How will a Republican Party-controlled government impact pension policy?
After Donald Trump’s resounding election victory this week and the reconquest of the US Senate by the Republican Party, pension and tax policies could be significantly affected after the transfer of power, according to the National Association of Planning Advisors (NAPA).
A political majority in the US House of Representatives remains unclear, but should the Republican Party take control there as well, the Republican Party will have control over the executive and legislative branches of government, as well as the judiciary, which will likely remain in place for decades.
In terms of implications for pension policy, NAPA said the most immediate changes came from the incoming leadership of powerful Senate committees. The chairmen of these committees have the freedom to choose the legislative agenda for Congress. Sen. Mike Crapo (R-Idaho) is poised to take control of the Senate Finance Committee, which oversees “the Internal Revenue Code, Social Security, tariff and trade issues, as well as health care-related tax issues,” NAPA wrote .
The Senate Health, Education, Labor, and Pensions (HELP) Committee, currently led by Sen. Bernie Sanders (I-Vt.), will likely be joined by Sen. Bill Cassidy (R-La.).
“The HELP Committee has primary jurisdiction over private pension plans and the Pension Benefit Guaranty Corporation through ERISA (the Employee Retirement Income Security Act),” NAPA explained. “But it shares jurisdiction with the Finance Commission as it relates to tax policy and ERISA issues.”
Crapo has a history of bipartisanship on pension issues, including his role in passing the SECURE 2.0 legislation with Senate Democrats. He also helped pass the Senior Safe Act “to increase protections for older investors from financial exploitation and abuse,” according to NAPA.
Cassidy is also a proponent of “collective investment trusts (CITs) in 403(b) plans, as well as legislation to establish an automatic reenrollment safe harbor,” according to NAPA. Cassidy has also sponsored legislation that would lower the minimum age of participation “for ERISA-covered defined contribution (DC) plans from age 21 to age 18.” He is against environmental, social and governance (ESG) investments.
At the Association of Mortgage Bankers (MBA)’s Annual Convention and Expo in Denver last month, MBA director Bill Killmer described something of a “tax super bowl” debate taking place in Congress over the soon-to-expire Tax Cuts and Jobs Act. The TCJA is one of Trump’s signature legislative achievements during his first term.
It was thought that the debate over whether to reauthorize or expand the law would be particularly difficult if Democrats retained a majority in Congress and stuck to the White Housebut the likelihood that none of this will happen has increased significantly since Election Day.
“The TCJA has created some changes to the pension tax system, but the roughly $1.5 trillion tax reform legislation provided major tax relief for corporations, pass-through entities, and individual filers, and simplified the system in numerous ways,” NAPA said.
But the upcoming budget debate is still expected to be animated, given that legislative majorities will remain thin and the budget reconciliation process can only go so far.
“During the campaign, President Trump discussed eliminating the tax on Social Security benefits and the tax on tips, as well as implementing broad tariffs in exchange for additional tax cuts. That would probably be part of the upcoming budget debate,” NAPA said.
