Retirement insights from a Colorado PERA perspective

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From health care to pensions to taxes, 2017 has been an active year for Congress. Although most of these pieces of legislation have yet to pass, PERA continues to closely monitor their progress.



<a href="https://www.copera.org/2017-federal-legislation-update" target="_blank" rel="noreferrer noopener">H.R. 173 – Middle Class Health Benefits Tax Repeal Act of 2017</a> Introduced on January 26, 2017, H.R. 173 would repeal the 40 percent excise tax (also referred to as the “<a href="https://www.copera.org/2017-federal-legislation-update" target="_blank" rel="noreferrer noopener">Cadillac Tax</a>”) on certain high-cost health plans created by the Affordable Care Act. The tax, currently scheduled to begin in 2020, would affect anyone who has some or all of their health care costs paid for by their employers beyond a set threshold. According to <a href="http://www.fightthe40.com/" target="_blank" rel="noreferrer noopener">Fight the 40</a>, a coalition of private and public sector groups who are opposed to it, roughly 82 percent of employers expect the tax to affect them within the first five years, and 178 million Americans rely on employer-sponsored health care. The bill has not yet been assigned to any committee and likely will not be voted on during the current Congress, but it has picked up 208 cosponsors, including Colorado Reps. Mike Coffman (R-06) and Ed Perlmutter (D-07).



<a href="https://www.copera.org/2017-federal-legislation-update" target="_blank" rel="noreferrer noopener">H.J. Res. 66 – Disapproving the rule submitted by the Department of Labor relating to savings arrangements established by states for non-governmental employees</a> This resolution, which became law when President Trump signed it in May, prevented the Department of Labor’s rule allowing state governments to create retirement savings systems for private sector employees exempt from the Employee Retirement Income Security Act (ERISA). Several states have already created such plans, and <a href="http://money.cnn.com/2017/05/03/retirement/state-retirement-plans-senate/index.html" target="_blank" rel="noreferrer noopener" class="broken_link">officials in at least one</a> state (Oregon) have said the rule’s revocation will not necessarily halt them from implementing their plans. A bill introduced earlier this year in the Colorado Legislature that would have created a similar system failed in the state Senate, and it remains unclear what the passage of H.J. Res. 66 will portend for future state efforts to create retirement savings systems for private sector residents who lack access to them.



<a href="https://www.copera.org/2017-federal-legislation-update" target="_blank" rel="noreferrer noopener">Department of Labor’s Fiduciary Rule</a> This rule from the Obama Administration would have required financial advisers to be fiduciaries to their clients, meaning they would have been legally required to act in their clients’ best interests. <a href="https://www.dol.gov/newsroom/releases/ebsa/ebsa20171127-0" target="_blank" rel="noreferrer noopener">Just this past Monday</a>, the Department finalized a rule that will delay the implementation of its main provisions from going into effect on January 1, 2018, to July 1, 2019. While this delay does not necessarily mean the end of the rule, <a href="http://www.investmentnews.com/article/20171127/FREE/171129942/delay-of-dol-fiduciary-rule-enforcement-mechanisms-now-final" target="_blank" rel="noreferrer noopener" class="broken_link">proponents</a> of the fiduciary requirements say it’s all but certain the rule will never be fully implemented.



<a href="https://www.copera.org/2017-federal-legislation-update" target="_blank" rel="noreferrer noopener">S. 915</a> and <a href="https://www.copera.org/2017-federal-legislation-update" target="_blank" rel="noreferrer noopener">H.R. 1205 – Social Security Fairness Act of 2017</a> The latest attempt by members of Congress to repeal the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) provisions of Social Security were introduced by Sen. Sherrod Brown (D-OH) and Rep. Rodney Davis (R-IL-13) in February. As previously mentioned in <a href="https://www.copera.org/2017-federal-legislation-update" target="_blank" rel="noreferrer noopener">PERA on the Issues</a> when the bills were introduced, while Congress has long been searching for a solution to making WEP and GPO more fair for public employees who collect partial Social Security benefits, their outright repeal faces a difficult road ahead since it will have a negative impact on the financial condition of the already troubled Social Security trust fund.



<a href="https://content.copera.org/financial-choice-act-repeal-dodd-frank/" target="_blank" rel="noreferrer noopener">H.R. 10 – Financial CHOICE Act</a> This bill, which would drastically alter banking and financial regulations put in place following the 2008 global financial crisis, passed the House 233-186 on June 8, 2017. Public pension systems, <a href="https://www.wsj.com/articles/investor-group-pension-funds-oppose-financial-choice-act-1495060509" target="_blank" rel="noreferrer noopener">including Colorado PERA</a>, wrote to members of Congress in May urging them to oppose the measure due to their concerns about the bill’s effects on protections for investment markets. Although there was no companion bill introduced in the Senate, one piece of H.R. 10—which dealt with transparency of Exchange-Traded Funds (ETFs)—passed out of the Senate, was approved by the House, and signed into law. It remains to be seen whether another bill will be introduced, or if Congress members will wait until 2018 to try again.



<a href="https://www.copera.org/2017-federal-legislation-update" target="_blank" rel="noreferrer noopener">H.R. 1124 – State and Local Pensions Accountability and Security Act</a> Currently awaiting consideration by the House of Representatives, this bill would prohibit the use of federal money to fund depleted state and local pension systems in the event they enter insolvency. This measure was <a href="https://www.scribd.com/document/358269167/Letter-to-Speaker-Ryan-090717" target="_blank" rel="noreferrer noopener">touted in a letter</a> to House Speaker Paul Ryan (R-WI) from Rep. Mark Walker (R-NC), who heads the <a href="https://www.copera.org/2017-federal-legislation-update" target="_blank" rel="noreferrer noopener">Republican Study Committee</a>. Although it appears unlikely the bill will gain any traction before the end of the current Congressional session, it has picked up nine cosponsors.



<a href="https://www.copera.org/2017-federal-legislation-update" target="_blank" rel="noreferrer noopener">H.R. 1 – Tax Cuts and Jobs Act</a> Arguably the biggest piece of legislation currently being considered by Congress, the first major overhaul of the U.S. tax code in more than 30 years passed the House on a vote of 227-205 on November 16, 2017. The Senate version of the bill is scheduled to have a hearing this week, and once passed will be reconciled with the House version in a conference committee. While retirement does not figure to play as large of a role in the legislation as originally thought (early versions of the bill were rumored to include “Rothification” of 401(k) contributions, among other potential retirement changes) public plan sponsors are closely monitoring a provision that would change how public retirement systems pay taxes on&nbsp;<a href="https://content.copera.org/retirement-roundup-pensions-are-keeping-promises/" target="_blank" rel="noreferrer noopener">certain investment earnings</a>. Public pensions like PERA are not currently subject to the unrelated business income tax (UBIT) paid on certain income generated by companies in which public pensions have invested retirees’ dollars. While it’s possible the provision will be stripped away during the reconciliation process, legislators must abide by a budgeting requirement that the bill cost no more than $1.5 trillion over 10 years.



See PERA Executive Director Greg Smith’s <a href="https://peraontheissues.com/wp-content/uploads/2017/11/Rep.-DeGette-re-Section-5001-of-H.R.-1-Letter-1.pdf">letter on UBIT</a> sent to members of the Colorado Congressional Delegation.

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