Momentum grows for bipartisan retirement bill in divided Congress

Legislation to help Americans save for retirement is emerging as one of the few areas for bipartisanship on tax issues in a potentially divided Congress next year.

House Ways and Means Committee Chairman Richard Neal (D-Mass.) and Rep. Kevin Brady (Texas), the top Republican on the panel, introduced a retirement bill late last month with hopes of congressional action in the lame-duck period.

Sens. Rob Portman (R-Ohio) and Ben Cardin (D-Md.) — members of the Senate Finance Committee — have previously offered similar legislation.

It’s unclear exactly when either chamber would take up either measure, but the bipartisan interest from key lawmakers signals that retirement legislation could cross the finish line even if there is split control of Congress in 2021.

“It’s not hard to imagine if Congress wants to do bipartisan legislation that this is the place where they could do it,” said Howard Gleckman, a senior fellow at the Urban-Brookings Tax Policy Center.

Lawmakers have a strong track record of reaching across the aisle to work on retirement legislation. In December 2019, President Trump signed into law a government funding bill that included a bipartisan retirement package called the Setting Every Community Up for Retirement Enhancement (SECURE) Act.

That measure made it easier for small businesses to join together to offer retirement plans, required employers to allow both full- and part-time workers to participate in their 401(k) plans and repealed the maximum age for making contributions to traditional individual retirement accounts (IRAs).

Lawmakers are now interested in building on the SECURE Act to further encourage retirement savings.

The new bill from Neal and Brady would expand automatic enrollment in retirement plans, allow groups of nonprofits to join together to offer retirement plans, simplify and expand the “saver’s credit” for low- and middle-income households that make retirement contributions, raise the age when people have to start taking required minimum distributions from 72 to 75 and allow employers to make matching contributions to retirement plans when employees make student loan payments.

The bill is co-sponsored by a number of lawmakers on the Ways and Means Committee on both sides of the aisle.

A spokesperson for Neal said last week that the chairman is hopeful the bill could advance as soon as in the lame-duck session of Congress this year. Brady made similar comments to reporters last week.

“I’m hopeful … that there’s such a strong bipartisan support for the new retirement security bill that we can move that quickly,” Brady said. “I don’t know the length of this lame duck or how much space will be allowed to non-COVID, non-government funding issues, but if there is space, I’m hopeful we can move that forward.”

The bill has the support of industry groups and advocates for older Americans.

David Certner, legislative counsel and legislative policy director at the AARP, highlighted the expansion of the saver’s credit — a tax break for contributions made to retirement plans by low- and middle-income filers. The bill from Neal and Brady would create a single credit rate of 50 percent, increase the maximum credit amount from $1,000 to $1,500, and increase the income limits for the credit.

“It will provide more help to more people and will be more of an incentive to help people save,” he said.

Certner also praised a provision in the bill that would allow more part-time workers to be eligible to participate in company retirement plans.

Chris Spence, managing director of federal government relations at the financial-services provider TIAA, spoke positively about the provision to expand automatic enrollment in retirement plans.

“Inertia is a very good way of getting people enrolled and participating in retirement plans,” he said.

Others said the bill is timely given the financial stress of COVID-19.

Paul Richman, chief government and political affairs officer for the Insured Retirement Institute, said some of the provisions in the bill would help to provide relief amid the coronavirus pandemic, while others would improve retirement savings in the long term.

The bill is “another step forward on the path to strengthening retirement security,” he said.

The Portman and Cardin bill, introduced in the Senate last year, has many similarities to the Neal-Brady one. 

Portman said in a statement last month that he was pleased that the two House lawmakers included provisions that he and Cardin have been championing, adding that he looks forward to working with Neal and Brady “to ensure we are able to make it easier for all Americans to save for retirement.”

Neither bill has received a committee vote.

Lobbyists say that it could be a heavy lift for Congress to pass retirement legislation during the lame-duck session. They noted that Congress has to pass legislation before Dec. 12 to prevent a government shutdown, and they might try to pass another coronavirus relief package, though the odds for that are looking slim.

But congressional observers think there’s a better opportunity for action on retirement legislation in 2021, even if Republicans keep their majority in the Senate.

Control of the Senate will come down to the results of two runoffs in Georgia on Jan. 5.

If Republicans maintain their control of the Senate, President-elect Joe Biden’s campaign proposals to raise taxes on wealthy individuals and corporations are unlikely to be enacted, making retirement security one of the few areas where tax legislation could be enacted.

“I see that as an opportunity to find common ground, to work together, to get used to the new dynamic we’re likely to see in 2021,” said Todd Metcalf, a principal in tax policy services practice at PricewaterhouseCoopers and a former aide to Democrats on the Senate Finance Committee.

There are already bipartisan bills introduced in both chambers of Congress, which gives lawmakers “a really strong foundation to work off of,” said Marc Gerson, leader of the government affairs practice at Miller & Chevalier and a former aide to House Ways and Means Committee Republicans.

In addition to retirement savings, lawmakers and tax experts also think there are other areas where Biden and a divided Congress could work together on tax legislation, particularly expanding the child tax credit and providing tax incentives to incentivize domestic production.

Additionally, experts said policymakers may want to address tax breaks that are set to expire at the end of the year, as well as tax increases for businesses established by Trump’s 2017 tax law that are set to take effect in the coming years.

Biden has offered several proposals to boost retirement savings. He proposed increasing tax preferences for middle-income taxpayers’ retirement contributions by shifting the deduction for contributions to retirement accounts to a credit. He has also backed an Obama administration proposal to require employers that don’t otherwise offer retirement plans to offer an option for employees to participate in an automatic IRA.

Gleckman said that Biden’s proposals focus more on lower income workers than the congressional bills. He said some of the provisions in the congressional bills would help lower- and middle-class people while other provisions, such as increasing the age for required minimum distributions, would be likely to benefit higher-income households. 

Gleckman predicted that the Biden White House might try to beef up portions of the congressional bills that are targeted toward helping low-income people save for retirement.

“The administration will make sure this bill tilts a little more to low- and moderate- income workers,” he said.