Key 2016 Election Issues: Retirement Security
The fifth issue that we've identified is retirement. It's an area that's getting a lot of play, kind of in the public discourse. You know, Americans aren't saving enough for retirement. So it's an area that because of that, we're starting to see a lot more potential implications across the realm kind of cascade down to businesses and small businesses as well.
Hillary's been very, very clear that she thinks social security needs to not just be reinforced, but actually expand it. She'd be looking to do that from what she said through probably raising the social security cap higher than the $118,000 in change it is now--to make wealthier Americans pay more into social security and stabilize it through that way. But she's not advocating in any way any type of cuts or increases to the retirement age or cuts to the cost of living calculation. She's very much been about let's really enhance and expand the social security.
Trump has also been very supportive about not any cuts, but also has not advocated any kind of tax increase or increase in the social security wage cap. He's basically saying that with increased employment, with a more robust economy, more people are going to be employed, more people are going to be paying into the social security system. And that's how social security will become more stable. So security obviously a really important issue for a lot of Americans and a lot of employers, because that's potentially a significant expense on their side as well.
From a tax standpoint, kind of the tax ramifications of that, some of the other things that Clinton has really said she would intend to change is a really significant increase in the estate tax, increase in the short term capital gains tax-- again, all of which have a little bit of a retirement angle to them. She would also advocate capping the amount that can be contributed to tax advantage retirement programs like IRAs and 401k's at $3.4 million.
Trump kind of the contrary of that is advocating no cap. He actually wants to eliminate the estate tax and keep capital gains taxes relatively stable. So again, some pretty clear distinctions in terms of some of the retirement related tax impacts. Another interesting thing, again where it's not directly part of some of the dialogue to date in the election debate, but that could also be very impactful, is some of the things the Department of Labor is currently doing in the retirement space. One of the things that there's been a lot of dialogue around is the fiduciary rule that's ramping up to become effective soon.
Clinton has been very supportive of that-- really saying that change to expand fiduciary liability to other parties, most prominently investment advisers, is a really good thing—really to take out some of that potential conflict of interest that an advisor would have, and really reduce costs to a lot of investors.
Trump is contrary to that—kind of against the fiduciary rule--because of the feeling that would potentially reduce the amount of quality investment advice that would be available to smaller investors and smaller plans.
Another thing that the DOL recently changed from a rule standpoint about is making it easier for states to start their own workplace retirement savings programs. Again, because of the feeling that a lot of people aren't saving enough for retirement and because it's been difficult to really move a program at the federal level because of the political ramifications-- so the DOL has made it easier for states to go and start their own programs. From a practical standpoint, it could absolutely impact an employer that's not currently offering a plan, like for a 401k plan. And they'd have to basically offer the state plan in lieu of that. So the presumption is that Hillary would continue that and be in favor of that, where may not be as supportive of that going forward.
You know, he might look to go in and make some changes to that rule if you were to be put in place. The other area that's kind of interesting on the retirement side is there is some federal legislation being proposed right now to make it easier for businesses--small businesses in particular--to start their own retirement plans. And it's one of those areas that has some rare bipartisan support.
So there has been some conjecture out there that may be whoever the new next president, is if they want to get an early win from a legislative standpoint, doing some of these things might be something that they may look to get done quickly, because it could have support on both sides of the aisle. If you currently are offering a plan, be aware of what some of these changes are and what could be happening.
But really importantly, if you currently are not offering a retirement plan, but are considering it, is to think about creating one now because you may be able to control your own destiny, and start a plan that would be in line with what you'd like to see as opposed to maybe having a state plan with terms that might be different-- maybe being forced upon you is something that you'd have to do anyways.
We're spending a lot of time in terms of the fiduciary role in particular, looking at our products that we make available to our clients in terms of record keeping and all that, and making sure that the alignment with the financial advisor community aligns really, really, well with that.
We're also working a lot with the advisors to help educate them as well--especially smaller advisers, what this might mean and how they may need to change their business and adapt their business models. Paychex is actually the preferred payroll, HR, and retirement provider for the AICPA. So we talk extensively with the CPA community to stay on top of the multiple changes and kind of the winds that are blowing relative to the election with some of the technical regulatory changes. So we do a lot of education for the CPA community. We do a lot of webinars that are just targeted to the AICPA. Because a lot of our businesses look to their CPA's as trusted advisers as well. We find that's a very helpful audience for a lot of our information, too.
Key 2016 Election Issues