardin and Enzi will reintroduce the Resolution Likely in September 3 National Retirement Security Week October 16-22, 2016 There is now a focus on retirement security and decumulation Effectively and sustainably withdrawing one s retirement resources throughout the retirement years of an individual is as important and crucial as savings and accumulating funds for retirement 4 2

3 2016 Legislative Priorities National Retirement Security Week Maintain preferred tax treatment of retirement savings Exempting Roth assets from RMD requirements Lowering costs and improving retirement outcomes Legislative Priorities Allow rollovers from Roth IRAs to governmental DC plans Eliminate the First Day of the Month requirement Increase Eligibility for Low Income Savers Tax Credit 6 3

4 Federal Budget (FFY 2017) Administration s budget released on February 9, 2016 The Administration did not include any major comprehensive tax reform proposals 7 President s FY 2017 Budget (Retirement Related Provisions) Provide for automatic IRAs and give tax credits for creating them (meant for small businesses) Permit unaffiliated employers to maintain a single multiple employer defined contribution plan Simplify RMD rules Treat Roth IRAs like other retirement plans Exempt balances under $100,000 from RMD 8 4

5 President s FY 2017 Budget (Retirement Related Provisions) Expand penalty free withdrawals for long term unemployed Require retirement plans to allow long term, part time workers to participate Make annuities more portable Allow inherited plans to be rolled over within 60 days Require non spouse beneficiaries of deceased IRA owners and Retirement plan participants to take inherited distributions over no more than five years 9 President s FY 2017 Budget (Retirement Related Provisions) Limit the total accrual of tax-favored retirement benefits to the amount necessary to provide the maximum annuity permitted for a tax-qualified defined benefit plan under current law (currently an annual benefit of $210,000) 10 5

6 Speaker Ryan (R-WI) tax proposals Not a lot about retirement provisions Discusses consolidation, but has not released any details of what that may be 11 Status: Federal Budget (FFY 2017) Neither the House or the Senate passed a budget resolution House Committee on the Budget reported a resolution in March Senate Committee on the Budget has not reported a budget resolution this year This resolution is non-binding, but provides a framework for moving forward 12 6

7 Status: Federal Budget (FFY 2017) No Appropriations bills have been passed for FY 2017 A number of bills have passed the House and Senate but none have been signed into law It is unlikely that anything will be enacted until after elections 13 Tax Reform Act of 2014 Introduced by former Chairman Dave Camp (R-MI) (Retired) Issues of interest to NAGDCA Coordination of contribution limitations for 403(b) plans and governmental 457(b) plans Deletion of 10-percent excise tax exemption for governmental 457 plans 14 7

8 Fiduciary and 457 Rule Update 15 Fiduciary Rule DOL published its final fiduciary rule for defined contribution retirement plans on April 6. The DOL asserts jurisdiction under ERISA and IRC sec State and local government DC plans are not bound by ERISA and the DOL rules. But, it can be expected that providers of investment services will likely treat participants in government plans similarly to those in the ERISA covered plans. Furthermore, many NAGDCA members follow ERISA guidelines. State and local 457 plans are not subject to IRC sec

9 Fiduciary Rule The SEC has indicated it will issue proposed fiduciary rules, but has not indicated a time frame. These rules would apply to state and local defined contribution plans. 17 Fiduciary Rule The rules impose fiduciary responsibilities upon brokers and dealers providing services to employees while funds are in covered employer sponsored defined contribution accounts, through the time funds are rolled over from the accounts into accounts covered by IRC sec. 4975, including individual IRAs. Require retirement investment services providers to put their client's best interest first, by expanding the types of retirement investment advice covered by fiduciary protections. Any individual receiving compensation for providing advice that is individualized or specifically directed to a particular plan sponsor (e.g., an employer with a retirement plan), plan participant, or IRA owner for consideration in making a retirement investment decision is a fiduciary. 18 9

10 Fiduciary Rule Such decisions can include, but are not limited to, what assets to purchase or sell and whether to roll over from an employer-based plan to an IRA. The fiduciary can be a broker, registered investment adviser, insurance agent, or other type of adviser. Being a fiduciary simply means that the adviser must provide impartial advice in their client's best interest and cannot accept any payments creating conflicts of interest unless they qualify for an exemption intended to assure that the customer is adequately protected. The "best interest contract exemption" will allow firms to continue to set their own compensation practices so long as they, among other things, commit to putting their client's best interest first and disclose any conflicts that may prevent them from doing so. 19 Fiduciary Rule When does the rule apply to transactions involving participants in government sponsored 457 and other deferred retirement savings plans? The rule clearly does not apply to advice when the funds remain in the government sponsored 457 plan. The rule does apply to advice that involves the rolling over or transfer of funds from a government sponsored plan to a tax deferred plan, e.g., IRA. The rules will apply to transactions once funds are in an IRA. It is very likely that the rule would not apply to advice when the funds are moved out of government sponsored plan to a non-covered investment

11 Fiduciary Rule To qualify for the new "best interest contract exemption," the company and individual adviser providing retirement investment advice must enter into a contract with its clients that: Commits the firm and adviser to providing advice in the client's best interest; Warrants that the firm has adopted policies and procedures designed to mitigate conflicts of interest; and Clearly and prominently discloses any conflicts of interest that might prevent the adviser from providing advice in the client's best interest. 21 Fiduciary Rule DOL believes the new rules will save employees saving for retirement and entering retirement significant amounts. The DOL contention is that in many cases employees and new retirees are advised to invest in expensive products that often yield those offering the products excessive compensation. Those opposed to the rules contend that they will limit the availability of advice for many employees and retirees because it will become financially impossible to provide advice and several products under the rules. The opponents contend that in order to assure evidence of acting as a proper fiduciary, organizations and individuals offering financial advice and products will be overwhelmed by record keeping and the ever present threat of legal action

12 Fiduciary Rule LEGISLATIVE ACTIVITY HR Affordable Retirement Advice Protection Act Roskam (R-IL), Roe (R-TN), Neal (D-MA), Larson (D-CT) Reported out of committee by Committees on Ways & Means and Education & Workforce related bill in Senate S 2502 HR Retail Investor Protection Act, Wagner (R-MO) Reported by the Committee on Education and Workforce Passed the House October 27, 2015 Similar bill introduced in Senate S Section 457 Rules On June 21, 2016, the IRS published proposed rules for 457 plans. The IRS indicated that these proposed regulations are essentially an update to incorporate new features for 457 plans that have been enacted since 2003, when the last major regulatory update was added to the Code of Federal Regulations

13 Section 457 Rules Not all of the provisions are directly relevant to government sponsored 457(b) plans. In fact, the proposed regulations for government sponsored 457(b) plans are modest and directly reflect statute and common understanding of the underlying statutory provisions. 25 Section 457 Rules The proposed regulations set forth straightforward rules on the operation of Roth 457 plans. The rules would assure that Roth funds are segregated from the other deferred funds. In fact, the rules specifically indicate there is no change in the first day of the month rule. The proposed rules describe that benefits should accrue to the survivor of a participant who dies while on military duty. Essentially, the death is treated as though the participant died while employed by the plan sponsor

14 Section 457 Rules There are provisions in the regulations related to deferred income programs other than sec. 457(b) plans The proposed rules describe when health insurance premiums for public safety employees will not be recognized as income. The proposed rules describe how severance and voluntary retirement payments, death benefits, disability pay and vacation and sick leave payments must be structured if they are to be considered part of a 457 plan. The proposed rules describe how deferred compensation is treated under 457(f) plans. 27 The Many Faces of Advocacy 28 14

15 Who, What, Where and How of Advocacy Who are you organizing? 1) Community Organizer Basic Tenet: develop leadership and facilitate those with knowledge to speak up and advocate 2) Community Planner Administrator, community wide, i.e. working with agencies to advocate for change 3) County and State Government State advocacy organizations 4) National Organizations Federal level Administration, Congress, working through national organizations i.e. NAGDCA, National Association of State Retirement Administrators (NASRA) 29 Who, What, Where and How of Advocacy Where? To whom is the message being given? Where is advocacy happening to effect change? Local government State government Federal government Organizations 30 15

16 Who, What, Where and How of Advocacy Development of Policy and Messages NAGDCA uses a committee structure Government Members Industry/peers Ensure the mix utilizes everyone s knowledge 31 Who, What, Where and How of Advocacy What do we do? Community organizing on a national level Bring local knowledge and experience to bear on federal regulatory and legislative policy: Executive Board meetings with Executive Branch; i.e. White House Department of the Treasury, Department of Labor Congress; bi-partisan, committees of jurisdiction (Senate Committee on Finance, House Committee on Ways & Means), specific members (Cardin (D-MD), Enzi (R- WY) Securities and Exchange Commission 32 16

17 Who, What, Where and How of Advocacy Developing a Message Must be done in a way that resonates Talking points for elected officials- one wants to weigh in for own membership (annual NAGDCA priorities letter) Elected officials (for them and to them) Strategically combining a number of elements including lobbying relationships and members involvement Including research and policy development 33 Who, What, Where and How of Advocacy Developing a Message Must be done in a way that resonates (Continued) Background papers including research and analysis Also the substance of the organization (survey, knowledge of membership, research and policy initiatives) Determine the usefulness/interest level for information you provide 34 17

18 Who, What, Where and How of Advocacy Delivering a Message Grass roots and demonstrations Meetings Knowing who to meet with Letters Ensuring that they get to the right place at the right time Role of lobbyists 35 Advocating For Organizations vs. Individual Clients Federal Level and Congress Committees vs. delegations Utilizing the leverage Broader messages vs. tailored messages NAGDCA vs. individual governments or specific clients 36 18

19 Advocating For Organizations vs. Individual Clients Federal Level and Congress (continued) Advantages NAGDCA has committees Specifics Utilizing delegations to reach the Executive Branch 37 Personal Professional Experience and How it Effects Work to this Day House to house, neighborhood by neighborhood Learning issues/research/presentation Developing relationships Must keep developing relationships due to staff turnover 38 19

20 Personal Professional Experience and How it Effects Work to this Day Advocating as a Social Worker Juvenile court Must always have client best interests at heart House to house Grassroots Community Organizer Streets, neighborhood blight House to house Community Working with agencies in communities 39 Personal Professional Experience and How it Effects Work to this Day United States Senate National Women s Political Caucus Goal was getting women elected to Congress House to house National Association of Counties Development of leadership. i.e. committees Consulting Work with boards and staff to develop leadership and issues, advocacy strategy 40 20

21 Money and Advocacy Citizens United Big money vs. individual contributions Political Action Committees (PAC) vs. bundling PACs pool campaign contributions from members and donate those funds to campaigns Must be well organized and really develop messages and relationships 41 Summary Skills Believe in issues Facilitate relationships Develop leadership Distill information in both directions 42 21

22 Summary Defense vs. offense Can take things for granted Example: consolidation and exemption from 10% excise tax penalty in early withdrawals from 457(b) plans Symbiotic relationship Lobbyists and membership What do you need from each other 43 Advocacy from the Perspective of a Former Capitol Hill Staffer 44 22

23 Advocacy Start with thinking about why you do what you do. Why is what you do important? To whom is what you do important? Who else benefits from from what you do? How does what you do benefit those beyond those most directly affected? 45 Advocacy How do the answers to these questions intersect with the roles of your elected representatives? Ask yourself what are the roles of your elected representatives? 46 23

24 Advocacy Elected officials truly want to serve the people and communities they represent. Most of the time they want to stay in office. To stay in office they must show that they share philosophies of their constituents and that they know their constituents and their needs. 47 Advocacy You are proud of what you do. You are knowledgeable of what you do. Putting everything together, you need to relate to your elected officials and their staffs that what you do is important to them because you are proving important benefits to their constituents and that these effort have an important positive impact on the communities they serve

25 Advocacy If your state or local government structure allows you, you should reach out to the Senators and Representatives offices. If you cannot go to Washington, reach out to the local offices. Try to get your Senators and Representatives to meet with you and your plan participants. You may not have a physical facility that serves as a reason for visiting. But, you do have significant numbers of constituents who would probably like to meet with their Congressional representatives. Let those in Washington know how important retirement savings is to their constituents