Mercer: Trump, New Congress Will Likely Continue Bipartisan Work to Expand 401(k) Coverage

The administration of President-elect Donald Trump and Republican control of both the House and Senate will not necessarily mean the end of bipartisan work to further expand employer-sponsored retirement plan coverage, according to policy watchers at consultancy Mercer.

While the SECURE 2.0 Act of 2022 continues to roll out, policymakers will likely continue to work across the aisle to work on further work to expand workplace savings, often called “SECURE 3.0.,” said Geoff Manville of Mercer during a Washington policy briefing on November 14, shortly after the race for control of the House of Representatives in the next congress was officially called for Republicans.

“Retirement issues are set to stay a mainly bipartisan affair on the Hill, we think, that probably extends to most of the SECURE 2.0 guidance coming out of the agencies,” said Manville, a partner in the government relations,law and policy group at Mercer.

Manville did say that there will be “more consistency” at the Department of the Treasury and the IRS, as opposed to the Department of Labor, which will be led by new Trump appointees. Trump’s pick for DOL head has not yet been named.

Areas of Agreement

According to Manville, areas of agreement between the parties include recent bipartisan bill proposals that would lay the “groundwork for a potential ‘SECURE 3.0’ package.”

One of those is the Helping Young Americans Save for Retirement Act, H.R. 9281, introduced in August by Representative Brittany Pettersen, D-Colorado, and Representative Tim Walberg, R-Michigan. That bill would require employers to offer 401(k) plans to employees as young as 18; currently, the Employee Retirement Income Security Act only requires employers to make plans available to 21-year-olds, and while they can offer them to younger workers, they often do not due to costs and administrative hassle.

“We don’t expect to see a [SECURE 3.0] bill soon, but when we do, it will probably include legislation to lower ERISA eligibility plan age and to encourage automatic re-enrollment,” Manville said. “There are proposals on the Hill to encourage lifetime income and to improve the portability of lifetime savings and [to help] caregivers who have to step out of the workforce catch up on retirement savings.”

Manville also mentioned the possibility of giving 403(b) plans approval to invest in collective investment trusts, specifically via the Empowering Main Street in America Act of 2024, S.5139. The retirement industry has widely supported that initiative, though a group of consumer advocacy groups recently sought to stymie the bill on the grounds that CITs are not regulated by the Securities and Exchange Commission, but instead overseen by the Office of the Comptroller of the Currency because they are only available to workplace retirement plans.

Finally, Manville and the Mercer team believe the current Congress, during this year’s lame duck session, has a “chance of passing” SECURE 2.0 corrections that would move the needle on some stalled areas of the legislation.

Tax Treatment

On the flip side of this bipartisan work, Manville warned that Republicans will likely extend expiring tax cuts started in 2017 while also keeping their eye on the federal deficit. That, in turn, may require them to offset costs, which they could do by limiting tax incentives for retirement savings and employer-provided health care coverage.

“I don’t want to overstate the danger—Republicans are not proposing this at the moment,” Manville said. “But $4.5 trillion is a lot of money, and the entire tax code is on the table for discussion.”

Manville pointed to past Republican efforts that included limiting pre-tax contributions, requiring more post-tax Roth contributions and freezing qualified plan limits, all areas he said Democrats would likely not support.

Another area of difference could be a “stronger position on the importance” of the Employee Retirement Income Security Act’s preemption of state laws by Republicans. In recent years, as states have enacted their own laws regarding retirement plan benefits, some have voiced concern that the state rules can confuse employers otherwise following the national ERISA standards.

Finally, Manville said he anticipates a Republican push to restrict the use of environment, social and governance investing in defined contribution plans. The first Trump administration placed an emphasis on plan fiduciaries considering only “pecuniary” factors for retirement plan investing. More recently, under President Joe Biden, the DOL issued a rule that allowed for ESG factors to be considered if a fiduciary wished.

“We think that Trump will roll back the Biden administration [ESG] rule,” Manville said.