November 10, 2010: Expanding retirement plan coverage most likely will take a back seat to reducing budget deficits when control of the House shifts to the Republican Party in January 2011, Hill watchers told BNA in interviews leading up to and after the election.

The likelihood that major retirement legislation will be considered and passed by a divided Congress appears unlikely, some political observers said. However, that prospect could change if members of the new Congress summon the will to tackle retirement policy, a retirement industry official said. Many employers that sponsor pension and retirement plans should be pleased with the election results, another business group official said.

“The big thing the retirement plan world is looking for is stability, and certainly the outlook for that is far greater with Republicans in control of the House and a divided government,” Ed Ferrigno, vice president of Washington affairs at the Profit Sharing/401(k) Council of America, told BNA Nov. 3.

However, with lawmakers and President Obama feeling pressure from midterm voters to enact bipartisan legislation, Congress might be able to move some retirement policy proposals. “There's definitely a possibility that there are enough ingredients to make soup here,” Brian Graff, executive director and chief executive officer at the American Society of Pension Professionals and Actuaries, said Nov. 2. Republicans and Democrats across the board agree on the policy goal of expanding retirement saving, Graff said.

Rob Portman Elected

The election to the Senate of former Congressman Rob Portman (R-Ohio), who worked closely with Sen. Benjamin Cardin (D-Md.) on pension legislation enacted in 2001, could provide the leadership necessary to gain bipartisan support for some retirement and pension policy changes, Graff told BNA. “There's no Republican in Congress who knows more about retirement issues than Rob Portman,” he added.

A bipartisan proposal for workplace individual retirement accounts, which was developed by scholars at the Brookings Institution and Heritage Foundation and later championed during the 2008 election campaign by President Obama, could gain political support in the new Congress if it is perceived as bipartisan legislation, Graff said.

In the area of Social Security policy, however, Graff said he has no expectations that a new Congress will call for changes in the Social Security retirement program. “I'm having a hard time seeing why Republicans would take that bullet,” he said. With the next presidential election cycle set to begin the day after midterm elections, Graff said, both parties lack the political will to take on the challenge of securing the retirement program's long-term solvency.

Some Hill watchers said they anticipate that Rep. Dave Camp (R-Mich.), the presumptive leader of the House Ways and Means Committee, might put some retirement proposals on the legislative agenda. Christopher Condeluci, counsel at Miller & Chevalier, in Washington, D.C., said Nov. 2 that Camp, now the ranking member on Ways and Means, and committee member Rep. Patrick Tiberi (R-Ohio) are interested in pension and retirement plan policy.

Condeluci, a former tax and benefits counsel on the Senate Finance Committee, said the election defeat of Rep. Earl Pomeroy (D-N.D.) will be felt as a loss to congressional members interested in moving proposals aimed at employees of small- and mid-size businesses who lack retirement coverage.

Mandates Unwelcome

Democrats and Republicans agree that having millions of American workers who are not covered by a qualified retirement plan is a problem, Condeluci said. However, with Republicans in charge of the House, measures based on employer mandates instead of employer tax incentives are unlikely to move forward, he said.

Republicans in the House generally also can be expected to resist retirement proposals based on refundable tax credits, such as the Obama administration's proposal to expand the existing Saver's Credit program to more workers by making it refundable for low-income workers, Condeluci said.

Condeluci added that a targeted retirement plan proposal based on an existing but underutilized qualified plan, the SIMPLE 401(k), could gain more traction in the new Congress than automatic workplace IRA proposals introduced in the House and Senate in August (167 PBD, 8/31/10; 37 BPR 1957, 9/7/10). A savings match plan for employees (SIMPLE) with a fiduciary safe harbor, for example, potentially could attract Republican and Democratic support, he said.

Multiemployer Plan Issues

Republicans and Democrats also will be interested in finding a solution to the funding problems of multiemployer plans in industry sectors that are declining, Condeluci said. Hearings on the topic will be held in 2011, but finding a workable, bipartisan solution will be difficult, he said.

Randy DeFrehn, executive director of the National Coordinating Committee for Multiemployer Plans, said Nov. 2 that the Senate Health, Education, Labor and Pensions Committee under Chairman Tom Harkin (D-Iowa), will hold additional hearings on multiemployer plans. The HELP Committee held two hearings this year to discuss a bill introduced by Sen. Robert Casey (D-Pa.) that would expand the ability of the Pension Benefit Guaranty Corporation to partition multiemployer plans so that significant portions of troubled plans remain solvent and remaining employers remain viable, DeFrehn said.

DeFrehn added that multiemployer plan funding rules will sunset in 2014 if Congress does nothing, and new plans will be required to comply with the old funding rules that existed before enactment of the Pension Protection Act (Pub. L. No. 109-280). “There will have to be some kind of action taken either to extend the PPA rules or to replace them with something a bit more reasonable,” he said.

“I do think there will be an eye toward trying to make some more permanent changes that might make it less necessary to have continual adjustments to the [PPA] rules, even though the reasons for these adjustments have been directly related to markets that we've never seen in our lifetimes,” he said.

Congress also may need to review anti-cutback rules, DeFrehn said. “I don't think that's an unreasonable thing to do as long as its done with a scalpel instead of an axe,” he said.

Public Pension Issues

Another retirement policy issue that the new Congress will be interested in is public pension funding, but Congress should let the states and local governments find solutions, Jeannine Markoe Raymond, director of federal relations at the National Association of State Retirement Administrators, said Nov. 2. Educating the new members of Congress about public pensions will be NASRA's primary objective in 2011, she said.

“State legislatures are not sitting on their hands,” Raymond said. States made more modifications to their pension plans in 2010 than in any recent year, she said, adding that “small modifications now can really right the ship.”

NASRA would like Congress to let states and localities continue on their own to address pension funding problems, Raymond said. Meanwhile, NASRA would like to become more involved with the new Congress in finding ways to expand retirement coverage in the private sector, she said.