Retirement bill would allow tax-free financial planning

Adviser advocates are grateful for attention to the matter, but say the provision needs to be clarified

May 30, 2019 @ 2:13 pm

By Mark Schoeff Jr.

Recently introduced legislation includes tax incentives for financial planning related to retirement.

The provision, contained in section 113 of the Retirement Security and Savings Act, would permit employees to use pre-tax dollars through employer-based retirement programs to pay for investment advice regarding qualified plans. It also would allow retirement advice for investments held outside such arrangements.

The feature is one of more than four dozen in a bill written by Sens. Robert Portman, R-Ohio, and Ben Cardin, D-Md., that was released earlier this month. The legislation is designed to help people save more for retirement and expand the number of businesses that sponsor plans.

The fact that the lawmakers promote financial planning around retirement drew praise from Chris Iacovella, chief executive of the American Securities Association, which represents regional financial services firms. The group highlights such policy in its own retirement security agenda.

"It's really good Congress is recognizing how important a sound financial plan is in times of volatility and uncertainty," he said.

But it's unclear how broadly the provision would apply and how it defines financial planning services, according to Maureen Thompson, vice president of public policy at the Certified Financial Planner Board of Standards Inc. Regardless, she's happy to see it's been included in an extensive retirement savings bill.

"We think it's important that Congress is focusing on the issue of retirement planning and looking at ways it can be more accessible," Ms. Thompson said. "It would be a helpful thing for people saving for retirement."

David O'Brien, principal at Evolution Advisers, said he would like to know more about the scope of the planning functions permitted under the bill and whether there are criteria for financial advisers who are hired.

"We need to understand what services are eligible and the standard of care under which financial planning must be provided," he said. "Consumers should be able to know that the services will be delivered by a CFP professional and with a fiduciary duty."

A spokespeople for Mr. Portman and Mr. Cardin did not respond to requests for comment.

The bill was introduced just before another comprehensive retirement savings measure, the SECURE Act, received overwhelming House approval last week.

Sens. Charles Grassley, R-Ia., and Ron Wyden, D-Ore., chairman and ranking member, respectively, of the Senate Finance Committee, have introduced the Retirement Enhancement and Savings Act, which closely resembles the SECURE Act, and have expressed a desire to move quickly on the House bill.

The Portman-Cardin measure could become part of the effort to move retirement security legislation, according to Mr. Iacovella.

"It's a natural complement to those bills," he said. The 417-3 House vote for SECURE "gives the Senate a lot of leeway to include a variety of bipartisan measures that will help working families save for retirement."

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