The 2018 midterm elections changed the landscape for retirement policy, upending the status quo but still leaving the prospects uncertain for efforts to increase savings among private sector workers. At the federal level, a Democratic majority in the House brings divided government and new committee leadership. In the Senate, retirements and election losses have meant changes in the leadership and makeup of key committees. In the states, several legislatures and governorships have changed hands, resulting in new directions and policy agendas for addressing a nationwide problem.
The Pew Charitable Trusts explored the prospects for federal legislation in an August brief, “Will Congress Act on Retirement Savings?” The start of the 116th Congress provides an opportunity to update that review with a look at what could be ahead over the next two years.
In Washington, action could come from both the legislative branch and the administration. Last year, President Donald Trump signed an executive order, “Strengthening Retirement Security in America,” that, among other things, directed the Department of Labor and the Internal Revenue Service to expand access to multiple employer plans (MEPs). By allowing employers to adopt a common plan, MEPs may lower costs through economies of scale and reduced employer liability, thereby increasing employee access. Businesses that join a MEP must have a shared connection, such as operating in the same industry or as subsidiaries of a common organization.
The Labor Department proposed rules late last year that clarify which groups of employers can participate in a MEP. A final rule is expected this year. Still, the changes will be limited because the agency did not use the process to authorize “open” MEPs—plans that any employer, regardless of a shared connection, could join. That leaves to Congress the prospect for more significant action on retirement savings.
The 115th Congress enacted no major retirement legislation, but interest remained strong as lawmakers introduced several bills, many specifically allowing for open MEPs. For example, former Senate Finance Committee Chairman Orrin Hatch (R-UT), now retired, and ranking member Ron Wyden (D-OR) championed the Retirement Enhancement and Savings Act (RESA), a bipartisan package of long-sought retirement modifications that has been introduced in virtually the same form in the past two Congresses.
RESA would have allowed unrelated businesses to join a common plan similar to an open MEP. It also would have increased savings by removing limits on the automatic escalation of the percentage of pay that employees contribute to plans. In addition, the bill would have encouraged employers to form plans by increasing the small business plan startup tax credit.
With Hatch’s retirement, the future of RESA is unclear despite the popularity of many of its proposals. In 2016, his committee unanimously approved a version of the bill that had the support of Chuck Grassley (R-IA), who is now the committee chairman. When the legislation was reintroduced in 2018, Representatives Mike Kelly (R-PA) and Ron Kind (D-WI) introduced a companion bill in the House with 90 co-sponsors.
RESA will not be the only starting point. Late last year, Senators Rob Portman (R-OH) and Ben Cardin (D-MD) introduced a comprehensive bill, the Retirement Security and Savings Act (RSSA), that would codify proposals crafted earlier in the session. With the backing of these longtime collaborators on retirement issues, the RSSA framework could shape legislative discussions going forward.
To increase contributions to retirement accounts, the legislation included new language on the automatic enrollment of employees into workplace plans that would allow employers to set the default contribution at 6 to 10 percent of pay. By default, contributions would then increase annually to at least 10 percent unless the employee made other arrangement.
Like RESA, the Portman-Cardin bill sought to spur the number of employers starting plans by raising the tax credit for small businesses that do so. But RSSA had unique provisions as well, such as changes to the requirements for certain annuity contracts to encourage more providers to offer them. Additionally, to help preserve plan savings, the measure would raise the age at which required distributions must be taken from 70½ to 75 over the next decade and exempted accounts with $100,000 or less from mandatory distributions at all.
In the House, Representative Richard Neal (D-MA), the new chairman of the Ways and Means Committee, has authored a wide range of retirement legislation in his years in Congress. Last session, he proposed the Retirement Plan Simplification and Enhancement Act, which, like RESA, would have authorized open MEPs and increased the small business plan startup tax credit but also would have covered more workers by changing language that excludes employees from participating in an employer plan based on the number of hours they work.
He also has proposed more ambitious legislation that would dramatically expand plan coverage by automatically enrolling those without a workplace plan into an IRA (the Automatic IRA Act) or a 401(k) or 403(b) (the Automatic Retirement Plan Act). In both cases, those automatically enrolled could opt out.
States continue to explore ways to increase private sector savings as well. Over the past decade, several have taken action in the absence of major legislation out of Washington. California, Connecticut, Illinois, Maryland, and Oregon have begun implementing auto-IRA programs that are similar to Rep. Neal’s national proposal; other states may soon follow. Voters re-elected sponsors of similar bills or study proposals in Colorado, Iowa, Massachusetts, New Jersey, New Mexico, New York, Nevada, Tennessee, Wisconsin, and Wyoming. Furthermore, the legislatures in Colorado and New York and governorships in Nevada, New Mexico, and Wisconsin changed parties, potentially bringing new attention to these issues.
Because nearly a third of private sector workers lack access to workplace retirement benefits, lawmakers at all levels of government will continue to seek common ground to address the savings shortfall. In many instances, proposals offered in previous years—such as efforts to create group retirement plans, increase automatic savings, and expand coverage—provide a strong starting point and are likely to be pursued by longtime champions and newly elected officials.
John Scott is the director and Andrew Blevins is a principal associate with The Pew Charitable Trusts’ retirement savings project.