Tax Reform 2.0 adds to momentum for open MEPs

Tax Reform 2.0 adds to momentum for open MEPs
New bill eases rules around open multiple-employer plans by allowing more employers to band together to offer a common retirement plan.
SEP 11, 2018

The House of Representatives is building on recent momentum to enact a popular retirement-security measure seeking to make it easier for small businesses to offer workplace savings plans. Rep. Kevin Brady, R-Texas, chairman of the House Ways and Means Committee, introduced a trio of bills Monday known as Tax Reform 2.0, which partly aims to make permanent rate reductions for individuals and small businesses codified in last year's tax-reform law. The Family Savings Act of 2018, one of the three bills, eases rules around open multiple-employer plans, or open MEPs. These rules would allow more employers to band together and offer a common retirement plan to employees, thereby reducing cost and administrative duties. President Donald J. Trump signed an executive order Aug. 31 directing the Labor and Treasury Departments to consider updating rules around open MEPs. A bipartisan piece of existing legislation, the Retirement Enhancement and Savings Act, also contains measures around open MEPs with language nearly identical to that in the Family Savings Act, experts said. RESA unanimously passed the Senate Finance Committee in 2016, and has been reintroduced in both congressional chambers. "The idea of an open MEP has long been this bipartisan thing, but there hasn't really been any fire lit under the movement," said Jake Spiegel, senior research analyst at Morningstar Inc. "I think Trump's executive order helped accomplish that. At the very least, it keeps it fresh in everyone's mind." The Family Savings Act contains several measures that were also part of the RESA legislation, including one that would make it easier to roll a 401(k) annuity to an individual retirement account in certain circumstances. The new bill also would provide an exception from taking required minimum distributions for people with less than $50,000 held in retirement accounts, repeal the maximum age to contribute to a traditional IRA (currently 70½), provide penalty-free 401(k) withdrawals for childbirth or adoption, and establish universal savings accounts — a Roth-like account with a contribution limit of $2,500 that investors can draw from outside of retirement. At the same time, the Family Savings Act omits a few provisions sought by some industry stakeholders, including the Insured Retirement Institute and the American Council of Life Insurers. Both groups issued statements lamenting the lack of provisions that would encourage employers to add annuities to 401(k) plans and require illustrations of how 401(k) balances translate into lifetime-income streams — both of which were included in RESA. Michael Hadley, partner at Davis & Harman, said he's "cautiously optimistic" about a retirement bill being signed into law by year-end. If that happens, it would likely be a combination of items from RESA and the Family Savings Act, he said. "We're closer to a retirement bill than we've been in some time," Mr. Hadley said. "The last real bill that had a chance to become law? I can't think of anything since the Pension Protection Act of 2006. It is high time for a comprehensive retirement bill."

Latest News

Retirement withdrawal strategies shift as US assets hit $51.2T
Retirement withdrawal strategies shift as US assets hit $51.2T

Advisors say record balances aren't a retirement income plan and urge clients to benchmark their lives, not an index

RIA revenue tool targets fee leakage as PE growth pressure mounts
RIA revenue tool targets fee leakage as PE growth pressure mounts

Wealth enterprises are leaving revenue on the table - a new PureFacts and Ascentix partnership aims to help firms take it back.

The Stacking Strategy: How Intelligent Allocation Can Create Better Tax Outcomes
The Stacking Strategy: How Intelligent Allocation Can Create Better Tax Outcomes

What if one investment decision could create tax-saving opportunities across your entire portfolio? Chris Vizzi shares how the Stacking Strategy helps investors align tax planning, portfolio construction, and wealth preservation to maximize long-term outcomes while keeping more of what they earn.

AI could drag down RIA valuations, warns Alaris CEO Allen Darby
AI could drag down RIA valuations, warns Alaris CEO Allen Darby

Buyers spending on AI may treat less efficient sellers as overstaffed and price the cost of rightsizing into lower offers

Former Western Asset Management star bond manager fined $3 million
Former Western Asset Management star bond manager fined $3 million

Kenneth Leech pleaded guilty in June to one obstruction charge, and could face six to 12 months ⁠in ​prison.

SPONSORED Built on insurance experience to deliver on long-term promises

Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.

SPONSORED In the Age of AI, Trust Becomes the Advisor's Greatest Asset

As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor