Government Affairs Update

November 8, 2021


House Labor Committee Introduces Bipartisan Retirement Bill

Earlier today, House Committee on Education and Labor Chairman Bobby Scott (D-VA), Ranking Member Virginia Foxx (R-NC), and Subcommittee on Health, Employment, Labor, and Pensions Chairman Mark DeSaulnier (D-CA) and Ranking Member Rick Allen (R-GA) introduced the Retirement Improvement and Savings Enhancement (RISE) Act. The bill seeks to enact several IRI 2021 Federal Retirement Security Blueprint and other objectives, including establishing an online retirement “lost and found,” enabling 403(b) multiple (MEPs) and pooled employer plans (PEPs), offering savings opportunities for part-time workers, clarifying rules for the recovery of inadvertent overpayments, authorizing small financial incentives for participation in workplace retirement plans, and simplification of reporting and disclosure requirements. IRI will be submitting a letter highlighting the Blueprint provisions contained in the bill prior to a markup on Wednesday.

In a press statement, Chairman Bobby Scott said, “The RISE Act is a bipartisan proposal that will help Americans prepare for, and achieve, the secure retirement they deserve. This legislation makes meaningful improvements to our retirement system, including making it easier for workers to track their retirement savings when they switch jobs, providing employers more tools to encourage their workers to participate in retirement plans, and expanding access to retirement plans for part-time workers. These policies are a step in the right direction toward a more secure retirement for workers and their families.” In her statement, Ranking Member Virginia Foxx said, “It is crucial to help Americans better prepare for retirement, and this is exactly what the RISE Act does. Improving saving opportunities for workers is an important bipartisan priority. We all want to see Americans enter retirement more secure and more prepared. This bipartisan legislation will help empower both workers and employers to work in tandem towards a better and more secure future.”

The House Education and Labor Subcommittee on Health, Employment, Labor, and Pensions held a hearing on June 23 entitled “Examining Pathways to Build a Stronger, More Inclusive Retirement System.” IRI submitted a statement for the record of the hearing in which IRI advocated for policies to further expand opportunities to save for retirement, several of which are included in the RISE Act.

Any questions should be referred to Paul Richman or John Jennings.


RILA Legislation Introduced in the Senate

Senators Tina Smith (D-MN) and Thom Tillis (R-NC) introduced the Registration for Index-Linked Annuities Act directing the Securities and Exchange Commission (SEC) to devise a new form for annuity issuers to use when filing a registered index-linked annuity (RILA) last week. Under current SEC rules, these and other innovative new products must be registered using forms designed primarily for equity offerings and therefore require extensive information that is not relevant to prospective annuity purchasers. IRI submitted a letter of support, noting that the promulgation of a new form will eliminate significant impediments constraining the issuance of RILAs, improving competition and diversity in the marketplace and improving consumer access to these products.  In a press statement, IRI President and CEO Wayne Chopus said, “The current rules and processes to register RILAs stymies innovation, creates a barrier to entry into this growing market for insurers that do not produce GAAP financials, and impedes consumer comprehension and choice with excessive and confusing information. This regulatory structure ultimately impairs consumer choice without any corresponding benefit to consumers or the SEC. The modernized approach contemplated by this legislation will encourage innovation and ensure investors can easily find the information they need about RILAs and other innovative products without having to wade through irrelevant, excessive, and confusing disclosure documents.” This bill was also called for in IRI’s 2021 Retirement Security Blueprint.

The bill is similar to a measure introduced earlier this year in the House by Representatives Alma Adams (D-NC), Anthony Gonzalez (R-OH), and Dean Phillips (D-MN). Both bills have also received support from the Consumer Federation of America. IRI is now working with the bill sponsors to harmonize some of the stylistic differences between the House and Senate versions and call for passage.

Any questions should be referred to John Jennings.

DOL Policy Director Nomination Approved by the Senate

The Senate confirmed Rajesh Nayak last week to serve as the Assistant Secretary of Policy at the U.S. Department of Labor by a vote of 52-45. In this position, Nayak will oversee an influential central office at DOL responsible for supporting all the subagencies on drafting regulations. He also serves as the department’s primary liaison to coordinate with the White House and OMB’s Office of Information and Regulatory Affairs on all proposed DOL rulemakings. He is arriving at a time when DOL is in the process of pivoting from a period driven by pandemic response and rollbacks of Trump-era measures to a phase when it will be developing and advancing its own regulatory priorities. Throughout his career Nayak has been known to be an advocate for progressive regulatory policy, advocating for overhauling the White House rulemaking review process to enhance regulatory capacity, and to give greater weight to inequality and worker interests when scrutinizing the need for agency rules. Nayak graduated from Yale Law School and during most of the Obama administration he served as deputy assistant secretary for policy, the number two official in the office he will now head, as senior counsel to the solicitor, and as deputy chief of staff to then-Labor Secretary Tom Perez.

Any questions should be referred to John Jennings.

Several Retirement Provisions Return to Build Back Better Package

Several retirement related provisions were included in the latest draft of the House Democrats’ Build Back Better Act, which was released last Wednesday, to raise revenues covering some of the cost of the programs proposed in the legislation. These include limits on individual retirement accounts (IRAs) containing millions of dollars. Under this provision, contributions to traditional and ROTH IRAs are prohibited once the account’s balance reaches $10 million. It would also require mandatory distributions for accounts that exceed that amount. The limit on contributions would only apply to single taxpayers (or taxpayers married filing separately) with income over $400,000, married taxpayers filing jointly with income over $450,000, and heads of households with income over $425,000 (indexed for inflation). The bill would also require accounts with at least $2.5 million to report their balances annually to the IRS. The new minimum distribution requirement generally will be 50 percent of the amount by which the individual’s prior year aggregate traditional IRA, Roth IRA and defined contribution account balance exceeds the $10 million limit, reduced by the amount that the combined balance amount in traditional IRAs, Roth IRAs and defined contribution plans exceeds $20 million.  The excess will be required to be distributed from Roth IRAs and Roth designated accounts in defined contribution plans up to the lesser of (1) the amount needed to bring the total balance in all accounts down to $20 million or (2) the aggregate balance in the Roth IRAs and designated Roth accounts in defined contribution plans. Once the individual distributes the amount of any excess required under this 100 percent distribution rule, then the individual is allowed to determine the accounts from which to distribute to satisfy the 50 percent distribution rule above, except that generally no amounts may be allocated to stock in a private company ESOP. These provisions will be effective in tax years beginning after December 31, 2028.

The bill also includes a provision to close a loophole which now allows for the use of a “back-door” Roth IRA strategy and a similar one for retirement plans to avoid tax liabilities. The provision proposed in the bill prohibits all employee after-tax contributions in qualified plans and after-tax IRA contributions from being converted to Roth regardless of income level, effective for distributions, transfers, and contributions made after December 31, 2021. In addition, the bill eliminates Roth conversions for both IRAs and employer-sponsored plans for single taxpayers (or taxpayers married filing separately) with taxable income over $400,000, married taxpayers filing jointly with taxable income over $450,000, and heads of households with taxable income over $425,000 (indexed for inflation). This provision applies to distributions, transfers, and contributions made in taxable years beginning after December 31, 2031. The provision like the Mega-IRA measure is not yet final and could be revised as it moves to the House floor for a vote as well as in the Senate when it considers the bill.

Any questions should be referred to Paul Richman.


NASAA Releases Results of Reg BI Survey Phase II

NASAA released the results of a survey conducted to assess broker-dealer industry policies and practices following the implementation of Regulation Best Interest. The purpose of this Phase II survey was to collect data regarding broker-dealer policies, procedures, and practices a year after the SEC’s compliance deadline in order assess the efficacy of Reg BI.

The report concluded that “the industry is taking steps in the right direction, just very small ones at this early juncture.” It also indicated that securities regulators will need to ensure that firms “do a much better job of providing fair and balanced point-of-sale disclosure regarding fees, costs, and risks…[and] do more to eliminate and mitigate harmful financial incentive conflicts.”

Further, in an announcement of the results, NASAA President and Maryland Securities Commissioner Melanie Lubin stated, “NASAA’s member states did not see the tide-turning reforms they had expected to see in the broker-dealer industry after Regulation Best Interest took effect…NASAA and the states look forward to working with the SEC and FINRA in the coming year to get more broker-dealer firms into compliance with this important rule.”

IRI will continue to coordinate with other industry trade organizations on how best to respond to and address the impact of the survey results.

Any questions should be referred to Sarah Wood.

IRI Presents at NCSL Insurance Task Force Meeting

On November 2, IRI presented at the National Conference of State Legislatures’ (NCSL) annual Insurance Task Force meeting on the progress made by states to adopt the revised NAIC Suitability in Annuity Transactions Model Regulation. During its presentation, IRI emphasized the importance of uniform adoption, discussed “lessons learned” along the way, and offered support to states as they look to adopt the NAIC Model. In addition to IRI, representatives from the National Association of Insurance Commissioners (NAIC) and the National Association of Insurance and Financial Advisors (NAIFA) also presented during this session.

Any questions should be referred to Sarah Wood.

IRI Submits Comments in Response to Proposed Changes to Form 5500

On Monday, IRI submitted the comments in response to two (2) related proposals to detailed revisions to Form 5500:

  1. DOL, IRS, and Pension Benefit Guaranty Corporation’s Proposed Revision of Annual Information Return/Report (Proposed Revisions)
  2. DOL’s Amendments to the Annual Reporting and Disclosure Regulations under 29 CFR § 2520 (Proposed Amendments)  

IRI received and reviewed the comments on the proposed changes to Form 5500 by the Chamber of Commerce of the United States of America (the “U.S. Chamber”), and we expressed our general support the U.S. Chamber’s comments, and respectfully advocated for the revisions in accordance with the U.S. Chamber’s requests and recommendations. Further, along with IRI’s general support of the U.S. Chamber’s comments, IRI included additional comments with respect to the Proposed Revisions regarding hard-to-value assets and trust information.

Any questions should be referred toEmily Micale.

SEC Proposal to Amend Electronic Filing Requirements

Consistent with several recent public statements made by Chair Gensler and the SEC on evolving with technology, the Commission released a proposed rule that would significantly expand and update the SEC’s electronic filing rules to cover a wide variety of documents that are currently filed in paper form. Additional information about the proposal can be found in the SEC’s Fact Sheet and Press Release. We will work with our Securities Committee to assess the proposal and formulate written comments, which will be due 30 days after publication in the Federal Register more fully.

Any questions should be referred toEmily Micale.