'Less pressure' on changes to defined contribution plans under tax reform: Graff

Brian Graff, executive director of the National Association of Plan Advisors, predicts the Trump administration will favor tax changes that will be well liked

Jun 26, 2017 @ 3:43 pm

By Greg Iacurci

The state of political affairs in Washington is making it less likely that there will be major changes to the treatment of defined contribution plans under any upcoming tax-reform legislation, an executive with the largest association for retirement plan advisers said Sunday evening.

"The White House has told me, has told a lot of people, that at least from the Trump administration's standpoint, anything in tax reform should not be a significant change in tax policy," said Brian Graff, executive director of the National Association of Plan Advisors. "What they're doing is saying, 'We don't want to rock the boat … We want to do tax reform if everyone likes it.'"

This points to an increasing likelihood that any change to the tax code will take the form of a temporary, "unpaid-for individual tax cut" rather than a permanent reform, said Mr. Graff, who spoke at the annual Kohler Retirement Plan Advisor Best Practices Conference in Kohler, Wis.

(More: Tax reform could be 'way worse' for retirement industry than Department of Labor's fiduciary rule: Graff)

Paul Ryan, speaker of the House of Representatives, cited retirement savings incentives as one of the items that Republicans would seek to preserve during a tax-reform exercise.

Since DC plans represent one of the federal government's largest tax expenditures, industry stakeholders have feared some of the existing savings incentives for plan participants would be amended to pay for proposed tax cuts.

However, some of the more extreme changes being floated, such as increased reliance on Roth contributions, "are significantly less likely and continue to be significantly less likely … if it's going to be politically negative [for Republicans]," said Mr. Graff, who's also the CEO of the American Retirement Association, the umbrella organization for NAPA and other retirement industry trade groups.

"The good news is this takes a lot of the pressure off us," he said. "I don't want to say we've won and it's over, but I do want to say that practically, there is less pressure because of the way things are going. Of course, that could be subject to change."

Mr. Graff still is a "little bit nervous" at the prospect of DC plans being used as a revenue-raiser for a tax cut on the corporate side.

After the election of Donald J. Trump as president in November, Republicans began outlining an ambitious agenda of health care and tax reform as two top-priority legislative items.

However, health care and the ongoing investigation of the potential ties between Russian officials and the Trump administration are holding up all other activities on Capitol Hill, Mr. Graff said.

(More: Planning Roth conversions during tax reform uncertainty)

And, if the new health care bill introduced in the Senate goes to conference, meaning it is reconciled with the House of Representatives' version of the Obamacare replacement bill, it could take up most of the summer, meaning tax reform likely wouldn't happen until the fall and would extend into next year, Mr. Graff said.

"Time is compressing," Mr. Graff said. "Something as significant as tax reform is being subsumed by all these other things."

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