Federal Roundup
November 17, 2014 by NAFA Staff
Congress returns next week from an active campaign season that resulted in a huge win for Republicans. The House gained a stronger historic Republican majority, and the Senate election produced a larger than expected Republican majority. Now D.C. insiders are already concentrating on 2016, when more Senate seats are up and a significant presidential election is at stake.
Although Republicans will control the legislative branch, it’s likely that policy gridlock will remain. Corporate tax reform, energy, healthcare and immigration legislation will likely occupy floor time. Certainly in the Senate, Republicans will have to work with Democrats to pass legislation as Democrats can filibuster and the President has veto power. Clearly, both parties want to show constituents they can produce results; however, there are fewer moderates in each party, and ideological differences will likely continue to pose challenges on major legislation. The House will advance more conservative Republican Party base legislation and the Senate will have to negotiate to secure some Democratic votes without alienating the House. Accordingly, the Senate will be a battleground for policy making to shape the future outcomes for both parties through 2016.
At this point we do not expect the lame-duck session of Congress to have any negative impact. Congress will return for two weeks, break for a week for Thanksgiving and then return for two weeks before adjourning (a December 12 target) for the year with the goals of completing an omnibus spending bill or a continuing resolution and addressing some tax extenders and nominations. Next year should prove favorable for the insurance industry in Congress, and NAFA remains focused on a range of policy issues. In particular, we will be closely watching for the release of new tax reform proposals to assess any impacts on the annuity industry. NAFA joined sister trade groups in the Secure Family Coalition to fight against negative proposals this year, and we will continue to support this effort. Lawmakers continue to grapple with tax and spending policies in an effort to spur economic growth and job creation while facing growing federal debt and entitlement spending obligations, making so-called “pay-for” threats a real concern. Furthermore, escalating lawmaker concerns about corporate tax inversions eroding the corporate tax base might nudge broader tax reform efforts forward in 2015. Accordingly, bipartisan consensus is emerging that Congress must tackle corporate tax reform before addressing individual reforms. However, given ongoing attention to the retirement savings gap, we anticipate various bills will be introduced to help stimulate the retirement marketplace for consumers and businesses.
Additionally, we expect movement from the Department of Labor (DOL) early in 2015 with the release of a long-awaited, re-crafted proposed fiduciary rule. While there is still some debate on timing, given the election results, the DOL might be spurred to act sooner as it faces a limited time to finalize a rule before a possible new Republican Administration. Secretary Perez is more engaged on the issue and has been communicating with the White House. We hear they are still concerned about rollovers, and apparently, the revised rule will still have a strong impact on the industry. NAFA will be prepared to submit a comment and work with industry allies in response. We’ve also learned that the Securities and Exchange Commission (SEC) staff is actively working on draft fiduciary standard recommendations for the commissioners to review. Chairman White has stated that consideration of a fiduciary standard is a high priority, but hasn’t confirmed that the SEC will pursue a formal rule. Many industry groups are actively pushing the SEC to propose uniform fiduciary standards before the Department of Labor.
Finally, NAFA will be working on the Department of Treasury final qualifying longevity annuity contracts (QLAC) rule. The rule would modify minimum distribution rules to allow 401(k) or similar plan and IRA participants to use up to 25% of their account balance, or (if less) $125,000 to purchase qualifying longevity annuity contracts. While we are pleased the rule promotes the use of fixed annuities, NAFA is working with the Treasury and industry partners on clarification regarding the treatment of fixed indexed annuities (FIAs). NAFA strongly believes that many FIAs meet the Treasury’s objective of providing consumers with guaranteed and predictable lifetime income to address longevity issues.
In closing, 2014 has been a good year in D.C. for NAFA and fixed annuities. In many public forums with lawmakers discussing retirement security, fixed annuities were repeatedly mentioned as being an important option for consumers to address longevity issues. Additionally, efforts by the Department of Treasury to promote QLACs and legislation by Senator Hatch (R-UT), the next likely Senate Finance Chairman, are positive. In June, NAFA members flooded into Washington, D.C., for our annual Leadership Forum to hear retirement regulatory perspectives from key policymakers. Also, NAFA formed the Coalition for Annuity Awareness (CAA), which is comprised of industry associations that serve consumers by helping them understand the important role of annuities as part of a secure retirement savings plan. CAA has designated June as National Annuity Awareness Month and will seek official recognition from Congress.
We look forward to your continued support and participation as we prepare for another year in D.C.!
