Current Thinking

HEALS May Not Offer Much for Retirees – But What About TRUST?

On July 27, 2020 the Senate Republicans rolled out their Health, Economic Assistance, Liability Protection and Schools (HEALS) Act, which would be another $1 trillion relief package for a nation still reeling from the COVID-19 pandemic.

What does it do for retirement policy? Not much, especially when compared with the Coronavirus Aid, Relief, and Economic Security (CARES) Act that was signed into law on March 27, 2020, details of which are available here.

On a retroactive basis, HEALS does three main things in the retirement space. It would clarify that employer-sponsored money purchase plans are included in those retirement plans that qualify for the temporary rules enacted under the CARES Act, which allow individuals to make penalty-free withdrawals from certain retirement plans for coronavirus-related expenses. Such plans cover less than one-fifth of private industry workers, according to the Bureau of Labor Statistics.

It would also clarify the due date for single-employer pension plan minimum required contributions; that date was delayed for 2020 by CARES.  

In addition, while the CARES Act allows eligible retirement plans to rely on an employee’s self-certification that he or she qualifies to receive a coronavirus-related distribution, HEALS adds that the plans also may accept an employee’s self-certification that he or she meets the requirements for the increased limits on retirement plan loans.

There are also various fiscal measures that HEALS addresses – the ins and outs of a second Paycheck Protection Program (PPP) for small businesses, another round of $1,200 stimulus payments, and the like – but that is pretty much it for the retirement issue.

However, Sen. Mitt Romney (R-Utah) has reintroduced the Time to Rescue United States’ Trusts (TRUST) Act, for inclusion in HEALS.

TRUST requests that, at the beginning of January 2021, the U.S. Treasury Department deliver a report to Congress on the state of a number of what are perceived as “endangered” federal trust funds.

Congressional leaders would then appoint members to serve on bipartisan “Rescue Committees” — one per trust fund — with the mandate to draft legislation that restores solvency and otherwise improves each trust fund program. If a Rescue Committee reports a qualifying bill for its trust fund program, it would receive expedited consideration in both chambers.

While 60 votes would be required to invoke cloture for final passage in the Senate, only a simple majority would be needed for the motion to proceed.

Of most relevance to our discussion, one of the trust funds involved is the Social Security Trust Fund, which according to some reports will deplete its reserves by 2035 if further funding is not made available.

If you think this sounds like a way of cutting Social Security funding, you are not alone. Cutting Social Security, Medicare and Medicaid has been proposed by various Congressional leaders for years – an understandably frightful idea for the nation’s aged and aging (that is, all of us) populations.

Nancy Altman, president of advocacy group Social Security Works, said that TRUST “creates a closed-door process to fast-track cuts to Social Security. It is a way to undermine the economic security of Americans without political accountability.”

Altman also questioned the wisdom of proposing such cuts during the pandemic, maintaining that Congress “should be focused on protecting seniors, essential workers, and the unemployed. Instead, they are plotting to use the cover of the pandemic to slash Social Security.”

AARP Executive VP and Chief Advocacy & Engagement Officer Nancy LeaMond has also objected to adding TRUST to HEALS, calling the former “a bill that is unrelated to the crisis and that wrongly targets Social Security and Medicare to reduce deficits that have expanded because of needed pandemic relief.

“These programs are critical to millions of Americans who rightfully expect Congress to be careful stewards of their earned benefits,” she continued. “Social Security is the principal source of income for over half of older American households, and roughly one quarter of those age 65 and older depend on it for nearly all (90% or more) of their income. And Medicare provides the critical health coverage they need. The TRUST Act provisions should be dropped from the bill.”

For his part, Romney said: “There is no interest on the part of either Republicans or Democrats to cut Social Security or Medicare for current retirees or people nearing retirement. At the same time, we’re going to have to make sure that what we propose for younger people coming along is something that is fiscally sustainable.”

Whether one sides with Romney or not, the concept of cutting Social Security and Medicare for anybody should give one pause. It does not seem prudent to be entertaining such thoughts, especially at this moment of crisis; for anyone who either depends on these programs now, or will depend on them later in life, the first cut to such programs may very well be the deepest.

About the Author

Richard Rausser

Richard W. Rausser has more than 30 years of experience in the retirement benefits industry. He is Senior Vice President of Thought Leadership at Pentegra, a leading provider of retirement plan and fiduciary outsourcing to organizations nationwide. Rich is responsible for helping to shape and define Pentegra’s viewpoint on workplace retirement plans, plan design strategy, retirement success and employee savings trends. His work is used by employers, employees, advisors, policymakers and the media to produce successful outcomes for American workers.  In addition, Rich is responsible for Pentegra’s Defined Benefit line of business, which includes a team of Actuaries and other retirement plan professionals as well as Pentegra’s BOLI line of business.  He is a frequent speaker on retirement benefit topics; a Certified Pension Consultant (CPC); a Qualified Pension Administrator (QPA); a Qualified 401(k) Administrator (QKA); and a member of the American Society of Pension Professionals and Actuaries (ASPPA). He holds an M.B.A. in Finance from Fairleigh Dickinson University and a B.A. in Economics and Business Administration from Ursinus College.