Bipartisan aura around retirement savings diminishes in reconciliation

Partisan tension has surrounded most issues in Washington, D.C. over the last several years with a few notable exceptions. One of them was retirement-savings policy.

For the moment, “was” is the operative word because of a massive bill that is creating brittle politics on Capitol Hill.

Democrats are pushing $3.5 trillion legislation that contains a range of spending on health care, education and climate programs as well as tax cuts for some Americans and tax hikes on corporations and the wealthy to pay for it. Also known as the Build Back Better Act, it basically contains the Biden administration’s economic agenda.

Democrats are using a parliamentary maneuver known as budget reconciliation for passing the bill in order to sidestep a Republican Senate filibuster. No Republican is going to back the measure. Some centrist Democrats in the Senate and House also are wavering.

When legislation as big as the reconciliation train moves through Congress, lawmakers want to put their favorite ideas on board. That’s been the case when it comes to retirement provisions in the budget bill -- and that’s what’s causing a breakdown in cooperation on retirement savings.

The House Ways and Means Committee’s contribution to budget reconciliation included a retirement-policy provision that Chairman Richard Neal, D-Mass., has advocated for years. It would require businesses that don’t offer a retirement plan to establish an auto-enrollment 401(k) or individual retirement account for their employees. It would provide a tax credit to help pay for plans but also would place an excise tax on companies that don’t comply.

In an appearance at the Insured Retirement Institute’s online annual conference on Sept. 28, Neal extolled the auto-IRA legislation and other savings provisions in the reconciliation bill for their potential to add $7 trillion in retirement savings and 62 million new retirement savers over the next 10 years.

“This was a big deal,” Neal said.

His Republican colleagues on the committee, however, thought it was a raw deal. For years, they have opposed Neal’s auto-IRA legislation, calling it a costly mandate on small businesses. During the committee vote on the reconciliation bill, they criticized the tax penalty.

The ranking Republican on the panel, Rep. Kevin Brady, R-Texas, said Neal’s approach to the retirement provisions of the reconciliation bill contrasted sharply with the bipartisan support earlier this year for the SECURE 2.0, which builds on landmark retirement legislation approved by Congress in 2019.

The legislation, which was approved unanimously by the Ways and Means Committee, boosts the age for required minimum distributions from retirement accounts from 72 to 75 and includes a number of provisions to strengthen retirement coverage and savings.

But Brady recently told Roll Call, a Capitol Hill publication, that Republicans are “reconsidering our support” for SECURE 2.0.

In his remarks to the IRI conference, Neal expressed confidence the full House would approve the bill by the end of the year.

“I’m very optimistic that we’ll get SECURE 2.0 over the finish line very soon,” Neal said.

But then it would have to navigate the Senate, which is split evenly between Republicans and Democrats. The chief tax-writing senator also is pushing retirement-savings ideas Republicans likely oppose.

Senate Finance Chairman Ron Wyden, D-Oregon, praised the House Ways and Means reconciliation bill for including provisions to curb IRA accounts that exceed $10 million.

“It’s important now to rein in the tax planning strategies for those who -- you could call them almost the uber fortunate -- who take advantage of the tax benefits for retirement savings to create what is really an enormous massive treasure chest,” Wyden said at the IRI conference.

Cutting big IRAs down to size probably isn’t on the Republicans’ agenda. That idea’s best chance to gain congressional approval is through a reconciliation process with only Democratic votes.

The question now is whether partisan battles over reconciliation will halt SECURE 2.0. The Insured Retirement Institute backs both the Neal auto-IRA legislation and SECURE 2.0, saying they complement each other to increase retirement savings. The bills also include provisions to promote annuities in retirement plans, an IRI priority.

“Bipartisanship is still prevailing on most retirement-security issues,” said Paul Richman, IRI chief government and political affairs officer at IRI.

He acknowledged there may be some policies on which Democrats and Republicans will disagree, but those disputes won’t setback SECURE 2.0. He said the insurance industry supports Neal’s auto-IRA effort.

“We would hope Mr. Neal’s Republican colleagues would see the benefit that could be provided to many more low- and middle-[income] workers to have access to retirement savings in their working years,” Richman said.

It’s unlikely Republicans will change their minds on the auto-IRA provision. But when the deeply partisan reconciliation process ends, both parties may be looking for an across-the-aisle win and come back together on SECURE 2.0.