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Post-Election Leaves House Control Unanswered
The November 8 mid-term elections brought surprises but left unanswered which party will control the House. The Democrats held 50 seats in the Senate and could gain another in Georgia, where a run-off will be held December 6. While it appears likely that the Republicans will take control of the House, there are still too many as-yet uncalled House races to be sure of that.
Despite widespread expectations that there would be a “red wave” on November 8, initial results suggest that the margins of control in both the House and Senate will be very narrow. There were still 55 uncalled races for House seats and three Senate seats 24 hours after polls closed.
As of 24 hours after the election, the three Senate races that were too close to call were:
In Alaska, incumbent Sen. Lisa Murkowski (R) is running behind challenger Kelly Tshibaka (R), so the race now moves to a ranked-choice process. However, since both candidates are Republicans, the seat will remain in the GOP’s hands regardless of who wins. Republicans would have to win both Nevada and the Georgia run-off to secure the majority.
House-side, there were still 33 races that were too close to call two days after the polls closed. So far, it appears that the GOP picked up 14 seats—they need five to take control of the House, but there are a number of races that are still open that could flip from Republican to Democrat as the vote counts are finalized. Of course, Republicans could take more seats from Democrats, too, as these races are finalized. Most Washington watchers think it is likely that the GOP will take the House once all the ballots are counted, but it appears now that the margin of GOP over Democratic House members will be in the neighborhood of ten seats. That is a very narrow margin, especially in light of the likely tension between far right and more centrist House Republicans.
Prospects: Right now, the betting is on a GOP-controlled House where leadership can lose the votes of only seven to 14 of its members (the number depends on whether the Republican members vote against a GOP measure, or vote “present” or simply fail to vote at all). The Senate party ratio stands at 50 Democrats and 49 Republicans, with Democratic Vice President Kamala Harris breaking the tie, or 51-49 if the Democrats prevail in Georgia.
These margins make for a very difficult legislative process, with both parties in both chambers needing virtually their entire caucus on board with any given vote. Unless the lawmakers of the 118th Congress unexpectedly learn to compromise, or an issue arises that does not trigger partisan positioning, it looks like 2023 will bring considerable gridlock on most issues, and heartburn-producing votes on must-pass legislation.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org; or Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
117th Congress’ Lame Duck Session Could Be Tricky
Facing very narrow margins of control in both the House and Senate, both political parties will likely bring a pragmatic attitude towards the lame duck session’s must-pass legislative agenda. That raises questions about whether the SECURE 2.0 retirement savings bill can be enacted this year.
The 117th Congress, with the 50-50 Democratic-controlled Senate and the Democratic-controlled House with only five votes to spare, must fund government agencies before December 16. The lame duck lawmakers must also approve a defense authorization bill, and there’s talk about doing a same-sex marriage legalization bill, too.
There had been considerable speculation over the past few weeks about whether Republicans, with what then seemed likely to be a healthy new majority in the 118th Congress, might force narrow legislative action in November-December because they thought they could “do better” in the GOP-controlled Congress in 2023. That speculation has dried up completely—even if Republicans take control of the House (that does seem likely) and/or the Senate (very much in question), it will be by such narrow margins that achieving consensus on even must-pass legislation will be difficult.
Consequently, the early new scuttlebutt is that the lame duck 117th Congress may combine the Defense authorization legislation with the year-end government funding bill and then declare themselves done. That would leave such high-profile issues as tax extenders, legalization of same-sex marriage, and the SECURE 2.0 retirement savings bill on the cutting room floor.
Another possibility is that lawmakers will add items (to the degree they are or can be made to be bipartisan and noncontroversial) to the year-end government funding bill or the defense authorization measure or any other bill that appears to be moving.
Right now, both parties’ lawmakers are reeling a bit—the Republicans for not doing as well as their hopes and expectations suggested they would, and the Democrats from the likelihood that they will lose control of the House and maybe also of the Senate. And the lame duck session doesn’t start until November 14 (but there is unlikely to be much more, if any, clarity about the make-up of the 118th Congress by then). So, all this could change.
SECURE 2.0 is not yet final but is promised to be ready by the end of November. It is both bipartisan and bicameral. Most of the 117th Congress’ lawmakers support it. So, its fate this year appears to depend on the macro politics of whether the lame duck Congress can approve anything beyond absolute must-pass legislation.
Prospects: Chances for 2022 enactment of SECURE 2.0 depend entirely on whether the lame duck Congress proves willing to allow “extraneous” legislation to be added to either the year-end government funding bill or the defense authorization measure. We should know the answer to this by the December 16 end of the 117th Congress. We will keep you posted. You can Tell Washington to Act for Retirement Security by emailing your lawmakers.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.
DOL Proposes New Worker Classification Rules
On October 13, the Department of Labor’s (DOL’s) Wage and Hour Division (WHD) proposed new worker classification rules. The proposed rules would also rescind the current Trump-era regulations on how to classify a worker as an employee or as an independent contractor.
The newly proposed rules set up a “totality of the circumstances” test. They would require an analysis of six specific factors as well as any other factors that are relevant to the determination. The six specified factors are:
The proposed rule, if finalized, would replace the current “economic realities test” that uses two “core factors” and three supplementary factors. The two core factors, the employer’s control over the worker and the kind of work/nature of skill provided, are weighed more heavily than the other three factors (the worker’s opportunity for profit or loss, the worker’s responsibility for the costs associated with performing the work, the method and form of payment and benefits, and the length of the job commitment and expectations).
The proposed rule expands on the analysis DOL will use to determine whether the employer exercises enough control over the worker to result in the worker being classified as an employee rather than as an independent contractor. Plus, the proposed rule will consider whether the employer can exert the necessary control as well as whether the employer actually exercises that control.
Comments on the proposed rule are due December 13, 2022 (this is an extension, announced on October 25, from the original November 28 deadline for comments).
Prospects: General reaction to the proposed rule ranges from considerable concern to “it’s not so bad” (from industries like ride-share companies that are widely viewed as the principal target of the rulemaking). NAIFA will submit comments requesting the DOL to modify its proposed rule to ensure that legitimate NAIFA member independent contractors are protected from misclassification as employees. Many comments—potentially thousands—are expected. Legal challenges may follow. Therefore, expect it to take at least months before the issue is resolved.
NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
CMS Answers Questions about Rule Requiring Agents to Record Health Insurance Client/Prospect Calls
The Centers for Medicare and Medicaid (CMS) has issued frequently asked questions (FAQs) regarding its rule requiring the recording of all calls between insurance agents/advisors and clients and prospects for Medicare Advantage and Medicare Prescription Drug (Part D) coverage.
The FAQs make it clear that the CMS rule applies to all agent-broker marketing calls, both outbound and inbound, and includes individual agents/brokers/advisors as well as call centers.
NAIFA has been working with certain members of Congress as well as within a coalition to point out to CMS that “marketing abuses” (concerns) are primarily focused on call centers, not individual agents/advisors. Reports are that CMS has advised supportive members of Congress that the agency plans to address these concerns and is asking that lawmakers hold off on introducing legislation to exempt individual agents from the requirement that all calls to and from Medicare Advantage/Part D clients be recorded.
In May, the Centers for Medicare and Medicaid Services (CMS) issued a Final Rule which revises the Medicare Advantage (Part C) program and the Medicare Prescription Drug Benefit (Part D) program regulations to implement changes related to marketing and communications, past performance, Star Ratings, network adequacy, medical loss ratio reporting, special requirements during disasters or public emergencies, and pharmacy price concessions.
One area of concern is a new requirement which mandates contracts between TMPO and Plan, or TPMP and Plan’s FDR must ensure that the TPMO affirms that Medicare Advantage plans and Part D sponsors are responsible for TPMO activities associated with the selling of those plans and requires that TPMOs record all calls with beneficiaries in their entirety, including the enrollment process.
On balance, beneficiary dissatisfaction is not with their agent of record, but with the call centers that solicit beneficiaries to switch plans that may not meet their needs. NAIFA believes that calls with existing clients should be exempt from this requirement. To that end, NAIFA has been in contact with CMS and, on July 26, sent a letter to CMS Administrator Chiquita Brooks-LaSure requesting an exemption for agents working with existing clients.
Additionally, on August 11, NAIFA joined with joint trades partners and sent an agents coalition letter to CMS advocating for a rule implementation delay of six to 12 months, during which CMS will work with stakeholders to develop marketing regulations that will protect beneficiaries while allowing them access to their trusted licensed independent agent or broker.
In response to the outreach and concern about the lack of guidance on the recording of calls with clients, CMS has issued an FAQ to assist agents and brokers with navigating this new requirement. This new guidance provides an overview of the process and addresses some of NAIFA’s concerns regarding the lack of prior clarity. Many of the FAQs are based on questions NAIFA raised, stressing issues many agents are having trying to comply. While the FAQs do not amend any of the recording requirements, this move is a positive step forward and possibly the first of other actions we could see CMS take.
Prospects: NAIFA is continuing its collaboration with CMS, as well as working with federal legislators, requesting an exemption for agents and brokers working with clients. NAIFA will continue to press this issue with CMS and will provide updates as necessary.
NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
IRS Finalizes Rule to Provide Relief for “Affordable” Family Health Coverage
The Internal Revenue Service (IRS) has issued a final rule aimed at eliminating the “family glitch” involved in determining whether individuals eligible to be covered under employer-provided family health insurance can qualify for ACA premium subsidies. The rule, RIN 1545-BQ16, allows family members to qualify for premium tax credits for other health insurance when the plan participant’s self-only coverage would qualify the coverage as “affordable.”
The so-called “family glitch” prevented family members from receiving ACA subsidies if a household member has access to employer-provided coverage that meets the requirements for affordability and minimum essential benefits under self-only coverage rules. This final rule expands the subsidies to family members who seek coverage outside of the employee’s family coverage plan.
Prospects: Legal challenges to this new family glitch rule are expected. Opponents call it an expansion of the ACA that exceeds the IRS’ statutory authority. “There absolutely will be litigation challenging the rule,” said Brian Blasé, president of the Paragon Health Institute and a Trump-era health care advisor who served on the National Economic Council. “This is the White House wanting to expand Obamacare, and the IRS to change its enforcement of the tax code because of White House political pressure.”
NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
IRS Delays Effective Date for New Ten-Year RMD Rule
In Notice 2022-53, the Internal Revenue Service (IRS) announced that the new ten-year required minimum distribution (RMD) rule will not take effect before calendar year 2023.
The Notice states that excise taxes and tax disqualification will not apply to failure by beneficiaries to take an RMD under the new ten-year rule for calendar years 2021 and 2022. The Notice also states that the final RMD regulations will not apply before calendar year 2023.
The ten-year RMD rule was enacted at the end of 2019 in the SECURE Act. The new rule prevents stretching out (over the lifetime of the beneficiary) distributions upon the death of a retirement plan beneficiary. Rather, such distributions must be taken within ten years of inheriting a retirement plan account. There is a 50 percent excise (penalty tax) for failure to take an RMD.
Prospects: The IRS proposed a regulation to implement the new ten-year RMD rule in February 2022. The proposed regulation triggered considerable comment and controversy, as did the statutory rule. While it currently appears unlikely that Congress will walk back this new “stretch IRA rule,” it is possible that either the final rule or new legislation could ease the complications it has caused, especially for people who already have plans in place that would be impacted by the new rule.
NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.
IRS Announces Inflation Adjustments for Retirement/Health Plans for 2023
The Internal Revenue Service (IRS) has announced inflation adjustments for contributions to 401(k) plans, IRAs, health savings accounts (HSAs), flexible spending arrangements (FSAs) and other plans with contribution limits that adjust for inflation each year.
The contribution limit for 401(k) plan in 2023 will go up by $2,000, to $22,500. Catch-up contributions will increase to $7,500. Retirement savers will be permitted to contribute $6,500 to IRAs, up from $6,000 in 2022.
FSA contribution limits will rise to $3,050 in 2023, up from $2,850 in 2022. If the employer’s FSA plan so permits, carryover amounts will go from the current $570 to $610 in 2023.
In 2023, HSA limits will go to $3,850 for single HSA owners. The limit will be $7,750, up from $7,300, for family HSA coverage.
Prospects: The inflation adjustments are so big because of rampant inflation. The inflation rate of the CPI-U, the measure used to calculate these inflation adjustments, was 8.2 percent this year. These inflation adjustments also affect Social Security benefits, which go up, due to inflation adjustments, by nine percent in 2023.
NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.
Treasury Releases Its 2022-2023 Priority Guidance Plan
On November 4, the Treasury Department released its priority guidance plan for between now and June of 2023. The current priority plan includes 21 regulatory projects in the retirement savings area—including guidance on SECURE Act rules (the law enacted at the end of 2019), MEPs (multiple employer plans), 401(k) plan rules, retirement age regulations, and regulations regarding the early withdrawal penalty tax.
The plan is aspirational—rarely does any agency reach all (or even most) of the regulatory goals on its priority agenda. But it is a good indicator of what to expect in the way of regulatory activity in the upcoming six months.
Also on the priority list are regulations on executive compensation, health insurance tax rules, other employee benefits, and employment taxes. Paid leave rules, financial product and institution regulations, rules regarding estate and gift taxes, partnership and S corporation regulations are also on the list. The list also includes a regulatory project under the section 72 exchange of property for an annuity contract rules.
NAIFA Staff Contacts: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org; or Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
President Biden Nominates Danny Werfel for IRS Commissioner
President Biden last week nominated Danny Werfel, currently a partner at the Boston Consulting Group where he heads the public sector practice, to be the new Commissioner of the Internal Revenue Service (IRS). Should he be confirmed by the Senate, he would succeed Trump appointee Charles Rettig, whose term ended on November 12.
Werfel has extensive bipartisan government experience including as Acting Controller in President George W. Bush’s Office of Management and Budget (OMB) as well as the OMB Controller for President Obama. After serving as OMB Controller, Werfel was appointed Acting Commissioner of the IRS until Obama’s official appointee John Koskinen was approved by the Senate to be Commissioner.
Prospects: It is expected that this nomination will be a high priority for Senate Democrats in the lame duck session, especially if the election outcome throws Senate control to the Republicans. Senate Republicans may be less ready to move quickly on the nomination in part because they oppose the $80 billion in new funding given to the IRS in the Democratic-only-supported Inflation Reduction Act enacted earlier this year. Senate consideration of IRS Commissioner nominees often has taken months in prior Administrations. However, Senate Finance Committee Chairman Wyden has already indicated his support. We will keep you posted on how this nomination proceeds.
NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.
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