Legislative Update - Summer 2019
June 12, 2019 | By Jon Vogler
Several bills which were introduced in the last session of Congress have reappeared in the current 116th edition. This is not unusual. Some bills garner support, but may not be signed into law for a variety of reasons, including differing policy approaches, the composition of the Congress, dueling legislative priorities, the inclusion of controversial provisions, a collective preference for a regulatory solution, or just plain politics.
One key bill which is back this time around is the Lifetime Income Disclosure Act (listed in the below “Annuities” category). The bill would require plan sponsors to show on the participant’s quarterly pension benefit statement, at least annually, the projected monthly income they could anticipate receiving at retirement if they took distributions as annuities (based on the amount of money in their accounts). The bill would also direct the Department of Labor (DOL) to issue (a) a model disclosure and (b) factors that employers may use in calculating an annuity equivalent.
The basic provisions of the Lifetime Income Disclosure Act are also included within the comprehensive Setting Every Community Up for Retirement Enhancement Act of 2019 (also known as the SECURE Act, listed in the below “Retirement reform” category). Among many other features, the SECURE Act would (a) raise the required minimum distribution (RMD) age from 70-1/2 to 72 for both retirement plans and IRAs; (b) extend plan eligibility to certain long-term, part-time employees; (c) allow penalty-free distributions (up to $5,000) upon the birth or adoption of a child; (d) expand the uses of 529 accounts to pay back student loans (up to $10,000) and cover apprenticeship costs; (e) increase the cap on auto-escalation in safe-harbor plans from 10% to 15%; (f) include an open multiple employer plan (MEP) provision; and (g) include a modified “stretch” provision for both defined contribution (DC) plans and individual retirement accounts (IRAs) under which an individual who inherits (other than “eligible designated beneficiaries”, defined as a surviving spouse, minor child, disabled, or chronically ill beneficiary or any other person who is not more than 10 years younger than the participant/IRA owner) must draw down the assets over a 10-year period.
The SECURE Act was passed by the House on May 23, 2019. As of this writing, the Senate may either pass the SECURE Act as is or reconcile it with the provisions of the similar Retirement Enhancement and Savings Act (RESA) (also listed in the “Retirement reform” category) reintroduced in the Senate in April.
On the regulatory front, the Securities and Exchange Commission (SEC) issued on June 5 its final rulemaking on standards of conduct for broker-dealers and investment advisors. The SEC has provided a compliance date of June 30, 2020 for registered broker-dealers to comply with Regulation Best Interest, which imposes an enhanced standard of conduct on broker-dealers when they provide recommendations to retail customers regarding a securities transaction or an investment strategy involving securities. Under Regulation Best Interest, a broker-dealer must act in the retail customer’s best interest and cannot place their own interests ahead of the customer’s interests.
Please download the PDF to read about bills that are actively being considered by Congress at this time. For more information on these and other bills, visit the Library of Congress website