A Beltway lobbying firm offered some short-term good news and long-term bad news on retirement security issues Wednesday during the Insured Retirement Institute annual conference.
The good news first. There is a good chance Congress will end up passing additional retirement security legislation before the end of the year, said Jeff Forbes, founding partner of Forbes Tate Partners.
The Securing a Strong Retirement Act of 2021 is a follow-up bill to the SECURE Act passed into law at the end of 2019. Known colloquially as "SECURE 2.0," it contains a variety of measures to boost retirement accounts and is heavily supported by industry.
The bad news concerns the Social Security trust fund. Trustees issued another somber annual report on Aug. 31 that projects the trust fund backing retirement benefits will run out of money by 2033, a year earlier than estimated in the 2020 report.
That should inspire Congress to act. But it won't, Forbes said.
"This is a classic case of an issue that everyone will ignore until it's almost a huge problem," he said. "It's so bad the way the Congress works, but that's how this will go. ... Then we'll be like, 'Oh, what are we gonna do about Social Security, and the fix will be a Band-Aid. And people probably suffer because of it."
A Bipartisan Bill
The door cracked open wider for annuities to be sold into retirement plans with the surprise passage of the SECURE Act in December 2019. After passing the House early in the year, the bill collected dust for months. When senators started looking for a bipartisan issue to get a legislative win, the pickings were slim, which elevated the SECURE Act.
That route could be repeated, the lobbyists said.
"Republicans are measuring the drapes a bit and trying to puff out their chests and want to do this on their own terms, which is, frankly, what happened before, too," said Jeff Strunk, managing partner of Forbes Tate Partners.
The SECURE Act made several changes, including:
- More time in individual retirement accounts and 401(k)s. The bill raises the age for taking required minimum distributions from age 70 1/2 to age 72.
- Granting older workers benefits. As long as you’re working, you can still contribute to your IRA after age 70 1/2. Previously, you couldn’t.
- Boosting small-business 401(k)s. Small businesses can now band together in group plans.
The industry immediately began lobbying for a second SECURE bill and it was introduced by Reps. Richard Neal, D-Mass., and Kevin Brady, R-Texas, in late October. SECURE 2.0 passed out of their House Ways and Means Committee in May.
The latest bill includes the following:
- Allow people who have saved too little to set more aside for their retirement.
- Offer low- and moderate-income workers a tax credit for contributions to a 401(k) or similar plan.
- Help people with student loans save by letting employers make retirement plan contributions equal to what an employee pays on their loans.
- Further support the use of annuities that provide guaranteed lifetime income in retirement.
- Create a new incentive for small businesses to offer a retirement plan.
Inflation A Looming Iceberg?
The dominant issue before Congress is President Joe Biden's $3.5 trillion 10-year spending plan. It includes sweeping child care and eldercare provisions, climate proposals and drug pricing controls. Although the measures are popular with many Democrats, they come with a price tag that has centrists on edge.
The proposed top tax rate would revert to 39.6% on individuals earning more than $400,000, or $450,000 for couples, and there would be a 3% tax on wealthier Americans with adjusted income beyond $5 million a year. For big businesses, the proposal would lift the corporate tax rate from 21% to 26.5% on incomes beyond $5 million.
The Democratic team of Senate Majority Leader Chuck Schumer, D-N.Y., and House Speaker Nancy Pelosi, D-Calif., are desperately wrangling votes to try and get the package to the finish line.
Meanwhile, inflation, which measures the increase in the cost of living over time, is running at 5.3%, the highest in nearly 13 years. If Democrats don't get inflation under control, Forbes said, they will not be in power for very long. And many economists believe that raising taxes fuels inflation.
"While there will be taxes raised, I don't think it'll be to the extent that the Ways and Means Committee just marked up and definitely not to the extent that Biden put out," he said.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.
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