Tax Reform and ASPPA s March on Capitol Hill

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Tax Reform and ASPPA s March on Capitol Hill Alisa Wolking, Director of Political Affairs Andrew Remo, Director of Legislative Affairs American Retirement Association 2

Tax Reform and March on Capitol Hill Tax reform in Washington: It s here Major players, political pressure, and crunched timeline Talking points: How proposals being considered in Washington right now could threaten our industry 401(k) is Main Street How pass-through cap could threaten small business retirement plans Rothification for revenue grab March on Capitol Hill: What to expect, FAQs What to expect: Logistics Helpful hints 3

Tax Reform 2017 GOP Majority: House, Senate, and White House Who are the big six : Key decision-makers in tax reform? September 27 Unified Framework for Fixing Our Broken Tax Code Tax-writing begins in House Ways and Means Committee, but Senate Finance Committee and members working on also 4

Unified Framework for Fixing Our Broken Tax Code Individual: Reduction in individual income tax brackets from seven to three: 12, 25, and 35 percent (potential additional top rate) Omits any mention of reducing current rates on investment income (capital gains, dividends, and interest) Doubles standard deduction, increases Child Tax Credit Repeals Alternative Minimum Tax (AMT) and estate tax Proposal from House Republican Better Way tax plan to cap the top tax rate for pass-through business entities at 25 percent 5

Unified Framework for Fixing Our Broken Tax Code Corporate: Reduction of the top marginal corporate tax rate from 35 percent to 20 percent Allow for immediate expensing of new investments for at least five years Provides for a one-time repatriation tax on corporate profits sitting overseas. Calls for a move from the current worldwide tax system to territorial tax system 6

Unified Framework for Fixing Our Broken Tax Code Retirement savings tax incentives: Work, Education, and Retirement : The framework retains tax benefits that encourage work, higher education and retirement security. The Committees are encouraged to simplify these benefits to improve their efficiency and effectiveness. Tax reform will aim to maintain or raise retirement plan participation of workers and the resources available for retirement. Simplification and 403(b) and 457 plans Pass-through penalty All Roth as last-minute pay-for 7

Tax Reform 2017 Political pressure for Republicans 2018 elections - crunched timeline Threat to our Industry: Goal to get tax reform over finish line at all costs 8

Tax Reform 2017 Timeline: Q4 2017 push House: "Half this country is living paycheck-to-paycheck and if that means we ve gotta stay here till Christmas to give them the relief that they deserve then tough we will do that," he said. "Because this has got to get done because people are hurting in this country. I don t care if I have to keep members of Congress working through Christmas we will get tax reform done. Speaker Paul Ryan, October 12 9

Tax Reform 2017 Timeline: Q4 2017 push Senate: The goal is to get it done this calendar year. But it is important to remember that Obama signed Obamacare in March of year two. Obama signed Dodd-Frank in July of year two. Senator Mitch McConnell, October 17 McConnell has ramped up Senate s schedule for year in attempt to keep up with this aggressive timeline. 10

Tax Reform 2017 Timeline: Q4 2017 push Treasury: There is no question that the rally in the stock market has baked into it reasonably high expectations of us getting tax cuts and tax reform done. To the extent we get the tax deal done, the stock market will go up higher. But there s no question in my mind that if we don t get it done you re going to see a reversal of a significant amount of these gains. Treasury Secretary Steven Mnuchin, October 18 11

Tax Reform 2017 Timeline: Q4 2017 push President Trump: The vast majority of Americans will be able to file their taxes on a single sheet of paper, because not only will these be massive tax cuts, but these will be a big simplification. It s going to be a very big simplification. So it s really tax cuts and reform, but I focus on tax cuts because it s such an important weapon to get our country really moving This is a once-in-a-lifetime opportunity, in my opinion. This is something that will be really unique. The timing is right. I have had people on both sides -- and I promised not to mention the name of the people on the other sides, or names -- but a lot of people are liking this very much, and I think we're going to have tremendous support. President Donald Trump, October 18, 2017 after meeting with Senate Finance Committee the day before. 12

Tax Reform 2017 Other Factors: Policy agreement on tax-reform principles The GOP has not introduced a bill from the House Ways and Means Committee, and likely won t for at least a few more weeks due to a variety of procedural steps and unresolved policy issues Budget first: This week The Senate hopes to match the House this week by approving a budget, but the two chambers will then need to reconcile differences in order to unlock budgetary rules known as reconciliation that will allow them to pass a tax bill with 51 votes, to break a filibuster in the Senate Revenue-neutral? Still issues to work out. House is expected to agree to the Senate budget s outline of $1.5 trillion in possible tax cuts. But senators are not likely to accept the House s $203 billion in mandatory spending cuts. 13

United Voice: ASPPA s Message to Capitol Hill 1. Americans Save at Work: Access to a retirement plan in the workplace is the most important factor in determining whether or not workers save for retirement 2. Pass-through Business Fix Needed to Keep Small Business Retirement Plans Viable: A simple tax fix that allows a business owner to deduct plan contributions against ordinary income will ensure that 320,000 small business retirement plans affecting over 24,000,000 non-owner employees will continue despite a lower pass-through tax rate 3. Congress Should Not Use the Retirement System to Pay for Tax Cuts: Mandating Roth contributions without making other changes to the retirement savings tax incentives will raise current-year taxes on lower- and middle-income savers 14

The 401(k) is Main Street s Savings Plan 401(k) plans are a middle-class benefit: 63 percent of participants in 401(k) plans make less than $100,000 per year. 35 percent make less than $50,000. Workers earning $30,000-$50,000 are 15x more likely to save at work: Data shows that over 70 percent of workers earning from $30k-$50k participated in employer-sponsored plans, whereas less than five percent without an employer plan contributed to an IRA. The 401(k) incentive is unique because it is a deferral, not a permanent exclusion. 15

Pass-Through Rate Cap Could Put Small Business Retirement Plans at Risk The framework proposes to cap pass-through tax rates for a small business owner at 25 percent while maintaining at least a 35 percent top rate on ordinary income. Small business owners of pass-through entities could be penalized for offering a retirement plan due to these mismatched rates since all retirement plan distributions will continue to be subject to the ordinary income tax rate. We need a simple tax fix that allows a business owner to deduct plan contributions against ordinary income. This will ensure that 320,000 small business retirement plans affecting over 24,000,000 non-owner employees will continue despite a lower pass-through tax rate. 16

Rothification = Revenue Grab Congress is seriously considering a significant change to the tax treatment of employer-provided retirement plans that would require some or all contributions to a plan to be made on aftertax (Roth) basis Requiring the immediate taxation of retirement plan contributions (aka Rothification ) alone will reduce the immediate take-home pay of savers and likely have a significant behavioral impact for budget-conscious low- and middleincome savers Rothification should not be used as a revenue grab without making significant changes to the Saver s Credit that would hold harmless low- and middle-income savers 17

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Importance of Advocacy Connect with staff who develop and influence laws Give them inside perspective of our industry, and show them why what we do matters for America s retirement Remember: Constituents are the most effective advocates -- keep it local 19

What to Expect in Hill Meetings: Logistics Meetings pre-scheduled for you: Pick up your meeting packet at March on Hill booth Transportation to and from Capitol Hill provided Talking points and leave-behinds provided for you Post-conference thank-you notes and sample text provided Post-conference meeting survey 20

March on Capitol Hill: What to Expect Monday, October 23 5:30-6:00 p.m.: Rally for Retirement! Join for quick overview of what to expect, talking point overview, and Q&A session Tuesday, October 24 11:15 a.m.: Transportation to Capitol Hill (staggered bus schedule, Maryland Bus Loop) 12:00-1:45 p.m. ASPPA Takes Capitol Hill Hill Meetings 2:00 p.m.: Last bus from Capitol Hill (staggered bus schedule) 2:30 p.m.: ASPPA Annual sessions resume 21

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March on Capitol Hill: What to Expect Before Tuesday, pick up your meeting information folder at the March on the Hill booth. Talking points will be in your folder, including a cheat sheet with big-picture asks. Go over the talking points ahead of time, and think about how you will convey this information in a conversational way. Try to travel to the Hill as lightly as possible. The lines at the metal detectors can get very long and you want to move through those as quickly as you can. Allow extra time to get to/from your meeting. Plan on departing the Gaylord 45 minutes or more before your meeting time. Be prepared for meetings to run late (and/or start late). Also be prepared to be escorted to the Capitol or another hearing or meeting room for your meeting. If a member listed within your meeting is not at your appointment at the scheduled time, please go ahead and start the meeting on time. 23

March on Capitol Hill: What to Expect If you meet with a member of Congress, please refer to them as Senator or Congressman/woman Do not be put off if the Member of Congress misses the meeting and you meet with staff Start the meeting by introducing yourself. Please mention your hometown within the state/district. Describe your professional practice and the benefit you provide businesses and plan participants List clients and plan sponsors with whom you work within the district and/or state by name if possible How many participants within the district/state and surrounding areas does your work cover? Being prepared with this number allows the Member of Congress or staff to visualize your impact within their district/state. 24

March on Capitol Hill: What to Expect Keep the tone pleasant, upbeat, and positive. Focus communicating how you want to improve and expand America s retirement security. Make sure to offer to be a resource as congressional debates get underway. Most staff do not have as much expertise on the intricacies of our industry as do you. Leave your business card with the handout you will leave behind Be sure to thank them for their time and efforts 25

March on Capitol Hill: What to Expect Send a thank-you note to your member of Congress (or staff person) thanking them for their time. ASPPA will provide you with template, note cards, and stamps that you can use immediately upon return from your Hill visit. Please also email the staffer a thank-you email. If it makes you feel more comfortable, please feel free to loop-in ARA and ASPPA government affairs staff in your email. 26

March on Capitol Hill: Other Questions How do I get my CE Credit? Complete email survey poll that will be emailed to you Follow up? Thank-you notes and templates provided What to wear Tuesday? Business, business casual, and comfortable shoes for walking on Capitol Hill It s not too late, sign up today: https://tinyurl.com/marchoncapitolhill 27

Questions? 28