Divided government unlikely to bring big changes to Washington

A divided balance of power in Washington will bring something of a stalemate to government over the next two years, a consultant said during a recent webinar.

Geoff Manville, partner and government relations leader with Mercer’s law and policy group, said that with Senate control in Democratic hands while the House of Representatives moves to Republican control, “the Democrats’ policy agenda – what’s left of it – will be on ice for the next two years.”

Health care “is not as much of a priority for Republicans as it is for Democrats,” Manville said. “But tax and budget issues are more of a priority for Republicans.”

Manville made the following predictions for the post-midterm environment.

• The new Republican House will be checked by the President Biden veto and the Democratic Senate. Republican control of House committees gives the GOP a key messaging platform, while Democratic control of the Senate insulates Biden from GOP bills while letting the president get his judiciary appointees approved. Turnover at key House committees that have oversight on taxes and ERISA issues will complicate the 2023 benefits policy outlook. Policy impacting employee benefits may be eclipsed by partisan fights over budget, tax and entitlement issues.
• Despite narrow margins, bipartisan deals are possible. Possible agenda items include health-care costs and unwinding the COVID-19 public health emergency. The retirement agenda may start with working on SECURE 3.0 but parties are split on provisions relating to environmental, social and governance investments.

Manville expressed high hopes for passage of SECURE 2.0 in the post-election lame-duck session. SECURE 2.0 sailed through the House in March, with only five members of Congress voting against it. But the bill is stalled in the Senate.

He said ongoing House-Senate talks aim to blend three bills into a piece of final legislation. Those bills are:

• Securing a Strong Retirement Act (HR 2954), which passed the House
• Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg (RISE & SHINE Act), which passed the Senate HELP Committee
• Enhancing American Retirement Now (EARN) Act, which passed the Senate Finance Committee

The three bills include many identical and similar provisions, Manville said. The provisions are generally intended to expand plan coverage, boost savings, streamline administration and encourage lifetime income.

However, some provisions concern plan sponsors, he noted. Those provisions include the requirement that at least one paper statement is issued per year, the creation of a registry for missing participants without a fiduciary safe harbor, and requiring catch-up contributions to be in Roth form.

Republicans plan a 2023 attack on ESG investing, Manville said. He named some examples.

• The Maximize Americans’ Retirement Security Act (S 4613) would curtail plan fiduciaries’ ability to choose funds based on ESG considerations. Plans could be selected based “solely on pecuniary factors” although nonpecuniary factors could be allowed if fiduciaries cannot distinguish between investments by pecuniary factors alone.
• The Financial Freedom Act (S 4147) would clarify that defined contribution plan fiduciaries could select any types of investment as long as participants have a broad range of investment options. The U.S. Department of Labor would be barred from limiting types of investments available through brokerage windows.
• The Retirement Savings Modernization Act (S 4973, HR 9066) would let fiduciaries offer specific asset classes without any presumption that such investments are imprudent. Lawmakers want DC plan participants to be able to have access to “a full range” of investment strategies used by defined benefit plan managers including digital assets, private equity and annuities.

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected]. Follow her on Twitter @INNsusan.

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].