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1 Washington in 2021
Washington in 2021:Democrats ControlWhite House &
CongressGeorgia elections cement Democratic control
7 January 2021
OverviewDemocrats Jon Ossoff and Raphael Warnock won theGeorgia
runoff elections, giving Democrats control ofthe Senate beginning
later this month. With the partiessplit 50-50 in the Senate, Vice
President-elect KamalaHarris will break ties, allowing major
priorities likestimulus, climate change, and health care,
potentiallypaid for with tax increases, to be brought up andpassed
in the House and Senate. The party ratio in thechamber was going to
be narrow under either Georgiarunoff scenario, requiring bipartisan
cooperation formuch to get done, but Senate control
affordsDemocrats additional options like budget reconciliation.
With such a narrow margin, Democrats face the choicesof: 1)
negotiating with Senate Republicans to achievethe 60-vote margin
necessary to move most legislationthrough the Senate; 2) using the
budget reconciliationprocess that allows certain legislation to
pass with 51votes, rather than the 60-vote filibuster threshold;
or3) changing rules regarding the filibuster. Regardlessof how
legislation is processed, moderate senators likeJoe Manchin (D-WV)
and Susan Collins (R-ME) will playa huge role in deal-making.
Democrats have potentially two opportunities toemploy budget
reconciliation if instructions can beapproved in the FY2021 and
FY2022 budgetresolutions — only one reconciliation bill is allowed
foreach resolution. House Speaker Nancy Pelosi (D-CA)has said a
first reconciliation bill will combine pandemicrelief with
Affordable Care Act (ACA) improvements.
What priorities or combinations would be the target ofa second
reconciliation bill is unclear. However, eachbill is limited in
that it must not increase the deficitoutside the 10-year budget
window. How much of anyof the first reconciliation bill would be
paid for isunknown now, as is how President-elect Biden willproceed
with his intention to raise the statutorycorporate income tax rate
to pay for changes that canbenefit middle-income Americans on “day
one” of hispresidency.
Year-end 2020 legislation (Pub. Law No. 116-260)omitted state
and local funding and liabilityprotections, and included smaller
direct payments andunemployment add-ons than some wanted.
Bothparties expect additional virus-related legislation, andBiden
has said “Congress will need to immediately getto work on support
for our COVID-19 plan.”
Beyond full-chamber leadership, Democratic controlalso means
chairmanships of committees, which willdetermine what bills and
issues are considered. Thelast 50-50 split was after George W. Bush
was electedpresident in 2000 and required Senate leaders
tonegotiate an agreement on committee ratios andprocedures. A
similar process is expected this time, butthe negotiations could
take some time.
Must-pass legislation in 2021 will need to address:• The federal
debt limit reinstated on August 1, 2021.• Expiration of government
funding, and highway
authorization & funding on September 30, 2021.
Washington Council Ernst &
Younghttps://www.ey.com/en_us/tax/washington-council-ernst-young
0 100 200 3000 20 40 60
Senate: 50 Democrats, 50 Republicans House: 222 Democrats, 211
Republicans, 2 open
* Two open seats attributable to an undecided race in New
Yorkand the passing of Rep.-elect Rep. Luke Letlow (R-LA).
DR
DRO
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2 Washington in 2021
Expected Senate leadership
Agriculture Democrats Republicans
Chairman Debbie Stabenow (D-MI) Ranking Member John Boozman
(R-AR)
Expected Senate committee leaders include
Leadership Democrats Republicans
Majority Leader Chuck Schumer (D-NY) Minority Leader Mitch
McConnell (R-KY)
Majority Whip Dick Durbin (D-IL) Minority Whip John Thune
(R-SD)
Appropriations Democrats Republicans
Chairman Patrick Leahy (D-VT) Ranking Member Richard Shelby
(R-AL)
Banking Democrats Republicans
Chairman Sherrod Brown (D-OH) Ranking Member Pat Toomey
(R-PA)
Budget Democrats Republicans
Chairman Bernie Sanders (I-VT) Lindsey Graham (R-SC)
Commerce, Science& Transportation
Democrats Republicans
Chairman Maria Cantwell (D-WA) Ranking Member Roger Wicker
(R-MS)
Energy & NaturalResources
Democrats Republicans
Chairman Joe Manchin (D-WV) Ranking Member John Barrasso
(R-WY)
Environment & PublicWorks
Democrats Republicans
Chairman Thomas Carper (D-DE) Ranking Member Shelley Moore
Capito(R-WV)
Finance Democrats Republicans
Chairman Ron Wyden (D-OR) Ranking Member Mike Crapo (R-ID)
Foreign Relations Democrats Republicans
Chairman Robert Menendez (D-NJ) Ranking Member Jim Risch
(R-ID)
Health, Education, Labor& Pensions (HELP)
Democrats Republicans
Chairman Patty Murray (D-WA) Ranking Member Richard Burr
(R-NC)or Rand Paul (R-KY)
Judiciary Democrats Republicans
Chairman Dick Durbin (D-IL) Ranking Member Chuck Grassley
(R-IA)
Small Business Democrats Republicans
Chairman Ben Cardin (D-MD) Ranking Member Rand Paul (R-KY)or Tim
Scott (R-SC)
Homeland Security& Governmental Affairs
Democrats Republicans
Chairman Gary Peters (D-MI) Ranking Member Rob Portman
(R-OH)
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3 Washington in 2021
House leadership
Agriculture Democrats Republicans
Chairman David Scott (D-GA) Ranking Member Glenn Thompson
(R-PA)
House committee leaders include
Leadership Democrats Republicans
Speaker Nancy Pelosi (D-CA) Minority Leader Kevin McCarthy
(R-CA)
Majority Leader Steny Hoyer (D-MD) Minority Whip Steve Scalise
(R-LA)
Budget Democrats Republicans
Chairman John Yarmuth (D-KY) Ranking Member Jason Smith
(R-MO)
Education & Labor Democrats Republicans
Chairman Bobby Scott (D-VA) Ranking Member Virginia Foxx
(R-NC)
Energy & Commerce Democrats Republicans
Chairman Frank Pallone (D-NJ) Ranking Member Cathy McMorris
Rodgers(R-WA)
Financial Services Democrats Republicans
Chairman Maxine Waters (D-CA) Ranking Member Patrick McHenry
(R-NC)
Appropriations Democrats Republicans
Chairman Rosa DeLauro (D-CT) Ranking Member Kay Granger
(R-TX)
Ways & Means Democrats Republicans
Chairman Richard Neal (D-MA) Ranking Member Kevin Brady
(R-TX)
Judiciary Democrats Republicans
Chairman Jerry Nadler (D-NY) Ranking Member Jim Jordan
(R-OH)
Natural Resources Democrats Republicans
Chairman Raul Grijalva (D-AZ) Ranking Member Bruce Westerman
(R-AR)
Oversight & Reform Democrats Republicans
Chairman Carolyn Maloney (D-NY) Ranking Member James Comer
(R-KY)
Rules Democrats Republicans
Chairman Jim McGovern (D-MA) Ranking Member Tom Cole (R-OK)
Homeland Security Democrats Republicans
Chairman Bennie Thompson (D-MS) Ranking Member John Katko
(R-NY)
Joint EconomicCommittee
Democrats Republicans
Chairman Don Beyer (D-VA) Ranking Member Sen. Mike Lee (R-UT)or
Sen. Tom Cotton (R-AR)
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4 Washington in 2021
Policy overviewDemocrats will have potentially two opportunities
toemploy budget reconciliation next year if instructionscan be
approved in the FY2021 and FY2022 budgetresolutions – only one
reconciliation bill is allowed foreach resolution. What priorities
or combinations will bethe target of reconciliation is unclear, as
is how Bidenwill employ the suggested rule from his campaign
thatshort-term stimulus will not require tax increases tooffset
revenue. Beyond stimulus, the Biden/Democraticpolicy agenda has tax
increases as a common thread:plans on health care, climate change,
education,housing and other areas envision tax changes likerolling
back parts of the Tax Cuts and Jobs Act (TCJA)and otherwise turning
tax rate dials, and those hikescould be used to fit a bill within
whatever revenueconstraints Democrats decide. The political
calculus ofhow bills move, including through reconciliation or
not,will involve assessing the difficulty of winning supportfrom
some Republicans and not losing moderateSenate Democrats.
Reconciliation is generally easier to do when raisingtaxes than
cutting taxes since reconciliation originallywas designed as a
deficit reduction measure, and thereis no worry about 10-year
sunsets or fitting thecontents of the bill within a revenue
constraint. If abudget agreed to by the House and Senate
has“instructions” to provide for items like
infrastructureinvestment or health care changes, and
spendingtargets to the appropriate committees of jurisdiction,items
being discussed by Biden would likely be able tobe considered under
the procedurally advantageousreconciliation process. Two major
limits on areconciliation bill are that the policy provision
musthave a budget impact or be material to the spending ortax
provisions and that it does not increase the deficitbeyond the
budget window.
If a determination is made that major Democraticpriorities like
climate change seem likely to bump upagainst reconciliation rules
and are more conducive tobeing enacted outside of the
reconciliation process,that likely will require filibuster repeal.
Democrats aresplit on this issue but former President Obama
andformer Senate Democratic leader Harry Reid, who bothsaw their
ability to move policy changes hobbled by thefilibuster, are among
significant Democratic forcespushing for the change. Democrats
might need toutilize both options through budget and
filibusterchanges to pursue their broad agenda.
Use of budget reconciliation requires two steps:– Both the House
and Senate must pass the same
concurrent Budget Resolution (requiring only a simple
majority in the Senate) that contains reconciliationinstructions
to committees of jurisdiction to changethe spending or revenue
numbers;
– Reconciliation bills that adhere to the
reconciliationinstructions from the budget resolution would
then,like other legislation, be passed by both chambers ofCongress
and signed into law by the President.
While only a simple majority is required for passage inthe
Senate, 60 votes are required to waive a point oforder against
potential violations of the so-called “Byrdrule,” which among other
things prohibits the inclusionof provisions that increase the
budget deficit for theperiod outside the budget window. There are
six testsfor matters to be considered extraneous:
It is the Byrd Rule prohibition against provisions thathave no
revenue effect that could trip up stimuluslegislation or
high-profile Democratic priorities likeclimate change. During the
ACA repeal debate, non-revenue aspects like eliminating essential
healthbenefits and permitting insurers to sell policies acrossstate
lines were found to violate the rule. During theTCJA, the budget
impact of a policy to expand 529savings accounts to home-school
expenses waschallenged by Democrats and found to be incidental
tothe non-budgetary policy around education.
In the climate change context, reconciliation is seen aslikely
precluding performance standards like those onfuel economy or
building standards. However, many ofthe goals of climate change
policy could be, with somecreativity, designed with a revenue
impact. ManyHEROES Act provisions have a revenue impact.
Byrd rule deems extraneous proposals that:– Do not produce a
change in outlays or revenues;– Produce changes in outlays or
revenue that are
merely incidental to the non-budgetary componentsof the
provision;
– Are outside the jurisdiction of the committee thatsubmitted
the title or provision for inclusion in thereconciliation
measure;
– Increase outlays or decrease revenue if theprovision’s title,
as a whole, fails to achieve thereporting committee’s
reconciliation instructions;
– Increase net outlays or decrease revenue during afiscal year
after the years covered by thereconciliation bill unless the
provision’s title, as awhole, remains budget neutral; or
– Contain recommendations regarding Social Security.
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5 Washington in 2021
TaxPresident-elect Biden’s proposed tax increases areintended to
be enacted as revenue sources for majorpriorities like climate
change, health care, educationand housing. A first bill sought by
Biden andcongressional Democrats is likely to be pandemic reliefand
health care changes. How much of that bill will bepaid for is
unknown now, as is how Biden will proceedwith his intention to
raise the statutory corporateincome tax rate to pay for changes
that can benefitmiddle-income Americans on “day one” of
hispresidency. “If you raise the corporate taxes back to28%, which
is a fair tax, you’d raise [$1.3 trillion] bythat one act…“ he said
Oct. 15. Some Biden advisorsand congressional Democrats have
indicated the typesof tax increases supported by Biden during the
campaignwould not be included as part of initial
stimuluslegislation, but instead would be used to offset the costof
changes in permanent policies. That could meansuch tax increases
might not take effect on January 1,2021, but could be delayed,
maybe until 2022.
Economic proposals outlined thus far include a $700billion plan
to aid US businesses through procurementand R&D investment and
a $2 trillion plan to createjobs by building a modern
infrastructure and a cleanenergy future. Both are intended to be
paid for with taxincreases. Biden has also proposed improvements to
USmanufacturing through a 10% “Made in America” TaxCredit for
investment in revitalizing factories andreshoring jobs, which has
been paired with a 10%“offshoring” surtax on a US company’s
overseasproduction profits from sales back to the US — suchincome
would be taxed at 30.8%.
Also intended to combat offshoring are changes to theglobal
intangible low-taxed income (GILTI) rules, withmany Democrats
arguing they do not have enoughteeth to prevent US companies from
taking undueadvantage of other international tax changes includedin
the TCJA that partially eliminated US tax on foreign-source
earnings. Biden has proposed combining the28% corporate tax rate
with a 21% tax rate on GILTI —seeming to concede that GILTI should
be taxed at arate lower than the corporate tax rate — and
proposingto apply GILTI on a jurisdictional basis, rather than
anaggregate basis as it currently applies, plus repealingthe GILTI
relief for foreign profits relating to qualifiedtangible property.
Democrats supporting such a movewill find good company with the
OECD’s efforts todevelop model minimum tax legislation under Pillar
2 ofthe Base Erosion and Profit Shifting 2.0 project thatalso
appears likely to include a per-jurisdictionapproach. All these
ideas seem to be aligned with
congressional Democrats’ stated desire to removeincentives for
companies to shift US jobs and physicaloperations overseas.
However, inconsistencies with theOECD approach are also clear. For
example, Biden’sproposal to dramatically increase the GILTI tax
rateruns counter to the OECD minimum tax model, whichlikely will
include a minimum tax threshold closer to12.5%. Another key
question is whether Biden andcongressional Democrats will simply
push to tinker withGILTI, or whether additional changes to the
TCJA’sinternational tax reforms may be considered.
Beyond international tax, Biden’s priorities align withthe
longtime Democratic priority of making wealthyindividuals and
corporations “pay their fair share,” apush that has increased, not
abated, since enactmentof the TCJA with solely Republican
support.
Biden has called for a “minimum corporate tax” of 15%applying to
book income for companies with net incomegreater than $100 million,
which is seen as addressingconcerns that some major corporations
pay no taxes.
Individual provisions include returning the top incometax rate
to 39.6% and repeal of lower rates on capitalgains and dividends
for those with incomes over $1million. Estate tax rules would be
returned to the 2009regime of a $3.5 million exemption and 45%
rate.
Biden has stated that tax increases won’t affectfamilies earning
less than $400,000 annually. He hasalso reportedly proposed phasing
out above a$400,000 income threshold the Section 199A
qualifiedbusiness income deduction available to
individuals,including many owners of sole
proprietorships,partnerships and S corporations, and capping the
valueof itemized deductions at 28%.
Not all of Biden’s proposals are tax increases. He hasalso, in
some of the same plans that call for taxprovisions as revenue
offsets, proposed to extend,revive or create tax incentives,
including credits forfirst-time homebuyers and renters, as well as
for thecare of children and the elderly.
President-elect Biden will likely lay out his tax proposalsin an
FY2022 budget, which will likely be outlined a fewmonths into his
presidency and detailed more fully inthe spring. Biden has
patterned much of his tax agendaon Obama administration proposals,
and could similarlyinclude significant lists of tax increases in
Treasury“green books.” Even if the proposals have no hope
ofadvancement, they could illustrate how money could
beredistributed toward middle-class priorities.
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6 Washington in 2021
Business tax proposals Clim
ate/
Infr
a-st
ruct
ure
Hea
lthca
re
Educ
atio
n
Mad
e in
USA
, R&D
Child
,el
der
care
Hou
sing
Corporaterate 28%
Otherbusinesschanges
End subsidies for fossil fuelsRepeal CARES Act excess business
losses provisionNo ad deduction for Rx companiesFinancial fee on
certain liabilities of firms with morethan $50b in assets
Intl’ tax
21% GILTI rate, per-country basis, no GILTI relief forforeign
profits relating to qualified tangible propertyTighter
anti-inversion rules
10% offshoring penalty
Minimum tax 15% minimum tax on book income >$100m
Real estate End use of like-kind exchanges, use of realestate
losses to reduce tax liability
Individual tax proposals
Top incometax rate
39.6%; 199A deduction phased out for incomesabove $400,000
Capitalgains
Repeal lower tax rate for capital gains forhouseholds earning
>$1m
Itemizeddeductions
Pease limitation reinstated over $400,000;28% cap for
“wealthiest“
Estate tax$3.5m exemption, 45% rate (2009 regime)
End estate tax stepped-up basis
SocialSecurity
Increase payroll tax withholding for annual incomesmore than
$400k
Highlights of Biden tax increase proposalsand plans they would
pay for
Biden and congressional Democrats are generallyideologically
aligned, having argued for years againstoffshoring and in favor of
making the wealthy andcorporations pay their fair share. The
leaders ofcongressional tax-writing committees, Rep. Neal
andSenator Wyden, have long aspired to act on the bread-and-butter
proposal to increase infrastructureinvestment, and Speaker Pelosi
has drawn comparisonsbetween Biden’s plan and the House
infrastructure bill.They would be expected to largely let
theAdministration drive the tax agenda, at least at first.Whether
in coronavirus relief or another context,Democrats are also likely
to act on their long-held goalof expanding low-income tax credits
like the EarnedIncome Tax Credit and Child Tax Credit. The
HEROESAct was characterized as a Democratic wish list, so itwill be
looked upon as representing where Democratswant to go when in
charge in Washington.
However, the influence of the progressive flank of theparty will
be felt, along with that of moderate senatorslike Manchin and
Kyrsten Sinema (D-AZ), whose voteswill be crucial even under
reconciliation.
There are also revenue proposals beyond what Bidenhas embraced,
including a financial transactions tax onstock, bond and derivative
transactions. SenatorWyden has also proposed a plan to impose a
mark-to-market approach requiring capital gains to be taxedannually
at ordinary income levels for wealthytaxpayers. “Anti-deferral
[mark-to-market] accountingrules” would only apply to individuals
with more than$1 million in annual income or $10 million in
assets.Applicable taxpayers would be required to pay annualtaxes on
unrealized gains and take a deduction forunrealized losses on
liquid assets, such as stock, whilefor illiquid assets a look-back
charge would be imposedon gains realized upon the sale of these
assets.
The TCJA started out as a tax cut but now presents awaterfall of
potential tax increases related to interestdeductibility, R&D
amortization and bonusdepreciation. Democrats may be reluctant to
supportchanges to the law they unanimously voted against.However,
potential compromise tax legislation couldtake the form of
Republicans negotiating to keep or fixsome of their priorities from
the TCJA in exchange forDemocratic priorities, such as expansion of
low-incomecredits.
R&Dexpensing
Interestdeduction
based on EBITDA100% expensing GILTI deductionat 50%
FDII deduction at37.5%
BEAT rate:10%/11% for
banks/dealers2020 50%2021 30%2022 EBIT
2023Phased down in
20% steps202420252026 37.5% 21.875% 12.5%/13.5%
Select changes scheduled under TCJA
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7 Washington in 2021
HealthHealth care is consistently ranked as a top
electionconcern for voters and was even more so this year asthe
2020 election was dominated by a global healthcare pandemic that
has threatened not only oureconomy, but also stressed our health
care system.According to Pew Research Center, 82% of
registeredBiden/Lean Biden voters said health care is
“veryimportant” to their 2020 vote, and the electorate willexpect
movement out of a Biden administration on thecoronavirus and
beyond.
Delivering on many campaign promises, however,necessitates
congressional action. Despite having aDemocratic-controlled Senate,
movement hinges ongetting both wings of the party on board with
legislationand a decision to either remove the filibuster or try
topass a health care bill through the more limited processof budget
reconciliation. Due to the difficulty andpolitical capital expended
to advance such a fight,bigger reform may be delayed; however, that
calculuswould change if the Supreme Court rules this spring infavor
of Republican states aiming to strike down theACA. Other changes in
health care policy could focus onbipartisan areas of consensus due
to limitationsimposed by partisanship, procedure and pandemicbudget
constraints. This means potentially picking upwhere committees left
off in negotiations around drugpricing – the big area of bipartisan
focus last Congressbeyond surprise billing, which was addressed in
theyear-end package – and focusing on other areas ofbipartisan
consensus including rural health,telemedicine, maternal mortality,
health equity, mentalhealth and opioid use disorders.
Biden is also likely to use executive action to unwindvarious
Trump regulations and guidance that underminethe ACA, reverse the
rollback of dozens of Obama-erapublic health rules, and freeze
Trump rules that havenot yet taken effect. Biden has nominated
CaliforniaAttorney General and former House member XavierBecerra to
helm his health department, who hasemerged as the nation’s defender
of the ACA, leadingmore than a dozen other Democratic attorneys
generalin supporting the law at the Supreme Court. Becerra hasalso
been outspoken on issues including women’s healthand addressing
health disparities, has gone after hospitalconsolidation, and
joined other attorneys general inholding drug companies accountable
for their role in theopioid crisis and providing discounts under
the 340Bprogram. After confirmation, Becerra will lead the
Bidenteam in regulatory change to pursue his health careagenda
regardless of congressional movement.
Biden administration priorities
Coronavirus response. Amid the global pandemic, Bidenhas said he
would give the federal government primaryresponsibility for the
response to the coronavirus,putting scientists and public health
leaders “front andcenter” in communication with the American people
andproviding “clear, consistent, evidence-based nationalguidance.”
In December, he announced a 100-day planto manage the pandemic,
including distributing 100million vaccine shots and signing an
executive orderrequiring people to wear masks on
interstatetransportation and in federal buildings. Among
otheritems, Biden supports increased investment in testingand
tracing, utilizing the Defense Production Act toramp up production
of personal protective equipment(PPE), providing vaccines and
treatment at no cost topatients, and restoring the White House
pandemic officewhile re-embracing international engagement
effortsand funding for the World Health Organization (WHO).
Strengthening the ACA. The cornerstone of the Bidenhealth care
platform is the creation of a new publichealth insurance option,
similar to Medicare, in whichthe federal government would set
providerreimbursements and premium rates. Costs would varyon a
sliding scale based on income and automaticallyenroll at zero cost
those in the Medicaid expansionpopulation in states that have not
expanded. Biden alsosupports other changes to strengthen the ACA
includingexpanding eligibility for financial assistance and
makingpremium tax credits more generous by eliminating the400% cap
on tax credit eligibility; lowering the limit onthe cost of
coverage from 9.86% of income to 8.5%; andreducing out-of-pocket
cost sharing for enrollees bysetting the benchmark plan at the gold
level. Bidenwould also restore funding to consumer outreach
andassistance programs, which were cut by the Trumpadministration,
and unwind various Trump-eraregulations and guidance that undermine
the ACA, suchas those expanding access to short-term
limitedduration plans and supporting Medicaid workrequirements and
block grants.
Expanding Medicare, Medicaid and long-term care. Inaddition to
automatically enrolling into the public optionadults who would be
eligible for Medicaid if their statehad expanded, Biden would allow
states that haveexpanded Medicaid to move enrollees into the
publicoption as long as they continue their current share ofthe
costs (“maintenance-of-effort” payments). Bidenalso supports
increased federal Medicaid funding forhome- and community-based
services.
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8 Washington in 2021
Regarding Medicare, Biden favors expanding Medicareeligibility
to age 60 and adding vision, hearing anddental benefits. He also
favors tax credits for informalcaregivers and seniors who purchase
private long-termcare insurance and improving nursing home
staffingand quality standards.
Reducing drug prices. Biden supports legislationapproved by the
Democratic-led House ofRepresentatives last year giving Medicare
the power tonegotiate “abusively priced” prescription drugs
withmanufacturers, capped at a level associated withOrganization
for Economic Cooperation andDevelopment (OECD) prices, which would
be leveragedfor Medicare and the public option but also available
toprivate payers. Biden also supports proposals to limitprice
increases for all brand, biotech, and highly pricedgenerics to the
general inflation rate, in addition tolimiting the prices of new
specialty drugs with little tono competition by establishing an
independent reviewboard to recommend a price through
externalreference pricing. Like President Trump, Biden alsosupports
proposals to allow for safe drug importation,to cap out-of-pocket
costs in Medicare Part D, toeliminate the tax break for
pharmaceutical companyadvertising expenses, and various bipartisan
proposalsaimed at improving the supply of quality generics
bycracking down on anti-competitive efforts that delayentry.
Biden’s promise to freeze Trump administrationproposed rules could
also delay recently finalized drugpricing rules, including one to
end drug rebates due totheir sizable economic impact.
Mental health and the opioid crisis. Biden aims toredouble his
efforts to implement the federal mentalhealth parity law in
addition to improving access tomental health care and eliminating
stigma aroundmental health, which he championed as vice
president.Included in this are plans to implement suicideprevention
strategies for veterans and the LGBTQcommunity, double the number
of mental healthprofessionals in schools and encourage youth to
pursuehealth care jobs. Biden has a five-point plan to addressthe
opioid crisis that includes increased access toservices, reducing
unnecessary opioid prescriptionsand holding pharma accountable for
their role in thecrisis. Biden would direct the US Justice
Department tomake addressing bad actors a top investigative
priorityand the Drug Enforcement Administration (DEA) to stepup
efforts to identify suspicious shipments and protectstruggling
communities.
Reducing disparities in care. Biden’s platform includesplans to
reduce disparities in care and increase accessto all regardless of
gender, race, income, sexualorientation or Zip code. This includes
expanding accessto contraception and protecting the right to
anabortion through restored federal funding for PlannedParenthood
and a reversal of the Mexico City Policy(also referred to as the
“global gag rule”). Biden alsosupports a national strategy to
address maternalmortality, health care protections for the
LGBTQcommunity, and a doubling of America’s investment incommunity
health centers to serve underservedpopulations. Biden also supports
an updated nationalHIV/AIDS strategy and restored global funding
throughPEPFAR and the Global Fund. Regarding immigrant
health care, Biden would reverse the Trumpadministration’s
“public charge” policy (which has beenblocked in the courts),
expand ACA coverage to includeDeferred Action for Childhood
Arrivals (DACA)recipients, remove the waiting period in Medicaid
andthe Children’s Health Insurance Program (CHIP) forlawfully
present immigrants, and allow undocumentedimmigrants to purchase
unsubsidized coverage in theACA marketplace.
Value-based care, price transparency andinteroperability. Biden
has not publicly said muchabout these three issues, seen as focus
areas for theTrump Administration, however they are
generallybipartisan in nature and will continue to be a focus
bothin the administration and in Congress. Biden will
likelyleverage the CMS Innovation Center (CMMI) to continuethe push
from Medicare fee-for-service to value-basedcare, begun in earnest
under the Obamaadministration, which could focus on increasing
accessto primary care among other items. There is also noindication
he will unravel Trump-era final rules thathave pushed providers,
insurers and health IT towardgreater price transparency and
interoperability in aneffort to get data into the hands of
consumers.
Surprise billing. Biden supports prohibiting health
careproviders from charging out-of-network rates insituations when
patients have no control over who theycan see, like in the case of
emergency hospitalizations.While this was addressed in the 2020
year-endpackage, Biden’s Health and Human Services (HHS)Department
will be in charge of crafting the regulationsthat will provide
additional specifics around theindependent dispute resolution (IDR)
process that willdetermine out-of-network rates to be paid by
healthplans if parties are unable to reach agreement, alongwith
other details regarding the bill’s reportingrequirements,
transparency components and patientprotections.
Market concentration. Biden says his administrationwill
aggressively use its antitrust authority to addressmarket
concentration across the health care systemthat has driven up
prices for consumers. This will likelybe a focus area for HHS
Secretary-designate Becerra,considering he brought a high-profile
antitrust caseagainst nonprofit health care giant Sutter Health
asCalifornia Attorney General and drafted an antitrust billthat
would have given the attorney general power toreview private
equity- or hedge fund-led mergers oracquisitions of a health care
system or hospital.
Congressional action
Pandemic relief will continue to be the top health carepriority
for Democrats in Congress, likely aiming toadvance priorities that
were not included in the year-end relief package. The House-passed
HEROES Act is aplausible starting point, which in addition to
funding forproviders, testing and tracing – some of which
wasincluded in the year-end package – also includedincreased
Medicaid and Medicare payments, an ACAspecial enrollment period,
and a variety of other healthcare and a variety of economic
measures and individualand business supports.
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9 Washington in 2021
Beyond bipartisan areas of consensus, what gets donein a
Democratic-controlled Congress could depend onthe future of the
filibuster and whether SenateDemocrats choose to remove it or try
to pass a healthcare bill through the more limited process of
budgetreconciliation. This, however, could prove challenginggiven
statements from Democrats in Republican states,including Joe
Manchin (WV) and Jon Tester (MT), whohave pledged to keep the
60-vote requirement forlegislation.
Democrats will also have to determine whether theyfocus on a
bigger bill package, which might include apublic option, or smaller
improvements to the ACA andhealth care markets. Similar to 2016,
when SenateRepublicans failed to advance an ACA repeal-and-replace
bill, there is divergence across the party on thebest market
intervention and it may be difficult to geteveryone on board with a
single piece of legislation.Due to the difficulty and political
capital expended toadvance such a fight, bigger reform may be
delayed;however, the calculus would certainly change if theSupreme
Court rules in favor of Republican statesaiming to strike down the
ACA due to the allegedunconstitutionality of its individual
mandate, althoughthis seems unlikely following oral arguments late
lastyear.
New Senate leadership priorities
New Democratic leadership will take the reins of thetwo key
health care committees in the Senate – theSenate Finance and
Health, Education, Labor andPensions (HELP) Committees. Sen. Ron
Wyden (D-OR)is expected to helm the Finance Committee and hassaid
he wants to focus on pandemic relief andaddressing systemic racism
in the nation’s health caresystem, including developing maternal
mortalitylegislation and advancing other equity concerns.
Wyden will also likely want to pick up where he left offin terms
of drug pricing legislation, which hecosponsored with current
committee ChairmanGrassley, who is set to vacate his spot as the
topRepublican on the committee. While Republicansvehemently oppose
the House-passed Democratic billthat would allow Medicare to
negotiate drug prices, theFinance bill features instead provisions
to rein in priceincreases through measures including
mandatedmanufacturer rebates for prices rising faster thaninflation
in Medicare Part B and D, price reporting fordrug cost increases,
and Medicare Part D redesign.While Wyden and Grassley were unable
to get enoughsupport from Senate Republicans to advance
thelegislation, a new Democratic majority would likely beable to
push through something similar, barringdemands from the left wing
of the party to includeMedicare negotiation or other more
progressivemeasures. Such a bill would also likely have
significantcost savings, something that will be highly sought
aftergiven the difficult budget environment, but it may stilllack
sufficient Republican votes to pass easily throughthe Senate. Sen.
Mike Crapo (R-IA), who is likely tosucceed Grassley as the top
Republican on thecommittee, put forward a Republican alternative to
thebipartisan Grassley-Wyden bill that is less aggressiveand leaves
the inflationary rebate piece that Democrats
insist must be included as a key mechanism for
curbingprices.
Sen. Patty Murray (D-WA) is expected to take control ofthe HELP
Committee, the principal health care panel inthe Senate. She would
likely also be focused onpandemic relief in addition to protecting
and expandingon the ACA following the systematic
dismantlingapproach of the Trump Administration. Murray wouldalso
have a new negotiating partner on the committee,as Sen. Lamar
Alexander (R-TN) retired, with RichardBurr (R-NC) having the right
of first refusal followed byRand Paul (R-KY). Following the
inclusion of thecommittee’s top priority – surprise billing – in
the 2020year-end package, the committee will be freed up tofocus on
other priorities, including traditionallybipartisan health care
packages like prescription andmedical device user fees (PDUFA and
MDUFA) alongwith those addressing issues such as opioids andmental
health.
Other areas of bipartisan consensus
In addition to the bipartisan priorities of lowering drugprices,
health equity, mental health and opioid usedisorders, another
likely focus area is on issuesplaguing rural and underserved
communities, many ofwhich are struggling with hospital closures and
havingdifficulty with provider recruitment and retention.
Abipartisan task force stood up this summer by theHouse Ways &
Means Committee aims to explore policysolutions for rural and
underserved communities.
Telehealth is also an area ripe for bipartisancompromise
following the need for an expansionthroughout the coronavirus
pandemic, with thepotential to make permanent some of the
newflexibilities after the COVID-19 public emergency isover. A
robust package featuring various Medicare andMedicaid issues is
also overdue. All of these areas,however, are likely to be costly
and could serve as aroadblock to significant change.
State and legal action
States will continue to be active in health care, withmany
advancing legislation at the state level thataddresses issues
Congress has been unable to advance,such as drug pricing,
transparency and data sharing.States will also continue to submit
1115 Medicaiddemonstration and 1332 state innovation
waivers,although those proposing policies such as Medicaidwork
requirements are expected to be a nonstarterwith the Biden
administration.
How far states can go will also in part hinge on thecourts,
which to date have blocked certain statemovements including
Medicaid work requirements. TheSupreme Court also recently upheld
an Arkansas lawthat regulates pharmacy benefit managers
(PBMs),finding that their state law requiring PBMs to
reimburseprescription drugs at a rate equal or higher than
thepharmacy’s wholesale acquisition cost is not preemptedby the
Employee Retirement Income Security Act(ERISA). This and other
cases in the pipeline for thisspring have the potential to impact
states’ ability toregulate their own health care markets.
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10 Washington in 2021
Financial ServicesIn financial services, Biden’s win and
victories byDemocrats in the Senate and House will bring agoverning
partnership between the White House andCongress that could produce
a number of progressivepolicy victories. While the narrow 50-50
Senatemajority will likely restrict the scope of what Democratscan
achieve, the Biden White House could press for“public option”
approaches not just for healthinsurance, but also consumer bank
accounts and creditreporting, ideas that will be welcomed by
Democraticcommittee chairs. The political alignment will also
likelymean greater scrutiny of big banks and “shadowbanking” risks;
an emphasis on affordable housingissues, racial diversity and
student debt; and a newlyenergized Consumer Financial Protection
Bureau (CFPB).Biden and congressional Democrats will also renew
theObama-era effort to impose a fiduciary duty onsecurities brokers
and advisers to retirement plans, andresume their scrutiny of
private equity firms. Finally, theeventual shift to
Democratic-appointed regulators willhave consequences for the
pending rewrite of a key1970s anti-redlining law for banks, and
could shift theSEC back toward “rules-based” enforcement.
Biden administration priorities. As a senator from
thebanking-friendly state of Delaware for many years,Biden was a
reliable defender of the state’s bankinglaws and the credit card
industry, and squared offagainst the future Sen. Elizabeth Warren
(D-MA) overthe 2005 rewrite of bankruptcy law that banks hadsought
for years. That posture will probably become arelic of history,
however, as Biden’s White House seemslikely to work hand-in-glove
with the two liberalchairmen of the House and Senate
bankingcommittees. Biden’s campaign signed on to a numberof
consumer-friendly ideas negotiated by the Biden-Sanders unity task
force. These include a proposal toreplace the three credit
reporting bureaus (Equifax,Experian and TransUnion) with one
federal creditreporting registry, housed in the CFPB, over a period
ofyears. Biden could support the more incrementalapproach of simply
offering the new agency as analternative to the three bureaus,
while requiringfederally backed mortgages and student loans to use
it.Sen. Sherrod Brown (D-OH), the incoming chairman ofthe Senate
Banking Committee, has signaled his interestin the issue,
tellingPolitico on Oct. 28, “The nextCongress must enact bold,
comprehensive legislation toreform a credit reporting industry that
has failed workingfamilies and that perpetuates systemic racism
andeconomic inequality. And that includes taking up Joe
Biden’s proposal for a public credit registry.”
Biden has also endorsed allowing the US Postal Serviceto offer
checking and savings accounts, remittanceservices and small-dollar
loans in an effort to reach theunbanked, though the administration
could soothealarm in the industry by taking the more modestapproach
of allowing for-profit banks to offer a rosterof consumer-friendly
products at post offices. Biden’scampaign also supported an idea by
Sen. Brown tohave the Federal Reserve be involved in
creating“FedAccount” consumer bank accounts with no
balancerequirements or fees, which could encourage savingsby
low-income households while allowing accountholders to receive
federal stimulus payments. But thatidea will meet some resistance
from the BankingCcommittee’s incoming ranking member, Pat
Toomey(R-PA), who told American Banker after the Novemberelection,
“The idea that we should have thegovernment go into the banking
business, that does notstrike me as a good idea.” Toomey instead
suggestedreaching the unbanked through financial innovationsand
lighter regulation of community banks. Biden’scampaign has also
said he will encourage banks to offersmall-dollar loans as a way of
eroding the businessmodel of high-interest payday loan vendors.
Notably, Biden and Sanders also agreed that aDemocratic
government should consider restoringGlass-Steagall firewalls
between retail banking andriskier investment banking that were
taken down by the1999 Gramm-Leach-Bliley Act. While that idea is
catnipto Sen. Brown and other critics of large banks, givenother
priorities it seems improbable that Biden, Brownand returning House
Financial Services CommitteeChairman Maxine Waters (D-CA) would
devote themonths necessary to the divisive task of
reinstatingGlass-Steagall, though other changes in the
financialsystem are being contemplated by former CFTC chairGary
Gensler and KeyBank NA executive Don Graves,whom Biden named to the
transition team after theNovember election. Other priorities
enumerated by theBiden-Sanders agreement could get a push from
thenew administration, such as proposals to allow studentdebt to be
discharged in bankruptcy; to immediatelyforgive $10,000 of student
debt per person per yearfor up to five years (originally offered by
Sen. Warren);to crack down on “predatory” for-profit colleges; and
totarget “usurious” credit card rates and strengthenoversight of
credit cards and consumer lendinggenerally.
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11 Washington in 2021
Senate Banking Committee. With Democratsreclaiming the Senate
majority, Sen. Brown will be thenew chairman of the Banking
Committee, providing aprominent perch for the unabashedly populist,
pro-consumer, pro-union senator who has lashed“megabanks”
mercilessly for their business practicesover the years. At a final
hearing of banking regulatorson November 10, Brown said, “We have
to break up thebiggest banks, and give that power to everyone
elsewho has been denied a voice in our economy. Ourfinancial system
should be a public good.”
Brown told The Hill in September that as chairman,after
addressing pandemic relief he would focus onhousing issues,
something the committee did not spendmuch time on under previous
Chairman Mike Crapo (R-ID). Brown could also be expected to try to
strengthencapital rules for big banks and press for regulators
totoughen stress tests and “living will” resolution plansfor those
banks. He shares Chairman Waters’ interestin targeting systemic
racism in U.S. institutions andlikely will push for the Fed to be
more pro-active inmeasuring and addressing such inequalities, as
well aspressing financial firms and public companies generallyto
formally disclose their efforts to promote diversityamong both
senior executives and rank-and-fileworkers. Brown has also
complained that the SEC stillhas not completed Dodd-Frank rules
under whichcompanies could claw back incentive compensationpaid to
executives whose firms had to correct materialerrors in their
financial statements.
Brown could also seek to reinvigorate other
Dodd-Frankachievements, by expanding the CFPB’s authority topolice
financial products or restoring the FinancialStability Oversight
Council’s power to designatespecific companies as systemically
importantinstitutions (SIFIs). The FSOC voted to give up
thatauthority in December 2019 after a presidentialexecutive order
and a rulemaking guided by outgoingTreasury Secretary Mnuchin, who
has chaired the council.Brown’s interest in post-crisis financial
stability issues hasalso been seen in his focus on “shadow banking”
risksposed by overnight repo markets and money marketfunds, both of
which proved unstable in the marketturmoil that accompanied the
early days of thepandemic. Brown also is likely to focus the
committeeon problems associated with private equity firms, asthe
House Financial Services Committee did last year.
Many of these initiatives would prove poisonous toRepublicans on
the Banking Committee, however, suchas incoming Ranking Member
Toomey, and the panelhas had a tradition of not spending time
marking upparty-line bills that would inevitably face a filibuster
onthe Senate floor. All that could change if SenateDemocrats moved
to eliminate the legislative filibuster,though with a narrow 50-50
split in the Senate thatscenario is likely a long shot.
House Financial Services Committee. Maxine Waters(D-CA) returns
as the chairman of the House FinancialServices Committee, which was
a prolific generator ofHouse floor legislation in the last
Congress, most ofwhich was ignored by then-Senate Banking
CommitteeChairman Crapo and the Senate’s GOP leadership.Waters will
have a more receptive partner in Sen.Brown, and both can be
expected to work cooperatively
with Biden’s White House and Treasury Department toadvance a
number of shared progressive priorities.
Waters can be guaranteed to maintain a focus onhousing issues
and oversight of the Department ofHousing and Urban Development
(HUD) and FederalHousing Authority (FHA), including a bill she
sponsoredin 2019 with Vice President-elect Kamala Harris tospend
more than $100 billion on affordable housing.Like Sen. Brown,
Waters was an intense critic of theOffice of the Comptroller of the
Currency’s May 2020update of the Community Reinvestment Act, a
1977law that requires banks to invest in underservedneighborhoods,
calling it overly reliant on expendituresfor CRA credit instead of
input from local communities.No other regulators signed on to the
OCC’s regime, soWaters will maintain close oversight of the
FederalReserve’s own CRA overhaul expected next year. At afinal
November 12 hearing of banking regulators at hercommittee, Waters
specifically cited the OCC’s CRArule, Federal Reserve actions that
have weakened theDodd-Frank Volcker Rule, and “a number of
troublingrulemakings to weaken capital and other
prudentialrequirements for the nation’s largest banks… I amputting
our witnesses on notice that I will be workingwith the Biden
administration to roll back these rules.”
Waters and other senior committee Democrats thoughttheir
approach of summoning bank and tech-companyCEOs for hearings over
the last two years was asuccess, and more of those can be expected.
Watershas also been a harsh critic of the SEC’s newRegulation Best
Interest, saying it fails to hold brokersto a fiduciary standard
when they recommend productsto clients, and will also press for a
Biden-appointed Laborsecretary to revisit the DOL’s fiduciary rule
for advisersto retirement plans. The Obama-era 2016 fiduciary
rulewas overturned by a federal court; the DOL is in theprocess of
completing a new, weaker version, but theBiden-Sanders task force
endorsed “taking immediateaction to reverse the Trump
administration’sregulations allowing financial advisers to
prioritize theirself-interest over their clients’ well-being.”
The SAFE Banking Act, which provides a safe harborfor banking by
cannabis businesses in states wheresuch sales are legal, also
passed the House in May(attracting support from half the GOP
caucus) and willbe reintroduced in the committee next year. In
adeparture from the posture of Sen. Crapo, Sen.Toomey has expressed
support for this effort, tellingAmerican Banker on November 18, “I
am open toworking with my colleagues on how we could
enablebusinesses that are operating legally in their
respectivestates to be able to have ordinary banking services.
Ithink that’s something we should work on.” In general,Waters can
be expected to be pulled further left by thegroup of high-profile
2018 freshman Democrats whoare returning to the committee,
including AlexandriaOcasio-Cortez (D-NY), Ayanna Pressley
(D-MA),Rashida Tlaib (D-MI) and Katie Porter (D-CA).
Waters is also committed to improving diversity amongregulators,
telling them at the November 12 hearing,“Financial regulation and
the approach to diversity andinclusion in this country are going to
change for thebetter… Under President Biden’s leadership,
ourfinancial regulators will and must be diverse.
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12 Washington in 2021
We are emerging from the dark days of the Trumpadministration
into the dawn of a new progressiveAmerica, where pro-consumer and
pro-investor policieswill always be first on the agenda.”
Financial Regulators
At the November 10 regulators hearing, Sen. Brownsaid, “The
‘Wall Street First’ attitude of the Trumpadministration is over…
President-elect Biden will havethe opportunity to install watchdogs
at these agencieswho will put working families and their
communitiesfirst, and we’ll give Americans confidence that
theirgovernment is on their side.” Treasury Secretary-designate
Janet Yellen will provide a familiar,consensus-building presence as
the new administrationfocuses on pandemic relief and other urgent
issues, butthey will have to deal with a number of Trumpappointees
with unexpired terms at the Fed, FDIC andelsewhere.
Federal Reserve. At the Fed, Chairman JeromePowell’s term
doesn’t expire until Feb. 2022. Whileappointed by President Trump,
Powell has not provedto be an ideological chair, and his aggressive
postureagainst the pandemic has won him high marks.Renominating
Powell could be a way for Biden to signalmoderation and continuity,
though a number of othernames will be in the mix when Powell’s term
is up, suchas Fed governor Lael Brainard, Sen. Warren, SarahBloom
Raskin, Roger Ferguson and others. The term ofRandal Quarles, the
Fed’s vice chair of supervision whohas presided over the weakening
of certain Dodd-Frankrules for banks, expires in October 2021, and
Biden isunlikely to renominate him.
Securities and Exchange Commission. The term offormer SEC
Chairman Jay Clayton, who departed theagency in December, featured
a number of party-linevotes on rules, including a 3-1 vote in 2019
forRegulation Best Interest, Clayton’s attempt to navigatea
standard of care for securities brokers. Democratssaid that effort
failed to fulfill the Dodd-Frank Act’s callfor a uniform standard
for brokers and financialadvisers. They would welcome a chairman
moredevoted to rules-based enforcement over “principles-based.” The
Democratic House and Senate could alsouse the Congressional Review
Act to overturn anumber of rules that have passed the
Commissionsince June, including: 1) amendments to Regulation S-K
that eased rules governing how public companiesmust describe risk
factors in their financial statements;2) changes to the SEC’s
whistleblower program; 3) arule change on “proxy access” that made
it moredifficult for shareholders to bring up items for a vote
atmeetings; and 4) a loosening of conflict-of-interestrules for
independent auditors.
CFPB. At the CFPB, Director Kathy Kraninger’s termdoesn’t expire
until Dec. 2023, but given the SupremeCourt’s June 2020 ruling
requiring the Bureau’s directorto serve at the pleasure of the
president, Kraninger canbe expected to offer her resignation. Rep.
Porter has
been mentioned as a possible candidate to lead theCFPB, which
under Democratic leadership could resumegreater scrutiny of student
loan servicers, mortgageservicers, credit card issuers, bank
overdraft fees,installment lenders, debt collectors and credit
reportingagencies. The CFPB is also likely to be much more activein
rulemaking than under Kraninger’s tenure.
Among other regulators, Biden will get to appoint anew
Comptroller of the Currency, the large-bankregulator, as Brian
Brooks is currently serving in anunconfirmed acting capacity after
the abrupt departureof Joseph Otting in May 2020. (At the eleventh
hour,the Trump administration nominated Brooks to serveas the
Senate-confirmed Comptroller, but the BankingCommittee never acted
on his nomination.) At theFDIC, Chairman Jelena McWilliams’ term
isn’t up untilJune 2023; she cannot be removed by Biden and
herspokesman has said McWilliams “intends to fulfill” herfull term,
but she could find herself outvoted 3-2 byDemocratic board members
as current members arereplaced.
At the Federal Housing Finance Agency (FHFA), theGSE regulator,
Director Marc Calabria is near thebeginning of a five-year term
that doesn’t expire untilApril 2024, but the same Supreme Court
ruling onCFPB (Seila Law vs. CFPB) could allow the newpresident to
remove him too. The FHFA director’sstatus is also the target of a
separate case theSupreme Court will hear this term. In the absence
oflegislation establishing a new system for housingfinance,
Democrats don’t like Calabria’s plan togradually recapitalize
Fannie Mae and Freddie Mac andrelease them from conservatorship,
and will press forsomeone with more progressive credentials.
Regulator Term expires
Federal Reserve Board ChairmanJerome Powell February 2022
Fed Vice Chair of Supervision RandalQuarles October 2021
Acting Comptroller of the CurrencyBrian Brooks Acting
capacity
FDIC Chairman Jelena McWilliams June 2023
Acting SEC Chairman Elad Roisman Acting capacity
CFPB Director Kathy Kraninger December2023
Federal Housing Finance AgencyDirector Marc Calabria April
2024
National Credit Union AdministrationChairman Rodney Hood August
2023
Financial Regulators’ Terms
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13 Washington in 2021
RetirementBiden’s win and the election of Democratic majorities
inthe House and Senate mean that Democrats will havethe opportunity
to pursue their priorities in the area ofretirement and pensions
policy. The power given theSenate’s minority to block any bill with
less than 60votes in support remains an obstacle, which themajority
could surmount by using the budget-reconciliation mechanism or
simply fashioning bills thatcould attract enough bipartisan support
to deliver 60votes on the Senate side.Biden’s priorities. Biden
will come to office havingproposed retirement initiatives during
the campaign,though he can be expected to work collaboratively
inthis area with key policymakers such as returning HouseWays and
Means Chairman Richard Neal (D-MA) andSens. Ben Cardin (D-MD) and
Rob Portman (R-OH). Biden has criticized the current set of
retirementtax incentives for providing a much stronger tax breakfor
upper-income individuals, and has proposed to“equalize” the system
by replacing the currentdeduction with a flat dollar tax credit.
That proposalhas struggled to find broad support in either house
ofCongress, and the administration would likely need toexpend
considerable political capital for it to gaintraction in either
chamber.Biden has also proposed allowing caregivers who
don’treceive wages for their work to make “catch-up”contributions
to a qualified retirement savings accounteven if they have no
earned income, as is currentlyrequired. The proposal tracks HR
3078, a bipartisanHouse bill offered by Reps. Harley Rouda (D-CA)
andJackie Walorski (R-IN). Biden has also supportedexpanding
employer-sponsored plans by automaticallyenrolling employees in
IRAs, similar to ideas longchampioned by Chairman Neal and the
Obamaadministration, and he has proposed shoring up theSocial
Security Trust Fund by removing the current$137,700 cap on FICA
payroll taxes.
House Committees. At the Ways and MeansCommittee, Chairman Neal
has a long record of stronginterest in legislation to expand and
promote retirementsavings and retirement security. He is likely to
workclosely with Speaker Pelosi and Education & LaborCommittee
Chairman Bobby Scott (D-VA) early in the117th Congress to advance
pension reforms aimed atshoring up the troubled multiemployer
pension fundingsystem, as the House has proposed in last year’s
HEROES legislation. Neal is also expected to seek toadvance the
Auto-IRA/Auto-401k proposal that he haslong championed. Those two
initiatives promise arobust debate on retirement savings policy
early in2021. Scott is also likely to take the lead on Houseaction
regarding the continuing battle over investmentadvice standards. At
the House Financial ServicesCommittee, Chairman Maxine Waters
(D-CA) will leadefforts to examine and potentially revise the
Securitiesand Exchange Commission’s Regulation Best Interest.
In addition to those two major initiatives, Neal workedclosely
with Ranking Member Kevin Brady (R-TX) on anew bipartisan
retirement policy bill in the lastCongress. The Securing a Strong
Retirement Act (HR8696), a follow-on to the SECURE Act that was
enactedin December 2019, was introduced on October 27 lastyear and
is certain to be high on Neal’s priority list thisyear. Key
provisions of the bill seek to expandretirement savings coverage
and allow Americans tosave more and earlier for their retirement.
The bill alsomakes changes to the Multiple Employer Plan
(MEP)provisions that were the centerpiece of SECURE, andwould
increase the age at which individuals must takerequired minimum
distributions from 72, as provided inSECURE, to 75. The bill
exempts those with less than$100,000 in retirement savings from
having to takeminimum distributions.
Senate committees. With the Senate in Democratichands, incoming
Finance Committee Chairman Wydenwill play a key role in moving any
retirement legislationthat includes a tax component. In 2019,
Wydenproposed raising taxes on capital gains to the samerates as
ordinary income, a change that he estimatedwould raise $1.5
trillion to $2 trillion over a decade,which would be used to shore
up the Social SecurityTrust Fund. The proposal would exempt the
first $3million of a taxpayer’s savings in tax-preferredretirement
accounts such as IRAs, 401k plans and403(b) plans, and none of the
gains in those accountswould be subject to the annual tax. When the
SECUREAct was released in 2019, Wyden called the bill “animportant
step forward, but we need to do much moreto help workers save for
retirement.”
Finance Committee members Sens. Cardin and Portmanhave a history
of working together on bipartisanpension-related legislation, and
that partnership could
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14 Washington in 2021
prove fruitful again in the next Congress. TheSECURE Act
included 20 proposals taken froma similar Portman-Cardin bill in
the Senate.They joined in sponsoring S. 1431, TheRetirement
Security and Savings Act,legislation that shares a great many
prioritiesand individual provisions with the Neal-Bradylegislation.
The overlap between theNeal/Brady and Cardin/Portman bills
couldprovide the basis for legislative progress onretirement
priorities.At the Senate HELP Committee, whosejurisdiction includes
pensions policy, likelyincoming Chairman Patty Murray (D-WA)
lastyear introduced the Information Needed forFinancial Options
Risk Mitigation (INFORM) Act,which would require pension plan
sponsors toprovide plan participants and retirees withinformation
when offering lump-sum
buyouts. The bill was a response to the TrumpAdministration's
2019 move to allow employersto offload pension liabilities
throughbuyouts. Murray is also at work on legislationthat would
address concerns from the financialservices industry and consumer
organizationsregarding the Trump Department of Labor’sregulatory
proposal regarding the acceptabilityof environmental, social, and
governmentalinvestment options in qualified plans.Similar to the
situation in the House relating togoverning the provision of
investment advice toretirement accountholders, Sen. Murray
hasexpressed interest in amending ERISA toestablish new standards.
Murray also has beenthe leader on legislation to address
themultiemployer defined benefit plan fundingcrisis.
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