Beltway Buzz, October 27, 2017
D.C. is humming this week, as the Senate and House are both in session after taking turns on recess the past two weeks.
401(k) Pre-Tax Deferrals: An Endangered Species? After being overshadowed by ACA repeal-and-replace efforts for nine months, tax reform efforts are now well under way in the House and Senate to send a comprehensive package to President Trump by the end of this year. On Tuesday, sources confirmed that the House intends to introduce its version of a tax bill on November 1, which could be appended to the Senate budget reconciliation measure that the House passed on Thursday. Although details are still skimpy, rumors have been circulating about various revenue-raising proposals that might be included in the final package. Late last weekend, in particular, the financial planning community was stunned when the New York Times reported that Republicans are considering lowering the current 401(k) deferral limit from $18,000 per year ($24,000 for participants age 50 and older) to possibly as low as $2,400 annually. Any contributions made above the new limit would be required to be made on an after-tax, or Roth, basis. The sound and the fury evidently reached the White House, as the president declared in a tweet the very next morning that there would be “NO change to your 401(k) . . . it stays!” But then, on Wednesday, House Ways and Means Committee Chairman Kevin Brady bumped heads with the president by issuing a seemingly contradictory statement, indicating that the House measure could, in fact, force changes to 401(k) and other retirement plans. This could set the stage for a rough-and-tumble battle between Congress and the administration. Where so many different interest groups have stakes, and yet huge sums of money must be found to offset huge tax cuts, no otherwise unpopular option is off the table. The idea of “Rothization” has been around for a while, and it will not likely be banished by a single tweet. We will, of course, keep our sights focused on this issue in the coming days and weeks, as the retirement industry holds its breath. (Hat tip to Richard C. Libert, Stephanie A. Smithey, and Timothy G. Verrall.)
USCIS Increases Scrutiny of Visa Renewals. The Buzz has been following the appointment of Lee Francis Cissna to run the U.S. Citizenship and Immigration Services (USCIS), and he has hit the ground running. On October 23, Cissna issued a memorandum that rescinds a 2004 policy that had instructed USCIS adjudicators to defer to prior determinations of eligibility when reviewing employers’ petitions for extensions of nonimmigrant workers’ visas. The October 23 memo states that the previous policy had improperly shifted the burden of proof in establishing eligibility to USCIS and clarifies that the burden remains on the petitioner at all times, even in cases in which an extension is sought. This new policy is consistent with the administration’s increased scrutiny of foreign worker programs and, more specifically, H-1B visas.
E-Verify News. In more immigration-related news, on October 25, the House Judiciary Committee approved the Legal Workforce Act (H.R. 3711), which would make E-Verify use mandatory for employers over a two-year phase-in. As the Buzz has reported previously, continue watching to see if this bill plays a role in the ongoing policy debate relating to a DACA legislative fix.
Tip-Pooling Proposal Advances. In our review of the administration’s spring regulatory agenda in July, we noted the Wage and Hour Division’s (WHD) intention to review the Obama administration’s regulation on tip pooling. This proposal took a step forward this week, as the WHD sent it to the Office of Management and Budget (OMB) for review. Although the submission to the OMB is not public, the regulatory agenda states that the WHD “will propose to rescind the current restrictions on tip pooling by employers that pay tipped employees the full minimum wage directly.” Because the proposal was originally scheduled to appear in August, its arrival at the OMB this week means that a notice of proposed rulemaking could issue sometime in November.
Arbitration—Return of the CRA. On October 24, the U.S. Senate used the Congressional Review Act (CRA) to rescind the Consumer Financial Protection Bureau’s (CFPB) July 2017 rule prohibiting consumer arbitration agreements. (Recall that the CFPB is still run by Obama appointee Richard Cordray, who, pursuant to Dodd–Frank, may be discharged only for cause—a standard that is still being challenged in court.) The resolution passed the Senate by a vote of 51–50, with Vice President Pence casting the tiebreaking vote. Senators Lindsey Graham (R-SC) and John Kennedy (R-LA) dissented from Republican ranks and voted to keep the rule in place. The resolution now goes to the White House, where it is expected to be signed by the president.
Although not directly related to arbitration in the employment context, rescission of the CFPB’s arbitration rule could have a ripple effect. Coupled with a Supreme Court ruling in Murphy Oil that allows for class action waivers in arbitration agreements, the rejection of the CFPB’s arbitration rule could lead to a Lilly Ledbetter–like legislative backlash that results in a significant political effort to amend federal arbitration law. Of course, a lot will have to happen for that effort to be effective, but it’s a safe bet that arbitration writ large will be a significant campaign issue in 2018.
Union News. At its national conference this week, the AFL–CIO reelected Richard Trumka to serve a third four-year term as president. The Buzz doesn’t envy Trumka, who will run an organization that is hemorrhaging members and will be facing a Republican majority National Labor Relations Board, a Republican-run U.S. Department of Labor, and the possibility that the Supreme Court may prohibit compulsory union fees for public sector workers. A list of adopted resolutions at the convention is here.
Stubborn as a Mule. In previous issues of the Beltway Buzz, we have referred to National Seersucker Day and National Lobster Day. To be sure, designating days for special honor is an important duty that Congress assumes in order to avoid having to deal with the really tough issues—such as naming post offices. This week brings another such day: National Mule Day was yesterday, October 26 (for you tipplers, National Moscow Mule Day debuted this year on March 3). It also happens to be the birthday of our own Hal Coxson! Despite his deep connections on Capitol Hill and unmatched persuasiveness, Hal was unable to convince our federal legislators to pick another day to designate as National Mule Day. Even so, Hal should be proud, as the mule is noted for strength, intelligence, patience, perseverance, endurance, sure-footedness, and an even temper—characteristics that Hal clearly shares. Hal also shares his birthday not just with mules, but with former senator and Secretary of State Hillary Clinton. So Happy Mule Day, and Happy Birthday, Hal!