Shift in Congress Could Result in New Developments on the Retirement Horizon
December 2006
The shift away from Republican power in Congress, as of the Nov. 7 election, could mean a change in the way government responds to retirement issues.
When Congress was under Republican control, President Bush touted a Social Security and retirement reform plan that pushed the creation of personal retirement accounts and heavily encouraged individual responsibility in saving for retirement security.
The President has said he intends to work with Congress to find the most effective combination of reforms. Some of the ideas from both parties have included: limiting benefits for wealthy retirees; indexing benefits to prices, instead of wages; increasing the retirement age; and changing the benefit formula to create disincentives for early retirement. Those are all on the table, according to White House staff.
Last year, new House Democratic Leader Nancy Pelosi (D-CA), introduced a retirement security platform called AmeriSave, that Democrats are expected to pursue next year. AmeriSave, among other things, would allow the government (through a tax refund) to match dollar-for-dollar the first $1,000 workers save in a retirement plan like a 401(k). It would also create a tax credit for employers who offer such savings plans, encourage employers to automatically enroll employees in these types of accounts and institute various changes to make it harder for companies to dump their pension plans.
The plan is estimated to cost $75 billion over 10 years. Experts have said the plan may be too expensive in present form to be practical, but has the potential to serve as a starting point for reform.
Perhaps the most significant effect of the change in control of Congress is the dramatic change in the leadership of the committees with jurisdiction over pension and benefit issues.
- In the House, Representative George Miller (D-CA), a close ally of incoming House Speaker Pelosi, will become chairman of the Education and the Workforce Committee, and Representative Charles Rangel (D-NY) will become chairman of the Ways and Means Committee.
- In the Senate, Senator Edward Kennedy (D-MA) will become chairman of the Health, Education, Labor, and Pensions Committee, and Sen. Max Baucus (D-MT) will become chairman of the Finance Committee.
These changes alone will have a significant effect on Congressional priorities regarding pension and benefits policy, according to legal experts.
Legal experts have also said that even though comprehensive pension reform legislation is unlikely to be enacted in the next couple of years, the new Congress will probably continue to be active on pension and retirement-related issues, such as 401(k) fees, and the regulation of hedge funds.
Regarding the Pension Protection Act, the new Congress will likely focus more on technical corrections to the legislation. There is the potential for more substantive change in the future, however.
Outgoing Leadership
The 109th Congress did take care of a few important items before it adjourned the second week of December.
As one of its last acts, the Congress passed the Tax Relief and Health Care Act of 2006 (H.R. 6111), which includes several significant Health Savings Account provisions, such as increases to HSA contribution limits and administrative simplifications.