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Tuesday, February 03, 2015

Obama Wants More Enforcement Dollars

Reported by Neil Anderson, Managing Editor

Obama wants more enforcement dollars for going after Wall Street and retirement plan sponsors, he wants more workers in retirement plans, he wants highly leveraged financial services firms to pay another price, and he wants to restrict higher income folks' use of 401(k)s and tax benefits.

Yesterday U.S. President Barack Obama unveiled his vision for the fiscal 2016 federal government budget. The 150-page proposal, which given that any budget would have to be passed by Congress before Obama could sign it into law, is a wish list, an opening salvo in a budget negotiation that may or may not go anywhere. So these proposals, particularly the controversial ones, are hypothetical and not to be feared ... at least not yet.

First, Obama wants more money for Mary Jo White. On page 33, he proposes a 15 percent increase in the Securities and Exchange Commission's (SEC's) budget, to $1.7 billion. White, the SEC's chair, says that the increase would allow the regulatory agency "to hire additional staff to enhance [the agency's] enforcement and examination capabilities," and more. The increase translates into adding 431 staff, including 225 in examinations, 93 in enforcement, and 37 "to enhance market oversight." Obama's also proposing increases for the DoL and Treasury (of 10.9 percent and 4.92 percent each, respectively), two other regulators with oversight over retirement plans.

Secondly, Obama is going after "large, highly-leveraged financial institutions." As some kind of "direct cost to leverage," on page 55 the administration proposes charging a fee of seven basis points to "the roughly 100 firms with assets over $50 billion." The budget document offers no details on how the fee would be tied to a firm's leverage.

Third, Obama wants to limit the tax benefits of higher-income workers. On page 56 he re-proposes capping all "the value of all itemized deductions and other tax preferences," including 401(k) contributions, at 28 percent for couples who make more than $250,000 per year. And on page 55 he again proposes cutting off retirement plan contributions altogether for savers who have already passed a balance (currently $3.4 million) that translates into about $210,000 in annual income in retirement.

Fourth, Obama offers several ideas for expanding access to workplace retirement plans. On page 53 he repeats his automatic, payroll deduction IRA idea. He also suggests expanding the tax credit small businesses that set up retirement plans and adding a tax credit for small businesses who add automatic enrollment to their plans.

Earlier in the budget, on page 38, Obama proposes allowing automatic enrollment for military and Defense department personnel. He also wants to expand retirement plan eligibility to long-term part-time workers, and he's allocating money to the DoL to help the states come up with their solutions to the retirement savings crisis. 

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