TIA Tracking Build Back Better, Retirement Legislation

June 6, 2022

As Congress looks ahead to its month-long "recess" in August, the Tire Industry Association (TIA) is closely watching several issues of key importance to independent tire dealers.

"By the time members (of Congress) return in September, the fervor of the midterms will be in full tilt and most legislative priorities will be sidelined," TIA said in a June 6 bulletin to its members.

"From a privately owned and small business perspective, we continue to monitor two big pieces of legislation that could see movement this summer" - a new version of Build Back Better (BBB) legislation and the SECURE Act, which increased the age at which participants in employer-sponsored defined contribution plans and traditional (non-Roth) individual retirement accounts must begin taking required minimum distributions. 

"It is clear that the version of BBB that was passed by the House late last year is dead and buried – primarily due to the opposition of Senators Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ). However, if common sense still holds sway with the Democrats, then there is still a chance that we will see a much smaller and cleaner reconciliation bill - probably not called anything like BBB - which will include only those provisions that Senators Manchin and Sinema support.

"If these two Senators are willing to back any new reconciliation legislation, then look for a few items such as the extension of the child tax credit and possibly universal pre-k, to be included. Once the process starts in earnest it should go quickly, since basically there will be only two Senators writing it and that assumes that Senator Manchin doesn’t pull back on the bill again.
"Again, if common sense prevails, this bill will be short and sweet – with a relatively few items which can be easily explained to the public. Senator Manchin is facing pressure in his home state of West Virginia to renew funding for the Black Lung Disability Fund. This renewal was included in the House passed BBB legislation and may be a bargaining chip that brings Senator Manchin back to the table to negotiate a new narrower version of the bill. He is on record saying that he wants to support some of the climate and energy tax credits, but also wants to include significant revenue raisers so that the bill will reduce the deficit. He also supports allowing Medicare to negotiate directly with the pharmaceutical companies to lower prescription drug prices. He said he’ll support a corporate tax increase from 21% to 25%. Of course, Senator Sinema is on record against raising taxes. It will be interesting to see if the progressive arm of the Democrat party is willing to scuttle a more modest version of BBB because it will not include many of the items they want or whether they understand that half a loaf, even a quarter of a loaf is better than nothing.
"There is a lot of pressure on the Democrats to pass something before the mid-terms, but whether they will be able to thread the needle amidst the various segments of their party to reach a compromise bill remains to be seen.
"Also on the watch list for small business this summer is the SECURE Act 2.0, which passed the House by an overwhelming majority (414 to 5) at the end of March. The margin by which the bill passed the House certainly gives it momentum as it moves to the Senate. However, it is likely that, rather than passing the bill in its current form, the Senate will make changes or pass its own retirement plan bill and send the matter back to the House. 
"It seems strange that any retirement plan bill could pass so overwhelmingly in the House, particularly since from the small business perspective, it has a number of problems. Chalk this aberration up to claims that the bill will allow more people to invest for their retirement at larger contribution levels (larger contributions is hardly accurate) while the real cost to key employees of small businesses has been ignored.
"Even though most of the major retirement plan groups in town are in favor of the House passed Secure Act 2.0, there are a number of proposals that are apt to cause privately owned and small businesses real problems. The bill would mandate new 401(k) plans to include auto-enrollment starting at 3% of pay and increasing each year up to at least 10%. This means that a participant would be automatically enrolled in the 401(k) plan and have 3% of his pay contributed to the plan in the first year, 4% in the second, until reaching 10% in the eighth year. Participants are allowed to opt out. The mandate will not apply to businesses with 10 or fewer employees or new businesses who have been in business for less than 3 years. 
"While auto-enrollment definitely increases participation in retirement plans, it also is difficult for small businesses to administer. Also of major concern is that the bill would force catch-up 401(k) contributions which are allowed for participants who are 50 or older to be after-tax, i.e., Roth contributions. It is likely that this change would cause many older participants to choose not to make catch-up contributions.
"Although the House was the first to pass its bill, the Senate has already been working on retirement plan legislation for some time. Last May, Senators Ben Cardin (D-Md.) and Rob Portman (R-Ohio) introduced the Retirement Security and Savings Act of 2021 (S.1770) which covers some of the same ground as Secure 2.0. 
"TIA will be closely monitoring the progress of this legislation and working to educate members about the retirement plan elements that are critical to small businesses and their owners and employees."