February 2022 Issue:

• Mark Your Calendar: NAIFA Annual Congressional Conference Set for May 23-24
• Work on BBB Reconciliation Bill Deferred
• Senate Committees Work on Generation-Two Retirement Savings Bill
• Congress Nears Agreement on Government Funding for FY 2022
• DOL Expected to Propose Changes to Fiduciary Rule
• Senior Protection Legislation Moving through Congress
• DOL Issues Supplemental Guidance on Inclusion of Private Equity Investments in Retirement Plans
• Pandemic-Sensitive Health Insurance Costs Are Increasing
• IRS Releases Updated Guide to Fringe Benefits Tax Rules
• Updated Uniform Life Table Now in Effect

Mark Your Calendar: NAIFA Annual Congressional Conference Set for May 23-24

NAIFA’s annual Congressional Conference—the first in-person since the COVID pandemic began two years ago—is scheduled for May 23-24, 2022, in Washington, DC. The Congressional Conference is an important way to maximize NAIFA’s influence with Congress and is both professionally and personally rewarding for those who participate in it. 

NAIFA's Congressional Conference establishes and cultivates relationships with lawmakers, to share the expertise of NAIFA members from all 50 states and educate them on the value that NAIFA members bring to their clients and the solutions they provide for 90 million American families.

The Congressional Conference draws hundreds of insurance and financial advisors from all around the country. Participants are briefed on pending issues, taught how to effectively lobby their own Members of the House of Representatives and Senators, and then sent to Capitol Hill to educate lawmakers on the important issues of the day.

In addition to the important constituent level grassroots advocacy that takes place during the Congressional Conference, participants network with their colleagues from around the NAIFA federation, enjoy the Nation’s Capital, and have a whole lot of fun.

This year the Congressional Conference starts at 1 p.m. on May 23 at the Marriott Renaissance in downtown Washington, DC. It continues through the afternoon and evening. Then on May 24, participants will meet with their lawmakers and visit insurance sites of significance. 

Travel stipends are available to the first 300 registrants (subject to eligibility requirements).

More information and registration are available online.

NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Michael Hedge – Director – Government Relations, at mhedge@naifa.org.

Work on BBB Reconciliation Bill Deferred

Enactment of the Biden Administration’s top domestic priority, the Build Back Better (BBB) reconciliation bill, is still also a top priority for Congressional Democrats. However, focused negotiations on how to change the House-passed BBB bill (H.R.5376), will not resume until after Congress addresses certain other priorities (e.g., legislation to fund the government for the rest of fiscal year 2022).

Senate action on H.R.5376 stalled last December when Sen. Joe Manchin (D-WV) announced he could not support the House-passed measure. Every Democratic Senator’s vote will be required to pass the reconciliation bill. This is because in the 50-50 Senate, with all Republicans opposed to the bill, it will take every single Democratic Senator’s vote to pass the bill.

Currently, several issues need to be resolved before the Senate can vote on its version of a BBB bill. These include:

1. The overall size of the package—Sen. Manchin is currently insisting on a package of no more than around $1 trillion to $1.5 trillion. The House-passed bill, while it claims to be fully offset, is estimated to be an approximately $2 trillion package.
2. The scope of the bill’s provisions—Sen. Manchin opposes inclusion of many programs for only a year or two. He is insisting on establishment and funding for programs for the full ten-year budget window. That means many of the programs in H.R.5376 will have to be dropped from the package.
3. A key negotiation point is what programs to include in a new BBB bill. At risk of being dropped is the House bill’s paid federal leave program. Funding increases for education, childcare, housing, and other programs are also at risk of being dropped from the Senate version of the bill, as is a change to current law’s limit on the state and local tax (SALT) deduction. Currently in play for inclusion are reinstatement of a child tax credit (likely subject to lower-income limits and to a work requirement), climate, and clean energy provisions.
4. Expanded Affordable Care Act (ACA) subsidies currently appear to have a good chance of remaining in the bill. 

Revenue: All parties to the negotiations agree that the cost of the BBB must be offset. That means tax increases. There does not appear to be much controversy over the tax increases in the House-passed bill, which largely fall on the super-wealthy and big corporations. However, new offsetting tax proposals remain possible as negotiators zero in on what to include in the new BBB bill. 

If new tax increase proposals do emerge, other Democratic Senators (e.g., Sen. Kyrsten Sinema (D-AZ)) may become key to reaching an agreement. Up to now, Sen. Manchin has not objected to imposing new taxes on the wealthy or on big businesses, but Sen. Sinema (and others behind the scenes) have objected to going too far with tax increases. For example, Sen. Sinema said “no” to earlier proposals to hike corporate and top individual tax rates.

Prospects: Washington insiders are growing increasingly skeptical about chances for enactment of any BBB bill. However, no one is confident about betting against it. Most observers believe that ultimately President Biden and the Democratic-controlled Congress will reach an agreement that can pass the Congress and be signed into law. But the timing is uncertain. The high likelihood is that serious BBB negotiations, and legislative action, will be delayed until at least March or April.

NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Michael Hedge – Director – Government Relations, at mhedge@naifa.org.

Senate Committees Work on Generation-Two Retirement Savings Bill

Considerable work on SECURE 2.0, the nickname for the emerging generation-two retirement savings bill, is absorbing much of Senate committee staffers’ time. They say it will take “a couple of months” before legislation is ready, but both Democrats and Republicans are optimistic about its chances for enactment.

The Democratic and Republican committee staffs are working together. They are collaborating with House retirement savings technical staff, examining input from committee members and other lawmakers, and also working with the private sector. Under scrutiny, Senate-side is the House-passed Securing a Strong Retirement Act (SSRA), H.R.2954, as are a range of pension bills offered by Senators. Those include the Portman-Cardin bill and a number of individual-issue bills introduced by Senate Finance Committee members and other Senators.

There are also some new issues, or new twists on pending issues, triggering technical staff study. Among them are a proposal to simplify required minimum distribution (RMD) rules, a provision to allow electronic-only notices and disclosures, and a provision extending the time a plan sponsor/administrator must hold plan participant activity history.

The RMD proposal contemplates allowing individual taxpayers who have multiple retirement savings plans to take their RMDs from the plan(s) of their choice. This aggregation rule would be an expansion of current law that allows aggregation of RMD payments from multiple IRAs; or aggregation of RMDs from multiple 403(b) plans, but not from 401(k) plans or across play types. The expansion could allow aggregation of RMDs from multiple 401(k) accounts, and/or aggregation of RMDs whether the accounts are individual (an IRA or a 403(b) annuity, for example) or employer-sponsored plan accounts (e.g., 401(k) plans). 

The electronic disclosure issue has committee staff looking at whether to expand the current law electronic disclosure rule. That rule allows plans to provide required notices and exposures electronically, except for once per year when the disclosures would have to be delivered on paper. (The rule is subject to a plan participant opt-out that allows the participant to direct their plan custodians to provide their notices and disclosures on paper.)

Also, getting attention from the technical staff is a proposal to require plan sponsors to hold onto (and make available to participants, on request) plan information for a much longer period. Some are suggesting this “hold time” should extend through the life expectancies of plan participants’ beneficiaries—up to 75 years or so. 

Prospects: Lawmakers from both parties, in both the House and Senate, are optimistic about chances for enactment of a new retirement savings bill this year. It is still too soon to predict the fates of the RMD aggregation rule proposal, the electronic disclosure rule modification, or the proposal to increase the time plan sponsors must hold onto plan information. 

NAIFA Staff Contact: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org.

Congress Nears Agreement on Government Funding for FY 2022

On February 9, Congressional leadership announced a bipartisan, bicameral “framework agreement” for funding the government for the balance of Fiscal Year (FY) 2022. The agreement was announced the day after the House passed a continuing resolution (CR) to keep the government’s discretionary programs funded through March 11. The Senate is expected to pass the short-term CR well before February 18, when current government funding expires. 

Whether Congress can translate the “framework” into an actual omnibus government funding bill by March 11 remains to be seen. There are many policy issues to resolve, even with a “framework” for agreement in place. Plus, funding decisions on specific programs must be made within the contours of the overall “framework” agreement.

However, agreement on an allocation of money to go to Defense programs, social spending plans, and other government priorities narrows the areas still up for debate. While the timeline between now and March 11 is short enough to create considerable pressure on the negotiators, both Democrats and Republicans are expressing confidence that they can get the job done without risking a government shutdown.

Prospects: The March 11 deadline means time is tight for negotiating the huge omnibus spending package. So, another short-term CR just before the March 11 deadline is certainly possible. 

And Congressional focus on the spending legislation means deferral of focus on other pending legislative initiatives, including, for example, a new Build Back Better bill, or the emerging generation-two retirement savings legislation.

NAIFA Staff Contact: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org.

DOL Expected to Propose Changes to Fiduciary Rule

Investment advisors and broker-dealers are anxiously awaiting expected proposed changes to the Department of Labor’s (DOL’s) fiduciary rule. A new proposal has not yet been submitted to the White House—the last step prior to releasing a proposed new rule. But all signs point to the agency readying to submit a new proposal to the White House’s Office of Information and Regulatory Affairs (OIRA) in the near future.

The current fiduciary rule was scheduled to take effect on December 22, 2021, but DOL announced last fall (in Field Assistance Bulletin (FAB) No. 2021-22) that enforcement would be delayed. The FAB specified that the agency would not pursue prohibited transaction claims (assuming good faith working towards compliance) until after January 31, 2022. Enforcement of specific documentation and disclosure requirements applicable to rollovers from 401(k) plans to IRAs (per prohibited transaction exemption (PTE) 2020-02) will be delayed through June 30, 2022, the FAB said. However, DOL has lifted its no-enforcement stance for the rest of PTE 2020-02, originally set to take effect on February 16, 2021, as of February 1, 2022. 

Prospects: NAIFA, in conjunction with its allies in the retirement savings community, has been in close communication with DOL as the agency gives its fiduciary rule a new look. Retirement plan community advocates are telling DOL that their rule—finalized at the end of 2020—combined with the Security and Exchange Commission’s (SEC’s) Regulation Best Interest provides robust protection for retirement investors and therefore needs no changing.

NAIFA Staff Contact: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org.

Senior Protection Legislation Moving through Congress

On January 20, Sen. Chris Van Hollen (D-MD) introduced S.3529, the “Empowering States to Protect Seniors from Bad Actors Act.” The bipartisan measure would provide to eligible state regulators $10 million in federal grants each year to “support the investigation and prosecution of senior financial fraud cases, invest in technology and training, and conduct outreach to older Americans and increase their awareness of scams.”

NAIFA is a strong supporter of efforts to protect senior investors from scams and frauds. That support was specifically noted by Sen. Van Hollen in his press release announcing the introduction of the bill.

S.3529 has three cosponsors—Democrat Sen. Raphael Warnock (D-GA) and Republican Sens. Tim Scott (R-SC) and Cynthia Lummis (R-WY) joined Sen.Van Hollen on the bill.

Prospects: S.3529 is companion legislation to H.R.5914. The House Financial Services Committee marked up and approved H.R.5914 last November. Prospects for Senate action are unclear—generally, the bill stands a good chance for acceptance, but competition for Senate time is intense. We will keep you posted.

NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org.

DOL Issues Supplemental Guidance on Inclusion of Private Equity Investments in Retirement Plans

On December 21, 2021, the Department of Labor (DOL) issued supplemental guidance to the agency’s June 2020 information letter discussing how a plan fiduciary can comply with rules governing offering private equity investments in a retirement plan. The information letter (which is not binding) focused on private equity investments in designated investment alternatives (DIAs) offered to plan participants in individual account plans. 

The supplementary guidance is in part due to questions and comments received by the agency and in part in response to a “Risk Alert” issued by the Security and Exchange Commission (SEC) that raised “compliance issues” during examinations of registered investment advisors who manage private equity or hedge funds. DOL says its supplemental guidance is to be sure that people do not “misread” the June 2020 information letter.

There are two main points in the supplemental guidance: 

1. Clarification that the June 2020 information letter was not “balanced with counter-arguments and research data” regarding the risk of private equity investments. Those counter-arguments include a conclusion that private equity investments do not have standardized performance metrics, may not have adequate disclosure to plan participants, and may have liquidity restrictions. 
2. Some plan fiduciaries may not have the knowledge needed to properly evaluate private equity investments, and in such cases, the fiduciaries would need to seek guidance from qualified advisors. DOL warned that most plan fiduciaries would need this qualified guidance, saying that in “only a minority of situations” will the plan fiduciary have the appropriate level of experience to evaluate private equity investments.

Prospects: Advisors should be aware of the heightened scrutiny DOL (through its agency, the Employee Benefits Security Administration (EBSA)) is giving fiduciary consideration of investments involving private equity.

NAIFA Staff Contact: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org.

Pandemic-Sensitive Health Insurance Costs Are Increasing

Health insurers, anticipating higher costs due to COVID-19, are changing their procedures relative to COVID-19 related costs. Many are now charging patients co-pays and deductibles for care related to COVID, where those charges were routinely waived during the earlier phases of the pandemic. Health insurance premiums may also go up.

Information released by the Kaiser Family Foundation (KFF) and the Peterson Center on Healthcare found that 72 percent of the two largest health insurers in each state and the District of Columbia are no longer waiving out-of-pocket costs (co-pays and deductibles) for COVID-19-related care. Another ten percent of these 102 health plans said they plan to phase out waivers for co-pays and deductibles by the end of October 2022.

The study also warned that these higher costs are likely to impact people who are not vaccinated and boosted disproportionately more than those who are fully vaccinated/boosted. “The policy change affects everyone equally in theory,” said Cynthia Cox, a KFF vice president, “but unvaccinated people are more likely to wind up in the hospital.” The Affordable Care Act (ACA) forbids denial of coverage or higher premiums for preexisting conditions – and vaccination status enters into a preexisting conditions analysis, but the ACA would not prevent the impact of the end of waivers on out-of-pocket costs related to COVID-19 treatment.

Short-term health insurance plans are not subject to ACA rules, and therefore, participants in these plans can be charged more for their coverage, experts say. And, wellness plans, if properly structured to comply with ACA rules, can impose a surcharge on unvaccinated individuals, so long as the surcharges are not discriminatory. Individual health insurance plans cannot impose penalties for failure to be vaccinated.

Another factor that may lead to higher health insurance costs is the cost of care for long COVID. Unfortunately, there is still not enough data to assess the impact of covering long COVID costs, and therefore experts are predicting a rise in at least some health insurance premiums. 

Prospects: The uncertainty about COVID-related health costs and the potential for increases in what people pay for health care and health insurance is likely to trigger Congressional scrutiny and possible action. But specific proposals to address these problems are unlikely before summer, or even fall.

NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org.

IRS Releases Updated Guide to Fringe Benefits

On January 31, the Internal Revenue Service (IRS) released its updated guide on the tax rules governing fringe benefits. The guide contains an overview of many tax-favored benefits available to employers and their employees. 

The guide is IRS Publication 15-B: Employer’s Tax Guide to Fringe Benefits for Use in 2022. The 34-page guide covers a range of benefits, from group term life insurance to various health insurance plan types, to dependent care benefits to de minimus benefits.

NAIFA Staff Contact: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org.

Updated Uniform Life Table Now in Effect

On January 1, 2022, a new updated uniform life table (ULT) took effect. The ULT is used to calculate required minimum distributions (RMDs) from retirement savings accounts. Generally, RMDs are required when a taxpayer reaches age 72. (There are special rules for taxpayers who in 2021 turned 70 ½—the previous age at which RMDs were triggered.)

The ULT and instructions for how to calculate RMDs are posted on the Internal Revenue Service (IRS) website.

According to retirement savings rules experts, the updated ULT means smaller RMDs for 2022 as compared to the RMDs required in 2021. One example provided by one registered investment advisor illustrated this as follows.

“Assume a 75-year-old individual has a $500,000 IRA balance. In 2021, their RMD on a $500,000 IRA with a RMD factor of 22.9 equates to 2021 RMD of $21,834. Compared to 2022, with the same $500,000 IRA balance, but updated RMD factor of 24.6, the RMD equates to $20,325, a 7% year-over-year reduction in the distribution. As one can see, the increased 2022 RMD factors result in incrementally lower required distributions.”

Prospects: RMD rules may change in the currently emerging generation-two retirement savings legislative initiative. One possible change is an increase in the age at which RMDs are required—there are proposals pending that would phase in an increase in the RMD age from 72 to 75. Another possible change is a proposal to allow flexibility in choosing which retirement account from which to take total RMDs, where a taxpayer owns more than one retirement savings account. Whether either or both proposed changes will be approved by Congress is yet uncertain. But prospects for both proposals should become more predictable within the next couple of months.

NAIFA Staff Contact: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org.